Digital switchover - more than just our TVs

01 May 2012

By David Lancefield, Economics Partner


Digital TV switchover is nearly complete in the UK. And it’s all taken place rather quietly, probably because most homes are already 'digital'.

The same is not true when we think of companies switching over to a more digital world. In fact we see a far more polarised picture. Innovators and disruptors - the likes of Google, Facebook, Apple, Zynga - act and think in a digital way. It's a norm. They've created and ridden the first digital wave, innovating in online search, social media, smartphones and games. And now they're looking to create the next wave, driven by passionate, creative leaders and demanding shareholders, let alone customers.

But the digital laggards - those incumbents who have struggled to rewire their organisation to cope, let alone thrive, in a digital world - are still learning to ride the first digital wave. The survivors are trying to 'fast follow' the innovators by creating a new digital energy in their organisation, typically by creating a digital division or appointing a string of digital executives. But they're mistaken if they think that's all it takes to catch up. It takes a change in behaviours - thinking faster, taking more risks, experimenting and making more decisions.

It's clear that digital technology offers the potential to innovate, and profit. Amongst other things, it supports far greater flows of information, at substantially lower costs, than previous technologies, and of course better products and services. Personalisation is easier. And therefore we see more effective price discrimination, for example through more effectively targeted advertising and proposition development.

But digital comes with challenges too. It's easier to free-ride, both on the investment in content (piracy) and infrastructure (the net neutrality debate). And some companies are tempted to control too much, driven by the behaviours of their leaders and pressure from their shareholders. But some consumers find that they're not quite as comfortable in either sharing as much information as they thought or being locked so much in to the system they use. Regulators and Governments are now alive to this issue. But they face a difficult challenge - how can they encourage innovation, which by its very nature affords a degree of monopoly power, whilst putting protections in place for consumers and the process of competition. Signals are important in this regulatory dialogue - regulators need to be careful not to dampen innovation, whilst innovators need to learn to use a conciliatory tone, quite a shift for the very people who have challenged conventional orthodoxy.

And we've yet to see 'digital' being used to its fullest. Digital has been used as a more effective channel for delivering products and services. But consumers often don't yet get the personalised service or the outcomes they're looking for that digital technology could provide. They’re often treated as a single group, or as a transaction rather than feeling like they have a relationship. Some companies don't think enough about the consumers' real interests, motivations and incentives to engage with companies. They target too hard or not enough to find that customers have switched to a competitor or turned off completely.

Reaping the benefits of digital demands new behaviours to overcome inertia and existing norms. Behavioural economics helps us to understand why some of the expected outcomes in the digital world take longer than we might expect. Executives have routines and habits formed in a different analogue or offline world - and it takes a new company, an active investor or a new colleague from a different environment to shake them out of their sleep. (See my perspective on leadership for more on this topic at:  https://www.pwc.co.uk/economic-services/publications/refresh-your-leadership.jhtml.)

So, while digital TV switchover is nearly complete, we have a long way to go to switchover to a fully digital world. The innovators face the challenge of working out how far to push their next digital wave innovation whilst not incurring the wrath of their consumers and the regulators. The laggards face the challenge of catching up to the 'New Digital Normal', which is grounded as much in learning and applying new business behaviours as in the technology itself.

Contact: David Lancefield  |  +44 (0)20 7213 2263

Twitter
LinkedIn
Facebook
Google+

Comments

Verify your Comment

Previewing your Comment

This is only a preview. Your comment has not yet been posted.

Working...
Your comment could not be posted. Error type:
Your comment has been saved. Comments are moderated and will not appear until approved by the author. Post another comment

The letters and numbers you entered did not match the image. Please try again.

As a final step before posting your comment, enter the letters and numbers you see in the image below. This prevents automated programs from posting comments.

Having trouble reading this image? View an alternate.

Working...

Post a comment

Comments are moderated and will not appear until the author has approved them.