The 21st century can certainly be described as the age of the Internet, and the business world is no exception to its influence – digitalisation is becoming the new big priority for the C-Suite.
Digitalisation is, in its simplest form, the conversion of analogue information into digital information. For businesses, it means moving the majority or all of its various sectors, such as accounting, marketing, and data storage, onto a digital format where all the information is interconnected and readily available, as well as using digital platforms to optimise and revolutionise business processes.
But it is not merely a matter of automating the existing business model; digitalisation requires innovation, and a complete reinvention of the methods previously used, in order to be successful. Businesses may have to remove some roles and create others, change the organisational structure, use algorithms and data analysis to automate certain decisions and implement new customer service protocols, to name just a few – clearly, digitalisation is not as straight-forward as it may sound. Business start-ups have a significant advantage, as they can design a digitalised business model from the very start and don’t have to work through the complicated process of adapting an existing model.
Nevertheless, businesses are increasingly realising the need for digitalisation, and are going ahead with the process, despite its difficulties. CEB Global state that 87% of senior business leaders cite digitalisation as a priority for their company, while another survey found over 40% of chief financial officers also had digitalisation as a priority, showing how the process is being view as critical to success in various aspects of the business operation. Similarly, IBM found that 83% of CIO’s also prioritise digitalisation.
Reasons for Digitalisation
But why is everyone so desperate to digitalise? Mainly, because of the huge impact it can have on profits. It is estimated that digitalisation of business processes can reduce costs by up to 90%. Yet this does not even require a specific focus on cost-cutting rather than increasing income – digitalisation can achieve both at the same time. Research by PwC found that businesses that have digitalised expect to increase annual revenues by an average of 2.9% and reduce costs by an average of 3.6% per annum over the next five years.
The time taken to see the benefits of digitalisation is also very short, which makes the process even more attractive. In the same PwC survey, more than half of respondents expected to see a return on their investments within 2 years or less, while another study similarly found that 60% of organisations that had implemented a paper-reducing, digital scheme expected results within 12 months, and 75% within 24 months.
While these figures are impressive already, there is the potential to yield even larger returns – and that’s by being the ‘first mover’. The first company to digitalise within an industry or market gets the full share of all the financial benefits it brings, as well as appearing to customers to be the most innovative and current enterprise available to consumers. ‘First movers’ can gain huge returns from digitalisation, with reports of 30% cost reduction and a 30% profit increase at the same time. However, a business would have to act very fast to see these returns nowadays; two thirds of business leaders believe that their company will lose its competitive position if they aren’t significantly more digitalised by 2020, suggesting that there is a far larger awareness of the need to digitalise than there perhaps was a few years ago.
Digitalisation should certainly be a priority for the C-Suite – the vast financial benefits it can bring make the decision a very easy one to make, although the process will bring other benefits such as streamlining business operations and ensuring it is still relevant in a rapidly changing business setting. But the sooner the change to digital the better; by the looks of it, all of your business competitors will doing exactly the same thing.
H&M to Shut Stores as Quarterly Results Plunge
Fashion retailer H&M announced today that it will be shutting down more stores after it experienced its biggest drop in quarterly sales in at least a decade.
Although group sales rose by 4% over the year, fourth quarter sales shrank by 4% year-on-year, to 50.4bn kronor ($6bn), as fewer customers visited its stores. This was far below the retailer’s expectations. Shares in H&M have now hit their lowest level in eight years.
H&M plans to adapt to changes in the market by closing more stores and selling the brand through Chinese online platform Tmall. It aims to integrate its physical and digital stores more, and will give more details on their strategy changes at a meeting with investors on February 14.
The company said:
“The quarter was weak for the H&M brand’s physical stores, which were negatively affected by a continued challenging market situation with reduced footfall to stores due to the ongoing shift in the industry[…] In addition, there have been imbalances in parts of the H&M brand’s assortment composition.”
The company’s rival, Inditex, the owner of high street brand Zara, as well as Massimo Dutti, Bershka and Pull&Bear, has continually outperformed H&M, as it expands more into e-commerce. However, this week, the Spanish giant also reported a slowdown in sales in its third quarter but said sales improved again in November given the colder weather.
Snap Opens Online Studio
The studio will enable brands to build adverts that individuals users can include in their own snaps.
Snapchat is adding another trick to its repertoire by allowing users to add branded animations to the existing arsenal of augmented reality lenses. This is not a wholly new innovation as advertisers can already sponsor lenses, although there is a hefty minimum spend of $300,000 and a current need to work closely with Snap’s design team. However, the new studio will enable advertisers to create their own adverts, which will then need to be accepted by Snap before they are given the green light. The move is part of Snap’s wider efforts to diversify their revenue streams.
Japan Is Behind Bitcoin’s Rise
Deutsche Bank released a research note saying that Japanese investors account for bitcoin’s meteoric rise.
Deutsche Bank analysts have said they believe that individual Japanese foreign-exchange (FX) traders are instead moving towards leveraged cryptocurrency trading in the search for astronomical returns. Already, Japan makes up 50% of the world’s leveraged FX trading and Nikkei recently said that 40% of cryptocurrency trading was denominated in yen throughout October and November. Evidently, the Japanese are growing tired of years of ultra-low interest rates and are turning to the blockchain to boost their savings.
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