Digital has already changed the way most of us do business. Yet the real implication of embracing digital, not just to allow access to an audience, but in all other business processes, is only just being glimpsed
Back in 1994 I was faced with a problem; I had a burning idea to create a magazine and I had a team of potential people who were all enthusiastic as I was and wanted to contribute, but unfortunately, I had neither the money nor the experience in magazine publishing to create a print publication. However, there was this thing called the internet, and as far as I could see it was going to do for business what punk did for the music industry.
With the internet I no longer needed to print a magazine, I didn’t need to do distribution deals to get the magazine into WH Smith and I didn’t need to buy paper or ink, so that was £100,000 saved from my start-up costs immediately.
I also didn’t need any servers as someone else was handling the hosting for me, and I didn’t need to have an office as all my writers could send me copy via email and I could simply edit and publish the copy via the internet from anywhere in the world.
So I launched the magazine on the internet and instead of wasting my £5k start-up money on a roll of paper, I instead spent it on some advertising and a salesperson to sell ads, and I spent as much time as I could out on the road promoting the business. Essentially what I did then was create a digital business, and that one-off event is now a way of life for many businesses.
For a long time people have seen the advantage of an internet-distributed business. It gives you a huge potential audience that you can switch on instantly – and off if you need to – and it gives you the room to scale, as well as the ability to experiment with things you wouldn’t normally be able to do.
What has taken significantly longer is the time it has taken for businesses and investors to grasp the move to getting digital throughout the business. It’s only in the last two or so years that businesses have come to understand that there are other parts of the business and the business processes that the internet can change, and that you can not only use digital to distribute your message, but can use the digital infrastructure as part of your business’ DNA.
This new “digital DNA” encompasses all the main parts of a business, from project management to accounts, from stock control through to fulfilment, from recruitment to HR, and from sales to marketing.
Taking the digital option has a multitude of benefits, the most obvious of which is the removal of capital expenditure for any type of business growth. By substituting digital services such as an online accounts service, or a CRM service like SalesForce, you no longer need to spend money on buying in new equipment, you don’t have the overheads you have with a conventional solution, and all those uncertain long term costs and unexpected costs are also removed.
In a nutshell the benefits of this new digital DNA are:
- Enterprise-class services at a budget cost
- Secure and infinitely scalable solutions
- You only pay for what you use
- Affordable monthly payments
- Zero maintenance costs
- No unexpected future costs
- You are always on the latest version
- Guaranteed uptime
- Complete business compliance with built-in disaster recovery
- The best and most expensive staff work for you
Simon Waldman is author of Creative Disruption – What You Need to Do to Shake Up Your Business in a Digital World and a group product manager at digital download site LOVEFiLM. “If you look at any business of any scale, and you go through all of the functions of that business, e.g. how they recruit people, how they operate internally, how they market and communicate with their customers and potential customers, then there is a digital seam that runs through all of those functions, and any small business can save themselves significant costs by replacing the current solutions with digital enterprise-class tools.”
A key factor in digital DNA is that with a digital solution you’re often buying solutions for just a few pounds, per user, per month, that would have cost substantially more just a few years ago.
As Saul Klein of Index Ventures and board member and investor in tens of UK and US ventures says: “If you look at a product like Erply’s, then a few years ago you would have had to buy that from SAP or Microsoft, and it would have cost £100k to buy and maintain.”
Digital is also much more than cloud, as Andy Redfern, co-founder of Ethical Superstore and business services business PointOV, points out: ” Ten years ago, for a retailer to do e-commerce cost tens or hundreds of thousands of pounds. Now new retail businesses starting up aren’t even bothering to build their own sites, instead they build on the markets like eBay, Amazon and ASOS which is essentially free to join.”
All the experts we talked to also agreed that the one thing that digital was good for was being experimental and taking a first step, without incurring the costs normally associated with a bricks and mortar approach. And this is especially so in the retail sector, as Redfern explains: “The key reason that businesses choose digital is the ability to put your toe in the water without having to sign a five-year lease on a shop.”
There’s also an additional speed to market that digital provides, that previously only a big company has been able to take advantage of. Waldman explains: “If you’re a small company you can get started with Google apps and Google Mail and be out of the box in a day.
There’s no need to have someone to manage your Exchange servers, and that allows you to scale. There’s also a level of mobility if you add in smartphones, then there’s the ability to do things more efficiently, which I think is critical.”
Many businesses are content to look at digital and just look at cloud-based-services as their digital DNA, but there are so many other processes that can be outsourced and managed digitally. Redfern set up his business in 2006 and decided that as his was an online business, it was necessary to build all of the infrastructure you associate with an online business from scratch. However if he started now he would do things very differently, explaining that “when we set up, we did the fulfilment ourselves. It’s only when you reflect back that you realise that we were just OK at certain things, but there were others who could do it much better. So now we’ve got someone else to do the fulfilment, and it’s freed us up to get on with more core things.”
As Waldman points out, the change to digital DNA will be gradual, but it will happen and there’s no going back. “I think increasingly there’s a digital dimension to every function in a business, and those dimensions are becoming entirely digital. So you move from advertising locally, to managing your Google AdWords, as your online marketing is now 80% of the way you do promotions.”
Klein agrees: “There’s pretty much nothing these days that there isn’t a digital alternative for.” He also thinks that digital DNA can also extend to your human expertise in the business. “People viewing the internet purely as a sales channel miss an opportunity to make their business more efficient and productive. Services like PeoplePerHour allow you to buy freelance help, cheaply and cost effectively, and offer a global talent pool that’s open to any small business.”
Digital is also becoming a tick box in the list of requirements that investors are looking for when they invest in a business, although rumours that it’s a must-have on some investors’ lists are rebutted by Klein. “There are no hard and fast rules, and while software as a service is very appropriate to business, it’s not appropriate for all business.” But that hasn’t stopped them studying a business’ attitude to digital before the invest: “We’re technology investors, so when we invested in businesses like Moo and GlassesDirect we looked at how they used the internet internally, not just at how they used it for distribution.”
One of the many criticisms of digital is that it’s only suitable to internet products, an assertion that Klein strongly denies. “If you look at businesses like GlassesDirect or Moo, in a previous life these would have been cottage industries. One sells glasses and another sells business cards, they would have been the optician and the printing services company on the high street. But both of these companies are now multi-nationals and reaching global audiences, because they’ve embraced digital technologies. But they’re fundamentally selling the exact same product as the traditional businesses sell.”
Culture has a big part to play in deciding to move to a digital DNA solution, the culture of buying tin and creating bricks and mortar solutions, and rooms full of staff are hardwired into our business culture and it will take a long time to replace it with a digital culture. Waldman feels that the office culture needs to be replaced before digital DNA can truly be exploited: “A lot of the exploitation of digital requires a culture of mobility, with people being able to work where, and when it suits them, and that goes against the current culture of presenteeism, where everyone has to be in the office at nine.”
While Klein agrees that culture is key, he also thinks one of the barriers to adoption has been time. “Companies are so busy getting their products and services right that they don’t have a lot of time to make hardware and technology decisions,” said Klein, adding: “it’s down to the digital businesses to make what they offer as simple and as easy as possible, and that is happening.”
There’s no right answer when it comes to digital DNA. You need to pick and choose from the options open to your business and see what services fit your business and the way it works. The good thing is that because of its very nature you can experiment with digital, it’s very easy to try a service to see if it works. It takes a few clicks and you’re up and running, and if it doesn’t work it takes a few seconds more to stop using the service. You don’t have to commit hundreds of thousands to new hardware, you don’t need to take on extra staff, and there are no usurious ongoing costs.
One myth we’re happy to dispel over digital is that we lag behind the US. Klein points out that in certain fields the UK leads the way: “The US tends to be an early adopter and it’s mass market in the US, but the UK has certainly advanced in things like online advertising and online retail.”
There are a lot of positive things being said about digital business, and investors and entrepreneurs aren’t likely to say much negative about digital DNA. However that’s not to say that there aren’t problems.
Founder of Lastminute.com and MyDeco Brent Hoberman in a recent interview (**) warned businesses of the dangers in investing in what he described as “low capital intensity start-ups” where the aim was for the business to raise just enough cash “to prove a point”. The problem with this cash-light type of operation, and by definition the problem with the digital DNA businesses we have described so far, is that, as Hoberman explains: “It does not leave any room to experiment, or to make mistakes, and companies only achieve game-changing results by experimenting.” It’s a useful point, but you could equally argue that even with small funded businesses the ability that digital gives to stick your toe in the water for next to no money more than makes up for the lack of a big bank balance.
One of the criticisms levelled at digital DNA is that if everyone uses SalesForce then everyone is going to look the same, and produce the same sort of service. Klein disagrees: “Everyone can use the telephone and has access to electricity, but that doesn’t make us all the same. It’s all down to how people use these things. There are plenty of people who sell business cards on the Internet but Moo has developed a very niche way of doing it. There’s still a great deal or room for innovation and creativity even if you use the same tools.”
Redfern also points out that while the internet is “flaky” in some areas such as service reliability, its ubiquity makes up for this. “When we have problems with our internet connection in the office we send our staff home, because we know that they all have broadband at home. The beauty with digital is that all your services are distributed, so if our building burnt down we could be physically back up and running the next day.”
It’s also true of digital DNA that while you can quickly set up and use it, there still isn’t a mechanism to allow you to chop and change at will, like you can with gas and electricity providers. The standards aren’t yet available to allow you to swap with ease from, say, one cloud-based accounting solution to another, as Waldman points out: “You can’t chop and change on a weekly basis, you do have to make some commitment.” Although, this will change in time: big hardware vendors like IBM and HP are starting to come together with the infrastructure vendors and the application providers to work out systems that will allow this utility type version of digital DNA.
The pros of installing digital DNA in your firm outweigh the cons, and those cons are diminishing as we get better at security and at allowing users to move seamlessly between digital providers. As with all technology advances, it’s not about what you do as a business, it’s about what the others do that counts. If you don’t get at least some digital DNA in your business, then those who do will be beating you at every stage of the game.
**AngelNews interview, October 2010
Doing Digital Today: Here are five key areas where digital makes a real difference.
- Replace your telecoms infrastructure – Most businesses have two networks, a phone network and a data network. Each desk needs two cables and there’s likely to be two server rooms and two boxes of very expensive equipment that need to be cooled and powered. With a VoIP/unified communications solution you can remove the telecomms network, remove the telecoms boxes and put all of your calls over the web.
- Get someone else to fulfil the fulfilment – Fulfilment is a time consuming business, it’s labour-intensive and costly to set up, but by outsourcing your fulfilment and your warehousing to a third party you get greater flexibility, and better economies of scale.
- Outsource your market and your marketing – Creating an e-commerce site requires you to build a customer base but why fight the tide? Tens of millions of people a day go to sites like Amazon and eBay with the intention of buying. By piggybacking on an established marketplace like eBay, Amazon, Etsy or ASOS you only pay for the marketing that works.
- Rent not buy – A recent survey by management consultants Advanced Workplace Associates found that on average, desk space is occupied just 49% of the time. Broadband, mobile and cloud services allow your business to reduce money spent on rent and rates.
- Move your servers to the cloud – Big boxes with flashing lights can be a significant drain on your businesses resources. Moving the work the servers do to the cloud can save you significant amounts.
Getting the big picture
TV is a new environmental consultancy that helps other businesses to understand the impact of key environmental and social issues through instructional online videos, and they’ve had digital built in to the business from the start.
Tyler Moorehead is the chief executive and explains their use of digital. “When we started we could have gone along the standard small consultancy route and helped one business at a time, and perhaps grown slowly. Digital has allowed us to instead go for a fast scaling business where, clients can pick and choose their help and build their own solutions.”
The ability to scale has also been very useful in getting BigPicture.TV out to a much wider audience for a minimum investment as Moorehead explains: “We were self-funded and we launched in October 2010 but in less than six weeks we were able to get our videos out to a network where they can be seen by a potential audience of 160 million people.”