www.pwc.co.uk Profitable growth in the digital age Unleash your potential Achieving profitable growth in the current climate is challenging. But digital can play a role in unleashing your potential – making your e‑commerce channels more profitable and developing customer value propositions that are centred on delivering better outcomes for your customers. It requires a business strategy for the digital age, not a digital strategy. Deciding how to make the most of digital opportunities can be complex and overwhelming. That’s why many organisations fail to explore the opportunities, or worse, apply a wait and see approach. But not embracing digital opportunities is no longer an option. Barely a week goes by without another reminder of how the power of digital technology continues to disrupt traditional business models and offer innovative opportunities to create new sources of value. That said, moving too soon and not being clear on where you need to be can also disrupt your current business. So, what does it take to succeed? There are three keys to success: • Knowing your customer and market. • Defining your ambition and success criteria. • Identifying the right path to your end goal. You need to know and understand your customers if you are to retain their loyalty. You need a clear understanding of what success means for you and, based on that, choose the right strategy. This will involve some hard choices and trade‑offs but will help you unleash your full potential in the digital age. How well do you know your customer? The growth of digital and mobile technologies has fundamentally changed the DNA of the customer. Demographic change will see digital natives becoming the norm over the next decade. So, you should ask yourself: how well do you know your current customers and how well are you serving the needs of new customer groups? 100 % UK active adult population 90 80 70 Digital natives 60 50 40 30 Digital converts 20 10 0 2000 Traditional consumers 2002 2004 2006 2008 2010 Up to 2013 The Traditional consumers are the majority 2012 2014 2016 2018 2013-2020 The Digital converts are the majority Are you ready to survive, grow and win in the digital age? 2020 2022 2024 2026 2020 and beyond The Digital natives are the majority The digital generation is growing up – making digital the new normal in both the B2C and B2B markets. This creates issues, threats and opportunities for all businesses. One thing is clear: continuing as is or just trying harder is unlikely to work. 2 Increasing degrees of digital fitness are required to play and win: profitable growth requires the best that digital can offer Digital technology has transformed the scope, scale and potential of business over the last decade. In doing so, it has disrupted the business models of traditional organisations at a rate never experienced before. And it won’t stop there. Profitable growth requires the best that digital can offer. Knowing what success is for your organisation and the digital opportunities available is critical to achieving profitable growth. Those who have harnessed the potential have achieved greater returns and higher engagement with their customers. Looking to the future, we see three waves of opportunity for organisations to generate profitable growth: First digital wave Improve eCommerce profitability with a better customer experience, more compelling propositions, more effective distribution or smarter pricing. Second digital wave Develop propositions that encourage your customers to share their consumption data. That way you increase customer loyalty, increase revenue and reduce operating costs even further. Third digital wave Act as a trusted fourth party on behalf of customers to aggregate their digital data, and to meet their needs through managing relationships with companies offering products and services. The digital waves of profitable growth opportunity Increasing degrees of digital ﬁtness are required to play and win The next digital wave? Business model change Increasing issues, threats and opportunities in the digital economy Buying brands Third digital & digital identities wave: digital identity emerge Consumption chain Consumption data is shared with the customer to enable outcomes Second digital wave: digital consumption Demand chain Customer service Marketing eCommerce is used to transact, to advertise, as a marketing platform and to provide self-customer-care First digital wave: digital commerce Sales Operating model change Supply chain (operations) Ongoing operational integration across the supply chain, including suppliers and partners Channel integration E2E supply chain integration Time 5 -10% Growth +£ 10 -20% Growth 5 -10% Efﬁciency -(£) Innovation & loyalty +£ 5 -10% Growth +£ 10 -20% Efﬁciency -(£) 5 -10% Efﬁciency -(£) Innovation & loyalty Innovation & loyalty 3 You will need a business strategy for the digital age – not a digital strategy Evolving your organisation requires a repositioning of your existing business, whilst creating and building your digital growth opportunities. This means that you need to foster more collaboration, greater innovation and faster decision‑making than you’ve ever experienced before. It’s challenging for leaders. During this period of change you need to protect the value and reputation of your assets as well as transform the way that your business operates. You’ll need an accelerated programme of change to make this happen. Our rapid digital growth assessment is designed to help you work out what to do and when to do it based on a business case and action plan for change. Our rapid digital growth assessment Understand the rapidly‑evolving digital customers behaviours, needs & desired outcomes and their impact on profitability and growth. Equip your organisation to protect your assets, data and reputation against the threats of the digital world. Deﬁne Know Protect Adopt agile approaches to design, build and integrate enterprise‑wide social, mobile and web solutions. Understand how value is created in the digital economy in your value chain and ecosystem. Define your new business model. Evolve Accelerate Create Design your new business and operating model, and the transition path to get there. Create new business ideas, their incubation and development to scale. Rapid digital growth assessment Stage 1: What is your baseline and how should you be structured? How do we want to create value? Stage 2: What are the opportunities and what do we need to change? Stage 3: What is the case for change? The rapid digital growth assessment takes up to 8 weeks, giving you a clear business case for change. It establishes a strong platform for sustainable change and the business strategy creates a catalyst for sustained and profitable growth. Experience tells us the greater the investment you make the better the outcomes from this process. 4 Increasing your profitable growth potential Our impact How we do it Typically we achieve significant incremental new revenue growth of up to 40% focusing on quick wins in year 1 that also pay for subsequent phases of the programme. Profitable revenue growth • Return on investment at the core. • Diverse perspectives deliver deeper insight and sustainability. • Focus on the right opportunity, right moment, reflecting your ambition, risk appetite and capability. The customer is the heart of everything we do. Our change programmes drive the people, organisational and cultural change to deliver great customer experiences that lead you to more profitable revenue streams in the new digital age. Creating loyal customers • Deep insight into customer needs and market opportunities. • Change and operating model orientated around your customer. • Agile organisation that senses and responds to changing circumstances. We deliver efficiencies of up to 30% by sophisticated and sustainable cost reduction initiatives, ongoing cost control and more effective deployment of your assets. Delivering significant efficiency savings • Supply chain efficiencies to optimise inventory and WIP with appropriate sourcing models. • Effective use of cloud computing and software as a service to reduce IT capex. • Increased asset efficiency. We work with you to build an agile organisation – we improve the speed to market of new products, the quality of decisions, and the responsiveness to customer and competitor behaviour. Building an agile organisation • Reduction in complexity. • Improvements in standardisation and new ways of working. • Better collection and use of all forms of data in decision‑making. Shared risks, shared success – we believe so strongly in the quality of our approach that we will align our fees to your success. Giving you confidence in delivery • Trusted partner prepared to share the risks with you. • Delivery team aligned to the achievement of your success. • Programme structured to deliver benefits early and often. 5 Key contacts Scott Bailey Cross sector +44 (0) 117 923 4257 [email protected] Carlo Gagliardi Financial Services, Technology, Media & Telecoms +44 (0) 7798 860 693 [email protected] Mike Greig Cross sector +44 (0) 2072133089 [email protected] Matt Hobbs Retail & Commercial Banking, Insurance +44 (0) 020 7213 1565 [email protected] David Lancefield Technology, Media & Telecoms, Health +44 (0) 20 7 213 2263 [email protected] David Percival Technology, Media & Telecoms, Industrial Products +44 (0) 7714 229219 [email protected] Phil Stokes Entertainment & Media +44 (0) 7802 204008 [email protected] Huw Thomas Technology, Media & Telecoms +44 (0) 20 7213 3758 [email protected] Matthew Tod Retail and Consumer Products +44 (0) 20 7213 5360 [email protected] This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. © 2013 PricewaterhouseCoopers LLP. All rights reserved. In this document, “PwC” refers to the UK member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. Design Services 28115 (04/13).