South African companies entering the digital age have a small window to position themselves to succeed in this unfolding digital journey.
Booz & Company has produced a useful typology to characterise a country's readiness to embrace a digital communications channel between companies and their customers.
* Constrained economies have barely begun to develop affordable Internet connections, often because they are held back by political factors or lagging economic development. Internet services remain expensive and limited in reach. Examples include India, Egypt, South Africa and Kazakhstan.
* Emerging economies have achieved significant progress in providing affordable and widespread access. However, the reliability of services remains below par, capacity is limited and usage is low. Examples include Botswana, Brazil, Lebanon, and Costa Rica.
* Transitional economies provide citizens with ubiquitous, affordable, and reasonably reliable services, and usage is expanding at a relatively rapid pace. Examples include Turkey, Mexico, Qatar, Saudi Arabia, and Mauritius.
* Advanced economies are in the most mature stage of digitisation. These countries have a talent base that can take advantage of digital services. Examples include the US, the UK, the United Arab Emirates, Norway, Australia, and Italy.
The benefits of digitisation are massive. Each 10% growth in broadband penetration translates into a growth of between 0.16% and 0.25% in gross domestic product (GDP) per capita; when the ensuing digitisation is added, GDP growth rises to 0.5% to 0.62% of per-capita GDP.
It's this promise of growth and efficiency that gives governments the incentive to put the fundamentals in place to allow digitisation to take place.
Among these fundamentals, one would have to include the political will to make it happen, the capacity to regulate the communications industry effectively, the network infrastructure and a competitive ICT environment to drive down prices.
International markets are addressing these fundamentals as a matter of priority. In fact, in the last five years, twice as many countries moved up to the next level of digitisation as compared to the previous five years - truly exponential growth.
Given the importance of promoting digital technologies, it's worth mentioning the factors that underlie slow adoption.
They are:
* Lack of visionaries within organisations;
* Technology challenges, such as many disconnected systems;
* The absence of national recognition and policies that would drive the need for digitisation; and
* Infrastructure.
Cry, the un-digital country
SA's Internet penetration level currently stands at only 14%, but that tells only part of the story - mobile penetration stands at close to 100%. Even more significant is the fact that growing volumes of entry-level smartphones are entering the market. In other words, the majority of South Africans (and the rest of the continent, for that matter) will only ever access the Internet via a mobile device; in these markets, therefore, mobility and mobile broadband hold the key to digitisation.
The majority of South Africans will only ever access the Internet via a mobile device.
The big challenge here is that mobile bandwidth charges remain relatively high. In addition, volatile exchange rates make digital technologies expensive, including even the entry-level smartphones that are the key to making digitisation practical for the mass market.
SA may be lagging, but the news is not all bad. It opens a small window of opportunity for companies both large and small to identify and overcome the challenges they face in preparing for a digital future - because, make no mistake, the future is digital.
Based on my experience helping companies to create digital strategies that support the overall business strategy, in order to take full advantage of the opportunities offered by digital technology, it is essential to:
* Create an omni-channel strategy. A key characteristic of the digital age is that consumers use a variety of channels as it suits them. They expect to have the same customer experience on each of these channels. The days when a customer has one type of experience inside a branch and a totally different one online are rapidly coming to an end. It will be important to learn how to reach customers via a variety of channels, among them the Internet, mobile, in-store, kiosks and call centres.
* Develop a single view of the customer. It's vital to create a single "golden record" that contains all the customer's interactions with the company, irrespective of channel. For the customer, the omni-channel strategy must yield a consistent experience; for the company, it must yield a consolidated customer record in order to enable the effective use of analytics to target marketing effectively. For example, a regular online customer is increasingly likely to be alienated by an SMS campaign offering an inducement to become a customer!
So, SA is 'constrained' in the digital sense and, as a result, companies are not able to take real advantage of digital technology to reach their current and potential customers. At company level, the C-suite knows digitisation is an imperative, but does not yet fully understand the challenges.
In part two of this Industry Insight, I will look at some of the digitisation strategies adopted by South African companies, and the issues they should be considering.
* 9 Challenges facing South Africa https://www.youtube.com/watch?v=mXhPtMoaGa0
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