What is the Digital Transformation of a business? How do you recognize one? Can you afford to delay digitalization of your business ? Answer is no, otherwise new competitors will definitely change your market forever.
I was asked to present to small medium enterprises (#territoridigitali) why there is a need to innovate and to profit from digital opportunities to transform the business. I needed to use a simple and effective example to show why staying conservative is not an option anymore for many. I used an innovative service launched in Italy, called Enjoy : it is a mobile based, self-service car rental of nice city cars targeting business users in large cities. It is delivered and managed by ENI (biggest energy company in Italy) in collaboration with Fiat, aka as FCA Group the biggest italian car manufacturer.
Enjoy is a flavour of car sharing: thanks to a mobile application, subscribers can use Enjoy cars around largest Italian cities (Milan, Rome, Italy, Turin). The subscriber can locate a nearby car, unlock the doors, start the engine and drive around the city. When he has reached destination he parks the car, re-locks, stops the metering and he will receive a full e-bill via mail he can pay with any of major credit card brand. Tariff are very transparent and far cheaper than using a taxi: the self-service mantra hits yet another business again. Obviously, cars are available in several city locations, so no big deal to find and pick one, and the vehicle comes with full availability of pass to enter no-traffic zones, zero parking costs in the city center and GPS navigation systems. All cars are nice and stylish: top-model Fiat 500, bright red and yellow, much fun to drive (Enjoy as er its brand).The big news is that this service is posed to change the way traditional taxi drivers deliver and badly care their not-so-beloved top business customers.
First of all, why is this a case of digital transformation? Because all digital transformations, which are leveraging digital to re-invent the value chain of a product or a service, have two distinct characteristics, ie. they:
- reshape and enhance the value proposition to the end users thanks to digital
- lower the cost of operations of the business model thanks to higher efficiencies unavailable for non-digital version
Hence, digital transformation can enhance both the revenue and cost model components (see analyze a business model) thanks to data gathered along the value chain actors (users, assets, suppliers, etc). Let’s see why Enjoy is so disruptive.
Taxis are a strictly regulated business in Italy, hence owners resisted all kind of innovations: once you get a license you’re sure to have customers, and limited competition, so there goes the incentive to invest and improve customer experience and processes. Looking to the picture above:
- Traditional user experience, customers needs to know the number of the local radio-taxi company, dial and talk to an operator. Apps are seldom used or not-advertised by operating companies
- Customers are unidentified, total stranger for just a single run: it is a a pure transactional business, no up-sell or cross-sell, no incentive to be faithful to a specific taxi company
- Prices are fairly expensive and the investments in care for customers do not match the requested premium-price
- Handmade paper receipts, payment often due in cash, with electronic POS rarely available in cars (owner resistance)
- A major source of inefficiency costs (passed to users) is drivers waiting with no passengers at cab stations
Now, let’s compare the Enjoy version:
- User experience: cars found via smartphone, geo-localized on maps, no cost for picking or booking one
- Entertaining experience to drive nice luxury city cars unlocking the doors via mobile (the ultimate remote control)
- Detailed user purchase history and ability to offer high mileage discounts (“fidelity programs“)
- Payments via credit cards, transparent receipts delivered via mail fore easy claim corporate expenses (convenience)
- Cheap prices: the self pick up, no driver, high mile-turn-over per car allow lower cost of operations. This is givent back as price benefits to users, with transparent fees sent the mobile app (no unknown baggage or zone charges)
Obviously Enjoy is not for the occasional passerby, but for the regular business users who need to move in large cities. However, in the first few months, just in Milan and Rome it scored more than 150 thousand users for more than 2 million rides. These figures are already old now and the service has doubled the covered cities and still continues to grow.
Why is this a huge risk for taxi drivers? Because thanks to digital it has built a unique knowledge of those customers, it is more efficient and has many strategic options thanks to its tracking of usage, travels and habits of faithful, hi-end, valuable business customers. Examples:
- Do analytics to mine habits (big data) and offer the “next-run” instantly, via mobile, based on patterns (when a person exit the station, same hours, time … etc), thus preempting taxi queuing up
- Drive cross-sell and up-sell offers with partners, such as rental for the weekend or discount to nearby restaurants in conjunction with city deals or Groupons (ie. monetizing “profile, usage and habits”)
- Offer “volume-purchasing” to corporates: since users are known and tracked, Enjoy can offer top company wide agreement, with volume prices for the overall usage, thus shifting companies from taxi in exchange of price, clear (electronic) billing and easy credit card usage;
- Help municipalities to spot travel habits and improve the mobility plan, thus getting support and parking spots
All these are the advantages of “Big Data”, ie, exploiting knowledge of users, cars and travels. Definitely, taxi drivers resisted too much to deliver on electronic payments and innovations like mobile apps, thus they are now exposed to substitute offers delivering advantages to users and employers. If we consider the ENI point of view, they probably decided to enter the “gasoline-as-a-service” business, copying with users who will want not buy a cars inside biggest cities in the future. They are closely monitoring how mobility habits will change and how this will impact their business. Not standing still on they way they used to do business.
The lesson is that not changing and not delivering new digital value propositions is not an option for today businesses, new and old !!! Your next competitor can come from an adjacent business, and will invest to know your customers better than you ! Especially when you mistreat those customers.
Published by Carlo Arioli