I asked the artificial intelligence (AI) ChatGPT, “When did the term digital transformation first come into use?” Its response was, “It’s difficult to pinpoint the exact moment, but the concept arose in the 1990s and gained significant prominence in the early 21st century.” Although I did not ask it to, the response included additional relevant information related to my question. It informed me that the increasing prevalence and impact of digital technologies, such as the internet, mobile devices, and advanced computing systems, prompted organizations to re-evaluate their strategies and operations. This led to a recognition that embracing and leveraging digital technologies could fundamentally change how businesses operate and create value.
In this article I explore what digital transformation looks like to me, how customer centric digital transformation has disrupted how some business-to-customer (B2C) models operate, and what all of this could mean for the water treatment industry.
Digital “things” have been an increasingly more important part of my daily life for as long as I can remember. I’m a 70’s baby, an early 80’s child, and I have seen digital technology transform from the Macintosh II that sat gathering dust and side-eyes in the corner of my primary school classroom to the infinitely more powerful iPhone. The latter is never more than an arm’s length away and has become an indispensable tool to help me navigate daily life.
I began working in the water treatment industry in 2001, back when laptop computers were still a relatively recent addition to the workplace. IBM’s ThinkPad, often credited with setting the business laptop standard, had come on the market a mere 10 years earlier. Over the next twenty-plus years, computers became increasingly more powerful, and the way I interacted with my customers incrementally changed. Letters became emails; handwritten service reports became Excel spreadsheets and then online dashboards. Simultaneously, our dosing controllers and sensor technologies became more sophisticated, transmitting telemetry data 24/7 to communicate how treatment programs were performing and alerting me if action was required. Slowly, online dashboards were improved to make data more understandable but were still supplemented with other forms of service reports. More recently, AI applications have emerged in the industry, and although they are not ubiquitous yet, they do present a tremendous opportunity for delivering value to our customers.
My experience is not unique. So, if digital technology has been part of our lives for this long, why are we often presented with Digital Transformation as if it’s a “new” thing? It feels like it’s been around for quite some time.
For the most part, the changes I described previously were incremental, not transformational. They didn’t change what we were doing, they improved upon how we were doing it. Emails and phone calls are quicker than letters and more likely to get a customer’s attention. Sensors and online dashboards provide the ability to measure things more often and to visualise the data, to see how a treatment program is performing between customer visits, but they do not fundamentally change how we service our customers.
Most companies use the same approach of ‘doing the same thing only better’ to make incremental improvements with digital technologies that maintain or increase their competitiveness. Until recently. Now, companies that only use this approach easily could lose competitiveness because their rivals can utilise digital solutions to fundamentally change the business models for value creation and delivery. In doing so, they disrupt their competitors’ standard business models and thereby gain an advantage.
Consider how B2C relationships have been transformed during the past 10 years. Innovative B2C companies have found new ways of solving problems that their customers did not even know they had, or if they did know, they couldn’t conceive of a solution. Let’s look at a few examples.
Few people born after the turn of the century experienced Blockbuster LLC. For the 20th century people, a trip to the video rental store would have been a childhood treat. On the way there they may have wondered what the latest releases were and hoped they were not already out on loan. The whole ritual of going to the store, browsing for something to watch, paying, and going home probably took the better part of an hour. We didn’t mind one bit. But in 1998, Netflix began servicing customers differently when it implemented a DVD By Mail service and then again in 2007 when it started an online streaming service. In 2010, Blockbuster filed for bankruptcy, heralding the end of the bricks-and-mortar movie rental business model. In 2023, Netflix consumes approximately 15% of the world’s bandwidth with more than 100 million subscribers. It became successful by solving a problem that, twenty years earlier, many people didn’t even know they had.
Uber is another B2C transformation story. Prior to 2009, standing in a taxi queue or peering hopefully down the road in search of a yellow taxi light was an accepted end to many evenings even during poor weather or when, at times, it was downright unsafe. Today, I make a few clicks on my phone, and when notified, I walk out the door and step into the back of my ride.
Blockbuster and traditional taxi organisations offered long-established service models that were broadly accepted as the way things were done. The video rental store model had operated with little change for more than 30 years. Taxi organisations had followed the same business model for more than 100 years. And they both were disrupted by innovators who provided differentiated service via the combination of digital technologies and deep knowledge of what their customers preferred.
Could this happen to other businesses or larger organisations? Yes, it already is happening.
Virtual banks such as Revolut are breaking the bricks-and-mortar model, avoiding substantial operating costs by dispensing with the need for physical branches. Revolut is winning many more new customers than its rivals, who are operating a traditional banking model. Just what do its 28 million customers find so attractive about Revolut?
Revolut executives understand their customers very well. They understand the social side of financial transactions: people like to go out for meals with and buy gifts for friends and family. But people find asking friends and family for money (splitting a bill) to be awkward. Not surprisingly, many relationships have been spoiled by minor financial misunderstandings. Revolut helps remove these little stressors. Bills can be split, and money can be sent and requested easily, all without any money physically changing hands.
Revolut executives also understand that their customers like to travel but don’t like to pay foreign exchange fees, that they always carry their phones, they don’t like to carry cash, and they may wish to invest in stocks but aren’t sure how to do so. Revolut and other virtual banks frictionlessly facilitate all these customer needs and more.
So, what do Netflix, Uber, and Revolut all have in common? They apply technology innovatively to meet customer needs, they make it easy for customers to benefit from their solutions, and they are willing to break away entirely from the way services were delivered in the past.
The innovators behind these businesses did not come up with their new business models based on customer feedback or focus groups. They came from personal experiences and by developing deep knowledge of their customers’ needs. If you aren’t familiar with their origin stories, I encourage you to research them.
Additional examples of how B2C companies are digitally transforming their business models exist; in doing so, they too gain many more customers than their competitors and position themselves well for further growth. Certainly, the disruption of B2C operating models cannot be directly transferred to business-to-business operating models. But lessons can be learned from the digital transformation of B2C relationships. For instance, traditionally, knowledge and expertise in the water treatment industry is slow to acquire and difficult to retain. Over time, field representatives form close relationships with their customers, trouble-shoot and problem-solve together, acquiring industry expertise along the way. This is how they prevent future problems, add value, and earn new business. It’s been that way for over a hundred years. Sometimes this knowledge is written up in a case study, other times it’s shared directly with colleagues. But, often, much of the knowledge acquired during a working life is lost upon retirement.
Technological advances, such as cheap data storage and generative AI (e.g., ChatGPT), offer the potential to retain and share knowledge more easily. This presents new opportunities for water treatment companies of all sizes, including new market entrants. Companies that use these technologies will be more resilient to employees joining and leaving their organisations. Cheap data storage enables digitized knowledge to be retained when an employee leaves. Generative AI will make it possible for new hires to quickly acquire knowledge because it will enable them to search large volumes of digitized material and return relevant results more efficiently than has ever been possible before. AI also offers the potential to automate routine tasks, such as optimising a water treatment program and gathering relevant content for a service report, which enables field representatives to focus on other value-added activities.
IoT devices, advanced PLC controllers, and sensors are well-developed, readily available technologies, and they are becoming more affordable. Their ability to better control water treatment programs levels the playing field in our market because, to some extent, they negate the advantages of having the “best available chemistry”. This potentially increases the competitiveness of smaller companies and reduces the barriers to new companies entering the market.
Propriety technologies do help companies retain competitiveness if they are widely deployed to customers. OnGuard™ 3B and 3H sensors enable us to understand more easily the dynamics of cooling tower chemistry and microbiology. The OnGuard iController is a powerful platform for producing insights into the operation of customer assets. OPTIX™ delivers new-to-the-world insights into paper machine operations. Solenis Cloud™ enables us to collect data from these IoT devices and then produce value added insights for our customers and field representatives. And it has the potential to create a virtuous loop: the more data we gather, the better we understand our customers; the better we understand our customers, the more successful we will be at adding value today and developing new solutions to further meet their needs.
Netflix, Uber and Revolut teach us that companies that utilise digital technologies to break away from established business models and make it easy for customers to benefit from their solutions can successfully retain and grow their customer base. Companies in the water treatment industry also can break away from established business models to increase their competitiveness. But this requires wide-spread adoption of IoT devices. Therefore, water treatment companies that execute a successful strategy to greatly increase the number of IoT devices installed on customer applications will build a strong foundation for digital transformation.
So, what does “Customer Centric Digital Transformation” in the water treatment industry look like to me? I see it as this: applying a combination of IoT devices and digital technologies, especially propriety technologies, along with deep customer knowledge from our field representatives and support teams to find new ways of meeting the needs of our customers and by embracing new ways of working that break away from how value was delivered in the past.