Shifts in Digital Utility

Digital is a consumer driven trend. When the utility of digital behaviours becomes greater than the utility of traditional methods, consumers shift behaviour and business must follow. 

Research carried out in 2016 identified that consumers primarily sought utility in any purchase journey over and above anything else. What constituted utility differed by products, sector and price of purchase. Organisations failed their customers when the ‘utility cost’ was greater than the perceived value of making the purchase. 

In the past year the shifts in digital utility have become more pronounced because of the pandemic. 

COVID-19 and the Value of Digital

The pandemic has highlighted the value and utility of the digital experience. Whether for work, commerce or entertainment, companies in the digital sector have been able to meet the needs of people during this period of isolation and fear. 

The relative utility of digital vs traditional models, known as the utility gradient, has proven to be the fundamental driver of when and how much a sector will transform. COVID-19 has dramatically shifted the utility gradient towards digital, and markets will follow. 

In a COVID-19 Digital Sentiment Survey conducted by McKinsey in 2020 there were huge indications that, “the rapid migration to digital technologies driven by the pandemic will continue into the recovery”(McKinsey). The survey showed that 75% of people using digital channels for the first time will continue to use them when things return to “normal”. To a large extent the pandemic exponentially increased the shift towards digital on the utility gradient. Now that people have had a taste of digital life they will be reluctant to go back. 

From a logistical perspective, COVID-19 has also shown us that the digital utility of remote working sometimes outweighs the traditional benefits of working in the office.  

The Transition to Digital 

The classic modern example of a digital model triumphing over a traditional model is Netflix v Blockbuster. Essentially, the two companies offered the same service: you pay to watch movies and TV shows. Where Netflix succeeded and Blockbuster failed was in the move toward digital convenience. 

Netflix was one of the first companies to identify the value of streaming over the in-store experience. They identified the shift in the utility and profitability of digital behaviours in entertainment. As a result, we are now in a ‘Streaming Era’ which will most likely dominate the entertainment industry for the next decade. 

When making the transition to digital you should always be aware of the human cost. Is this shift going to benefit the people in my company? That question should also occupy your mind when you are asking yourself how the digital shift will make your firm more profitable.“Digital transformation should not just be about replacing people with machines”(Financial times). 

This digitisation journey is replicated across various industries and will be the trend for the foreseeable future. “Conservative estimates supported by analysis of real-life cases suggest that digital optimization can boost profitability by 20 to 30 percent”. (McKinsey

If there is both increased utility and profitability in going digital then it quickly becomes unavoidable. Right now it is an area for rapid wealth creation. The seismic shift may feel uncomfortable at first, but it is essential for firms to take these steps to prevent getting left behind.