Illustration by Antti Kalevi
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Measuring earnings before interest, taxes, depreciation, and amortization (EBIDTA) profits may be the gold standard for assessing traditional companies, but it is not the way digital businesses think. Successful digital disruptors focus on creating long-term value through two distinct levers: customer lifetime value (CLV) / customer acquisition cost and the end-to-end customer experience. While digital disruptors have pioneered this approach, established companies are actually often better positioned to take advantage of this “digital growth engine” because they have one thing startups lack: customers. To kickstart their own digital growth engine, companies should: 1) Align their customer experience ambition with financial ambitions and operational reality, 2) Optimize their customer data strategy, 3) Differentiate engineering for experience, data and AI, and enterprise, 4) Develop an “electronic brain” powered by predictive AI models (with feedback loops). 5) Launch a data and AI-enabled omnichannel customer outreach program, and 6) Transform KPIs, structure, and incentives.
One of the great myths of the digital world is that you can best measure a company’s success by its earnings before interest, taxes, depreciation, and amortization (EBIDTA) profits. Although this may be the gold standard for assessing traditional companies, it is not the way digital businesses think. It’s not that digital disruptors don’t make money — they do. But these profits are only part of the picture.
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Copyright for syndicated content belongs to the linked Source : Harvard Business – https://hbr.org/2024/06/when-it-comes-to-long-term-value-incumbents-should-think-like-digital-disruptors