April 7, 2021
PUBLISHED BY Wildcat Venture Partners
Much has changed in the past year and there’s no question that digital transformation initiatives across every business have been front and center. There’s been a lot of forced experiments that have accelerated the adoption of these technology efforts, as the pandemic has catalyzed a shift in how companies approach optimizing their operations.
Grahme Taylor, Associate at Wildcat Venture Partners is a firm believer in the power of technology companies to fight inefficiency at scale and solve massive, costly problems for industry and society alike.
In this episode, he shares key trends on the digital transformation front and perspectives on where the Wildcat team sees trapped value. Further, Grahme offers insights on factors that influence a portfolio company’s ability to capture its market opportunity
What is Digital Transformation?
Digital transformation can often be viewed myopically with the focus on merely adopting core technologies like cloud, IOT or machine learning vs. drilling in on what the technology is intended to do. However, Grahme defines this Wildcat thesis area much more holistically. It’s “how companies make use of new technology to either optimize their existing business processes or create new ones so they can drive higher revenue or reduce their costs.”
Technology itself is table stakes. It’s the strategic application of the technology that is going to be key to solving the challenges that exist. In fact, Grahme shares that the real opportunities involve combining these technologies in a way that creates new processes that fundamentally drive business outcomes.
An additional benefit of digitizing business processes is improved user experiences. User experience is important for B2B software but particularly so for B2B2C platforms whose revenue can depend heavily on utilization. Wildcat’s portfolio company, Carrum Health is one such example. They provide a new way to deliver planned surgeries by directly connecting self-insured employers to top-quality regional healthcare providers through a comprehensive bundled payment solution.
Carrum, which now has more than 1 million lives under management, focused at the outset on delivering a great user experience which has resulted in an extremely high net promoter score. Patients not only love using their app but feel well taken care of throughout their journey.
The Shift in Traction from the Knowledge Economy to the Physical Economy
The adoption of technologies typically applied in digital transformation initiatives have traditionally been concentrated in ‘knowledge economies’ – those systems of consumption and production that are based on intellectual capital and whereby significant amounts of good data are available to work with. These companies have been primed for flexibility, change and innovation. Coupled with their ability to digitize processes easily and attract top talent who have specialized skills to support the implementation, these companies have been able to get ahead of the curve in successfully adopting new technologies to streamline processes.
Yet, there is a growing traction among those in the ‘physical economy’. The pandemic has not only exposed key vulnerabilities in the way they operate, but also prompted cultural and customer expectation shifts that have accelerated technology adoption.
For example, with new data sources available (e.g. proliferation of data from IOT devices), industries such as manufacturing, construction or transportation are now able to track and quantify activity that’s occurring throughout the value chain. This translates into new ways to increase revenue and reduce costs.
Where There’s Trapped Value and Activity – Now and in the Future
These changes in processes and implementation aren’t limited to the ‘physical economy’ but are also commonly occurring in traditionally risk averse “knowledge economy” industries like healthcare and insurance.
Insurance is one vertical where the Wildcat team sees significant opportunities.
With processes historically being intellectually tedious and manually powered, there is now an eagerness to adopt new technology that automates core business processes like underwriting and claims administration, in addition to the improving customer acquisition experience. By optimizing the end-to-end approach and truly fulfilling customer needs, there will be the ability to fundamentally change the insurance company and policy holder relationship which in the end, will make the market run more efficiently.
Where Potential Lies (from a Personal Perspective)
There are other industries that Grahme personally sees a lot of potential in. One of which is advanced air mobility such as drones for aerial surveying as well as transportation.
As the world becomes more distributed, the core technologies supporting transportation infrastructure need significant innovation to make systems run more smoothly and safely – therefore more trapped value to unlock.
There’s also a whole new generation of autonomous electric powered vehicles that can revolutionize the way supply chains work for both long distance transportation and last mile delivery.
These transformations are currently occurring with low risk applications like mapping surveillance and some military and law enforcement use cases. The next phase will involve moving lightweight, high value goods and services around for local and regional use with the third phase transporting much heavier goods around and eventually people. But what’s important to consider is the software ecosystem that will develop around it in the future.
What it Takes to Create Financial Traction through Digital Transformation?
To create that momentum, organizations need to take a comprehensive approach that include the following:
- A clear strategy that defines how the technology will fit into company operations
- Alignment and buy-in of those involved to make it happen – particularly from those at the top
- The right talent to facilitate the implementation
- The necessary data infrastructure to digitize
- Success metrics to determine the ROI and impact
It’s not the technology itself but the overall application of it based on the strategy, people and process. Grahme however reminds us that to realize the full benefits of digital transformation initiatives, it still simply starts with identifying the massive problem to be solved where the solution of that problem will have a material impact.
Traction and Trapped Value is produced by Flywheel Associates