Harnessing the Power of Digital Transformation in the Hotel Industry: A Customer-Centric Approach.

• Companies can achieve profitable growth by implementing customer-centric business models aided by digital technologies.
• A customer-back business model (CBM) enables organizations to pursue strategic business goals, create sustainable competitive advantages, and improve their operations.

An article authored by McKinsey & Company discusses the customer-back business model (CBM) and its potential to help companies achieve profitable growth by reimagining business operations using digital technologies. CBM is particularly impactful in industries experiencing disruption due to new technologies and geopolitical changes, such as the travel and hotel sectors.

In the context of the travel and hotel sectors, organizations are reevaluating their operations to serve their customers better. Traditional companies compete with disruptors in their industry, leading to a shift in the business model. Digital transformation has allowed change, growth, and increased efficiency. However, the article notes that organizations often capture less than one-third of the expected value from digitization. The common pitfall is the tendency to reimagine business domains in isolation, resulting in disjointed customer experiences and suboptimal business outcomes.

The CBM approach can address this issue. It is customer-centered, business-focused, and AI-enabled. This approach allows organizations to create new ways of adding customer value that is accessible to every functional area. For example, an industrial company that adopted the CBM approach reported a substantial profit increase and an 80% reduction in time needed for supply and demand balancing operations within three years.

The CBM approach includes three elements: setting ambitious business aspirations, prioritizing short-term impact initiatives, and applying digital technology to reimagined processes and new business capabilities. It provides a business- and customer-centered approach to reimagining a company’s operations through digital transformation.

The impact of this approach extends beyond profits to improving customer and employee experience and the company’s resilience. For a hotel or travel company, this could mean having a single view of customer data to generate insights that predict and anticipate customer needs, which in turn can be used to improve service delivery, planning, and future offerings.

Implementing a CBM is a pragmatic approach to digital transformation. It requires setting ambitious business aspirations, creating a roadmap for a self-funding journey, and taking a business-focused approach to technology. This approach can help hotels and travel companies achieve profitable growth, improve operations, and create a sustainable competitive advantage.

Discover more at McKinsey & Company.