Digital Really Is Different
Successful companies see digital disruption as the foundation on which to build new business strategies.
Successful companies have learned that digital disruption is more than a catalyst of unrelenting change. It is also the foundation on which they can build the new business strategies needed to move and evolve at the pace of consumers and markets. Here are the organizational changes driving their success.
by Glyn Knaresborough
Digital transformation requirements
A new approach to strategy: A key tenet of digital transformation is the understanding that digital strategy no longer plays a supporting role to business strategy. It is given first consideration, which determines other elements of the broader business plan. Without building on the basis of a digital operating model, there is no way to ensure alignment among a company’s digital initiatives. This is why so many digital transformation initiatives don’t live up to expectations or why they fail altogether. Pursuing a mobile app here or a big data program there is not establishing the core digital strategy on which to build the future business. It’s time to think of business strategies for a digital world — rather than thinking of a standalone “digital” strategy.
New strengths: Operational excellence, customer intimacy or product leadership — successful companies excel in one dimension and perform well in the others. That may change as a company undergoes a digital transformation. Financial services and insurance offer good examples of this shift. While some banks and insurers were known for their service or products, most have long focused on operating as efficiently as possible. To succeed in the digital economy, companies in these industries are finding it necessary to make a shift.
In banking, institutions that remain focused on operational excellence face an eroding share of the market as new competitors and faster-moving rivals roll out innovative new products and services and find ways to give customers a more personalized experience. In insurance, the rise of telematics, big data and the Internet of Things makes possible new models, such as usage-based pricing or allowing insurers to price risk more accurately and to a finer degree. Today’s most progressive businesses are leveraging digital technologies to put this type of highly contextualized information in the hands of their customers and, in many cases, even changing consumer buying habits.
Related: Enterprise IT Gets Lean
Digital leaders: Digital disruption is rewriting job descriptions, too, especially for the chief information officer (CIO). Leadership teams, recognizing that technology’s supporting role has changed, have also revised their thinking about digital leadership. Internal departments and employees were once seen as the CIO’s customer. Today, as they divest themselves of IT delivery, CIOs are now as focused on the external business customer as other members of the C-suite. IT delivery is becoming ever more commoditized and divested, giving CIOs the opportunity to try new things and to play a leading role in digital transformation.
In companies where this shift is not recognized, many of today’s digital initiatives fall short of their potential. They remain tactical in approach and lack a cohesive strategic focus. The digital world requires a CIO with the vision to see the emerging changes and opportunities, and the leadership ability to transition and transform organizations. The visionaries and winners have seen the opportunities, addressed the challenges and adapted to the expectations of the digital customer, while those with less-flexible minds, cultures and business models are rapidly falling away. (For more on this, see “7 Ways to Grow the Digital Leaders Your Firm Needs”).
Enterprise alignment: The commercial opportunities presented by digital transformation are immense, but even when an enterprise recognizes the potential, success is not guaranteed. To succeed, enterprise strategy, culture, people and processes must be in full alignment if the true potential of the digital transformation is to be realized.
The digital world is far more transparent and ruthlessly revealing of weaknesses and flaws in strategy and execution. Old-fashioned silos, defensive thinking and lack of organizational agility are incompatible with business models based on delivering better experiences to increasingly empowered and demanding customers. Without such alignment, many initiatives will fail to achieve their potential.
A new breed of technology partner: Mastering big data. Divesting IT infrastructure and transferring workloads to the cloud. Developing an ecosystem of partners. Implementing a digital-first strategy. These are just a few of the challenges to be addressed in the process of digital transformation. Each of these areas of business transformation is so completely interlinked that a new breed of agile technology partner is needed.
The traditional reactive vendor relationship needs to become one of proactive partnership in which the technology partner has a complete understanding of the business and the technology challenges facing the client. Indeed, more than just understanding, the technology partner must have the ability to leverage a broad ecosystem of its own partners to facilitate the client’s digital journey: top to bottom, edge to edge, and beyond.
In this new world, technology agnosticism is imperative as options and technologies proliferate and develop. Similarly, both technology and client partner must be open to the potential offered by new commercial models.
The way ahead
Companies planning for a future beyond the next few years need to take stock of their transformational strengths and weaknesses. Wholesale transformation will be needed to streamline operations, to develop new businesses that serve new customer needs and to shed those businesses that no longer meet the company’s objectives for growth — even businesses that were once considered core.
Transformation at this scale can be a long process. It will involve many challenges. But the opportunities it offers are unprecedented. The wins enjoyed will be significant. And no enterprise needs to take on all these challenges alone — in fact, it can’t.
Besides, the only alternative is to stick to business-as-usual. And if history is any guide, we all know how that story ends.
Glyn Knaresborough is senior managing partner and head of United Kingdom, Ireland & Netherlands (UKI&N) Consulting for CSC.