A core challenge of digital transformation is about keeping and preserving existing business, while at the same time preparing for a future shaped by technology change. It was at the heart of discussions at our recent PA/Savannah Group ‘Digital disruption and strategy’ breakfast briefing, with keynote speaker Professor Venkat Venkatraman of Boston University. Yes, digital may be a threat to all industries, but it's also an opportunity for every sector.
We think there are some critical keys to success.
Change your concept of value
In the digital age, you must think about what customer problem you’re solving, instead of what business you’re in or what product you’re trying to sell. It’s why digital assets and capabilities are becoming more important than industrial assets and capabilities.
Take the automotive industry. We’re used to thinking about buying products in terms of what’s being supplied – it’s why we buy cars from manufacturers, insurance from insurance companies, and petrol from oil companies.
But if you think about it, these align to one demand and outcome – road-based mobility. And this is the way digital companies need to think – deciding if, when and how they’re going to create value.
Put simply, you have three options 1) do nothing and risk disintermediation, commoditisation - and possibly extinction 2) be a participant of these value-driven ‘ecosystems’ orchestrated by others 3) be the leading orchestrator of one or more value-driven ecosystems.
Professor Venkat Venkatraman suggested that digital transformation unfolds in three phases: ‘experimentation at the edge’, ‘collision at the core’ and ‘reinvention at the root’. What’s more the digital ecosystem involves so many players it’s like a complex chessboard. So a first step is to understand where you fit in, how ready you are for transformation, which phase you’re in and where you want to get to. This includes understanding how and when to collaborate and/or compete with other players in your wider eco-system.
One way to get that picture is to complete our– use it to compare your organisation to others – and repeat it every six months or so to evaluate your progress.
Understand how to be an ‘end-to-end’ digital business
How do you keep an existing business going while working towards the future? The main challenge may be legacy – constrained by rigid business, technology and data architectures that may have been in place for decades. They may have started in a time when technology was inflexible, scarce and expensive. Think of a user of different software packages using a different PC and operating system for each one – add on the complexity of connecting these PCs with a web of cables – that’s what this challenge is like.
For many organisations, the answer is to run their current business on the legacy environment and create a separate digital sandbox or digital ‘bolt-on’ for the future business. But wouldn’t it be great to have a common digital fabric underpinning both the current and future business? Our metaphorical user will use just one PC and operating system on which different software packages can be installed, run easily, and tweaked rapidly. This means:
Think big, start small, scale fast
Blend strategy and execution into a ‘think big, start small, scale fast’ approach. We’ve seen this work for various organisations (including a leading recruitment agency). What does this look like?
There’s no ‘start and exit’ – these steps aren’t necessarily sequential, and are in a permanent state of flux. As the guests and panellists at our event agreed, it all takes a new way of thinking.