Our world today is undeniably digital. New technologies – from social media and GPS systems to artificial intelligence and digital twins – make the planet we inhabit unrecognisable from even 20 years ago.
If you’re feeling queasy at the speed of change, hold tight. It’s only going to get faster. The pace at which disruptive technologies are arriving is accelerating – and they’re changing how we live. Today, you don’t have to be a digital native to behave like one. Mid-lifers are nurturing their social media profiles and tracking their exercise regimes on Fitbit. Seniors are choosing tablets over newsprint and FaceTime over phone lines. More and more of us are spending more and more time connected, and the average US citizen spends more time staring at a screen than sleeping.
The same technologies are giving rise to new business models, with organisations using digital to create and monetise new forms of value. Increasingly, this value is delivered through new cross-sector, outcome-based propositions, rather than traditional sector-specific products and services. Organisations able to provide customers with tailored, on-demand products and services stand to reap the rewards.
All or nothing
Start-ups and digital giants move easily in this world and are poised to take advantage of the commercial opportunity. And their confidence, know-how and ambition are reshaping entire industries. By contrast, successful incumbents tend to tread cautiously.
We spoke with 425 leaders across a range for our National Digital Benchmark report, Transforming for tomorrow: preparing incumbents for digital disruption. More than half of these leaders (53 per cent) admit they over-invest in what they’re good at today – enhancing and refining their current propositions – and under-invest in what they should be good at tomorrow.
These organisations are opting to ‘experiment at the edge’, seeking to use digital to improve the customer experience or make processes more efficient, rather than to reshape their entire value chain. Of these leaders, 68 per cent are more comfortable adopting digital technologies to enhance current business models, rather than disrupting their current one.
The truth is, adopting a ‘digital at the edge’ approach leaves money on the table. Follow this path and you miss vital opportunities to create and monetise value. To truly transform for tomorrow, you must look beyond experimentation and towards complete reinvention of your own organisation, as well as to delivering solutions in ecosystems across multiple industry boundaries.
As leaders look to transform for tomorrow, our report found three areas of focus to unlock the opportunities of digital transformation:
Follow the digital-first blueprint
Both digital giants and new, emerging market entrants are led by digital mindsets, driven by how to disrupt their existing market or an entirely new one. Incumbents, who often seek to subtly adapt, need to break free from the shackles of the past and act boldly to seize the opportunities of the future.
To do so, they’ll need to look to partner and joint venture with those with dominant competencies. For example, the car industry has worked with geo-fencing technology providers to speed up the process of handing new cars over to dealers, making it more accurate and less risky. Sensors built into cars detect the exact moment the car transporter passes onto a dealer’s premises and software instantly transfers the asset from the manufacturer’s balance sheet to the dealer’s.
At the same time, incumbents must start imaging how they can disrupt their own organisation, learning from the mindset of digital-first firms. Any disruption will need to start with a view of the customer, lowering effort and friction at every touchpoint and using data to anticipate and respond to their needs.
Grapple with the digital talent challenge
For digital transformation to succeed, it must be driven from the C-suite and the boardroom. But our findings suggest that organisations are still focusing on nuts-and-bolts roles such as programming, rather than recalibrating their leadership teams and non-executive directors (NEDs) with the required digital skills.
With more than three quarters of organisations (78 per cent) admitting they experience tensions between traditional operating models and new digital ways of working, leaders must take positive steps to ensure their people are equipped to deliver the required transformation.
Leaders will need to look to fresh thinking outside of their sector and aim to upskill existing employees. In particular, our findings showed many NEDs are out of step with other senior leaders. While NEDs are there to bring a different, external view to strategic decision making, the marked difference in their levels of optimism around digital transformation suggests more must be done to widen NED talent pools and sharpen the insights they provide.
When faced with investing in what’s been successful to date versus investing in what might be successful in the future, our report found leaders typically opt for the former.
And this safety-first approach is inhibiting innovation and cultural change. Leaders told us they’re largely struggling to conceive, plan and launch new services or divisions as though they were a self-standing born-on-the-web business. And more than two thirds (69 per cent) said they do not believe their workforce and culture have been adapted for the digital age.
In order to successfully transform for tomorrow, leaders must embed a ‘think big, start small, scale fast’ mindset to quickly identify the art of the possible, encourage experimentation and move from idea creation to value at pace. Doing so can empower people to innovate, open up the possibility of multiple experiments running simultaneously at any one time and create a sense of momentum and excitement.
How will you get there?
We believe that every business must eventually transform for tomorrow in order to seize the opportunities waiting. Adding bolt-ons to legacy cores is no longer enough – total transformation is required.
While some organisations will survive for now with digital bolt-ons and running legacy and digital technologies side by side, the boldest will move straight to reinventing at their root. They understand that future advantage will come from creating new value from digital technologies and digitally-enabled business models, not from trying to protect current value in existing business models. Are you ready to transform for tomorrow?