Transformation has to run deep to be meaningful
The word ’digital’ seems to have overtaken ’cloud’ as the hottest word in the IT industry. I have no quantitative evidence for this, but if vendor PowerPoints are anything to go by, I don’t think I’m far off the mark. And as marketing teams get their teeth into this trending topic, it is inevitable that many of the old favourite buzzwords will be added to the mix, giving us terms like ’digital transformation’ and ’digital disruption’.
I gave up fighting the battle around marketing and management consulting jargon a long time ago; you can’t take on those with huge marketing budgets and win. But I do think that when you use horribly overloaded and ambiguous terms like those above you need to be clear what you are speaking of.
Let’s therefore say that ’digital’ is simply the latest shorthand that we can use when considering the impact of advances in technology and communications on how we live, work and do business. If you want to get more specific, you can focus on things like cloud, mobile, social and the Internet of Things (IoT), along with the analytics capability that helps you make sense of it all (throw ’big data’ in there for good measure).
’Digital disruption’ then refers to the way in which all this shakes up the status quo. As faster, more flexible and more automated methods emerge, old ways of doing things can be totally eclipsed, in turn undermining the performance of those relying on yesterday’s systems and best practices. The old principle of ’standing still means falling behind’ is not a new one, but with some of the dramatic shifts we are seeing at the moment, it has never been more apt.
Players like Uber and Airbnb demonstrate how digital disruption can operate at an overall market level, and when thinking of these we might consider the notion of ’disrupters’ and ’the disrupted’. But focusing on such success stories is a bit of a Red Herring for most established businesses. Only a few of these pure digital entities can succeed at scale. Indeed, the vast majority of digital start-ups fizzle out quietly, their disappearance seldom interesting enough to warrant a news story, except when it attracts the ire of those who have lost money.
Zooming out to the bigger picture, economies and societies still rely on businesses that make things, grow things, dig things out of the ground, etc, or move them around so the rest of us can consume them. Even most service companies are generally somehow involved in facilitating ’bricks and mortar’ activity taking place within their client base. Think it through and it’s clear that the world can only accommodate a certain number of Uber-like companies. Someone ultimately has to do the physical driving, making and transporting of stuff, and so on.
With this in mind, when considering digital transformation of your own organisation, don’t fall into the trap of thinking this means shedding the people, buildings, vehicles, plant and other assets your business relies on at the moment. Sure, advances in technology and communications can make outsourcing and partnering much easier and more cost effective, but it’s important to be selective and retain control of the core activities that make your company what it is and allow it to create value.
It’s also OK to just aim to keep up with market trends. We hear a lot of nonsense about always striving to be a leader and market disrupter, but another fairly obvious truth is that it’s not possible for everyone to be out in front. Most management teams don’t want or need the kind of risk and exposure that comes with living on the bleeding edge anyway; they can drive good success by simply remaining strong enough to compete and keep customers happy as one of a number of players in their industry.
But that isn’t a licence to be complacent and leave products, systems, processes and business models as they are. Markets really are being impacted by the march of digital and if you have been fortunate enough not to have been affected so far, it’s only a matter of time. You need to at least keep up, but preferably stay ahead of the curve. Waiting until your hand is forced can be very costly and damaging. This is the case whether you have world changing ambitions or not.
Against this background, we found it very enlightening to look at the behaviour of more successful large enterprises in a recent global study of 1,442 senior IT and business professionals. The more we looked at the data, the more it became clear that those delivering the best results in relation to various KPIs, such as market-share, revenue, profitability and ROI from digital investments, had one important thing in common – they proactively drove internal disruption within their organisations.
The important phrase there is ’within their organisations’ – the lesson being to by all means go ahead and try to disrupt your market, but make sure you pay at least as much attention to challenging the way your business operates behind the scenes. One example is shifting from traditional fixed product cycles to a more continuous and iterative approach to creating value. Another is exploiting modern technology to transform operational processes or enable your employees to work more productively and collaboratively.
The bottom line as you prepare your business for the next decade is that digital transformation needs to run deep. Creating an interactive website and throwing a few mobile apps out there isn’t good enough, regardless of the rhetoric we hear around digital customer engagement.
So how does your organisation stack up? Well, take a look at the research I have mentioned in more detail and make your own judgement. A report summarising the study results is available here