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March 31, 2016
Becoming a truly digital organization
By: Mark McDonald

Every business has the opportunity to become a digital business. However, some are better equipped to do so than others. Building a greenfield digital organization is admittedly easier for new market entrants who are unencumbered by traditional practices, particularly in comparison to established players with an analog heritage. But large incumbents shouldn’t be discouraged.

Digital is unchartered territory, steeped in unknowns, which can feel uncomfortable for risk-averse CEOs who have always done things in a particular way. But those ways are no longer delivering. Just like disruptors are paving new paths and making up the rules as they go, large incumbents also have the opportunity to do so too. However, they will only succeed if their digital strategy is more than just skin-deep. It has to be an inherent part of business strategy as opposed to just a veneer.

Many organizations claim that their digital offerings run deeper. They point to sales, services and marketing, highlighting apps and analytics investments as proof that they are digital. The bigger question, though, is whether true digital principles are fueling their business. A real digital business incorporates digital principles into its strategy, business model, operations and culture. By contrast, a digital veneer leads companies to limit change to establishing and unifying new channel technologies into the existing business strategy, model and operations.

Becoming a digital business is increasingly important and a critical multiplier for economic growth. The question remains, “What does it mean to be a digital enterprise?” One approach is to look at the digital nature of the principles that underpin an organization.

What are these digital principles?

Digital principles describe existing grounded truths created and accelerated by technology.  Technology principles such as the use of package systems, data consistency or adopting agile techniques alone no longer create sustainable value.  

Digital principles, by contrast, recognize the implications and imperatives of a world that is increasingly information intensive and connected.   

Digital principles redefine imperatives around customers, growth, efficiency and innovation. The section below discusses these persistent principles. Look to the links in this post and future posts for additional details. 

  • Customers are at the heart of every business model. Customers are the reason why digital is changing business as digital technologies finally touch the top line. A digitally principled enterprise concentrates on creating outcomes customers repeatedly notice, value and choose. Centricity is not enough. Instead, digital principles call for using technology to raise human performance, transforming people who are objects of a business model to subjects of shared value creation.

  • Growth is the goal—obvious but often overlooked—as companies redefine their existing business models for a new era. Supply exceeds demand in just about every industry. Without growth, there is silent disruption. Customers are the only higher principle since they are the source of accretive growth.

  • Efficiency is an imperative as digital changes transaction economics. Anyone can be cheaper, but a digitally principled firm delivers greater value per revenue through precision at scale—a new principle for efficiency.

  • Innovation is an obvious digital principle as digital technology appears to make just about anything possible. Competitive windows collapse with increased information intensity and connections. A digitally principled company recognizes the need to do new things in new ways—to find new answers to new questions. The result may be incremental or inspirational. Either way, a focus on new things opens new windows.

Digitally principled companies recognize the impact of information and connections on customers, growth, efficiency and innovation. They avoid dismissing these principles as digital hype. The principles may seem patently obvious in a world of stable competition. However, they are essential, particularly when digital disruption changes the rules, reducing the effectiveness of past practices. Digitally principled companies are subversive in this regard, changing the terms of competition without telling anyone. These companies operate by rules that do not make sense to incumbents, and are easily dismissed while they create silent signs of disruption.

The real digital threat

Executives without an appreciation of digital principles undermine their future competitiveness.  They re-automate past products and practices on new sheets of glass without thinking that there is more to digital than mobile apps, analytic reporting, etc. The result is growth in digital transaction channels and pseudo engagement, without attracting new customers, increasing products per person or relationship size.  

The resulting digital disillusionment feeds fear about disruptive start-ups and causes executives to lose sight of the real threat. It’s not the digital start-up that will kill you. Digitally principled companies are the real threat.  

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