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August 13, 2013
Delivering high performance through digital
By: Mark McDonald

Every business is a digital business, but many don’t know it yet. Realizing digital opportunity requires becoming a digital business. The economy is increasingly a digital economy with more than 14% of global commerce already online. The digital opportunity is growing faster than the general economy. Whether you know it or not, digital is becoming the default for creating customer value and generating company revenue. The real issue is how?

Digital refers to any information intensive technology. Digital businesses use digital resources to create growth and results. High performance through digital describes how companies generate a premium from leveraging the equation below.

Digital High Performance equation

Growth and results rising to the power of information delivered on technology platforms such as cloud, mobile, analytics, social and sensing technologies deliver high performance. This formula captures the relationships required to build a premium into customer experiences, products, services, channels and operations.

Digital Business Strategy defines the decisions and investments required to realize a digital premium to revenue, margins, operations and earnings. Companies earn this premium through digitalization of the business – creating new and valued combinations of current and digital resources. The alternative – digitization – swaps physical resources for digital ones, leading to further disruption of pricing power, revenue and earnings.

Finding and creating a digital premium is the goal of a digital business strategy. The source of that premium and the actions it requires represent the fundamental strategic digital decisions for every executive.

Building a digital business, one that generates premium value from digital resources, rests in finding new combinations of business and technology resources. Those combinations rest on a set of principles about the role of digital in business, innovative business models across industries. There are four:

  • Digital should drive organic growth

  • Digital should deliver operational results

  • Digital demands information

  • Digital requires new technology platforms

Taken together these principles describe how digital creates value and results in any business and therefore describes the principles that will shape every business.

Digital should drive organic growth

Digital markets are real and growing. Today, there is more than $14 trillion dollars of digital economic activity online according to Oxford Economics and billions of connected consumers and devices growing at a rapid pace. The digital market is new with few incumbents and therefore a source of future organic growth.

Every marketplace will be digital. If you have a customer, leverage limited resources, and coordinate across a value network, then you face a digital marketplace. Growing in a digital marketplace requires adapting to changing values by using information, innovation, and choice to re-level the playing field and return stability of top line revenue. Digital must drive innovative sources of customer value and company revenue to drive growth. Making something mobile, enabling the sales force with iPads or providing real time information may make things faster and cheaper, but not necessarily better in ways that drive growth.

Driving growth requires more than constant experimentation in hopes of finding temporary success. Creating sustainable growth opportunities in an adaptive market requires building premiums that go beyond price to connect with customer values, objectives, behaviors and experiences.

How will digital technology drive growth? This is the first and most important question in a digital business strategy. It is a question rarely asked when making the case for swapping out technologies.

Digital should transform operational results

Results are the difference between opportunity and operations. Everything that is possible in the digital world is not necessarily profitable. Digital drives operational results wherever people make decisions, come together to collaborate, take action to ship the product, serve a customer or support an associate.

Every result will involve digital technology. New combinations of information, mobility, task automation, etc. define new levels of cost and capability performance from innovative work practices and skills. Digital introduces new actors and roles into operations including collaborative communities, machine learning based expert systems like Apple’s Siri and full operational and robotic automation already present in ‘lights out’ systems.

Transforming results requires innovating the nature of work, creating new customer experiences, enhancing workforce ability.

How will digital redefine operational performance profiles? Cutting costs is important, but digital results transcend incremental rounds of efficiency.

Digital demands information

Digital creates and consumes information while redistributing relationships across the value network. Seamless and end-to-end information raises the power of growth and operational strategies. It forms the context for digital customer experiences, enhanced workforce abilities and competitive differentiation. Putting the right information into action is a critical success factor in creating and sustaining a digital premium.

Everyone is informed. Everyone has access to new applications of information. Customers, suppliers, partners, employees know and share more than ever before. Information challenges the effectiveness of branding and marketing. Information requires associates to know and do more with customers, products, services, procedures, etc. Too many face an imbalance of information. Companies know what happened. Customers know what they want to happen. Rebalancing the information arms race requires recognizing that information is plentiful but insight is in short supply. Information quality and execution trump information quantity and analysis.

Which critical insights drive the business and which dilute value and competitive position?

Digital must live on digital platforms

A digital technology platform is greater than an IT infrastructure. Digital requires supporting a range of complimentary business activities and technologies. Digital demands platforms that range from cloud to mobility, to remote sensing, analytics and big data. Platforms are the point of integration in contrast to an infrastructure that enables specific solutions.

Many out of one describes the goal of any effective platform for innovation and operational success. Digital business is economically and operationally crippled without a platform as legacy infrastructures generate cost and complexity. A platform supports diverse and evolving sets of products, services and processes. Amazon does not build an infrastructure for each of its markets, neither should you!

Infrastructures must evolve into digital platforms in order to provide an adaptable, scalable and efficient delivery vehicle. Organizations without a digital platform will quickly find infrastructure complexity, cost and fragility crippling and limiting, and a hindrance to new options and improved operations in the digital future.

What is the right structure and platform for digital technology?

Delivering high performance through digital requires thinking and taking new actions.

Growth, results, information and platforms represent essential elements of a premium digital business. A digital business strategy is the sum of specific and combined decisions around each of these elements. Each enterprise and every industry faces these decisions individually but collectively they will shape the future of digital business.

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