By Ilze Flatley, Consultant
Due to the Digital Transformation, local and global businesses are now more susceptible to disruption than ever before. By the Digital Transformation, we mean the use of technology that radically changes the market environment and ultimately improves the performance and reach of an organization. At the center of this are three questions:
- What should companies do more of to be successful in the Digital Transformation?
- How will the Digital Transformation impact and disrupt my business and industry?
- How do I enable my people to keep pace with new innovations and insights needed to be successful?
The answers to these questions are complex and context dependent, but here’s what we’ve learned so far:
What should companies do more of to be successful in the Digital Transformation?
Earlier in 2017, Bill Gates tweeted the following to graduates: “This is an amazing time to be alive, I hope you make the most of it.” While consumers are embracing “this amazing time,” also referred to as the fourth Industrial Revolution, organizations and CEOs are scrambling to reimagine an operating model and workplace that can keep up with the pace of technological advancements. In June 2017, Forbes reported that 73% of Fortune 500 CEOs consider the rate at which technology is changing and its impact to their businesses as their top priority. Perhaps even more interesting is that 71% of CEOs consider themselves leaders of a technology company. This statistic isn’t just a reflection of the impact of the Digital Transformation on business, but also a glimpse into the breadth of challenges and opportunities CEOs and business decisions makers face today.
As we’ve worked with leaders across industries, we have found the following two key elements that organizations need to do more of:
1. Organizations need to embrace their competitive landscape
Let’s revisit that statistic that 71% of CEOs consider themselves leaders of technology companies, and let’s keep that in mind as we look at Ford, as an example. Just a few years ago, Ford’s biggest competitors were other car manufacturers such as Nissan, Toyota, GM, and others. Today, Ford’s competitive landscape also includes technology giants such as Google and Apple and start-ups such as Tesla. To be successful, organizations must reevaluate who their competitors truly are today and who they might be in the future. They then should evaluate what each competitor’s disruptive focus is and how competitors have transformed their organizations to be successful in the digital era.
2. Organizations need to build strong ecosystems
Whenever the Digital Transformation is discussed, companies such as Uber, Airbnb and Facebook are referenced, but the truth is, you don’t have to be one of these “unicorns” to be successful in the digital era. Marshall W. Van Alstyne, Professor at Boston University Questrom School of Business, argues that companies should seek their own path of transformation. Technology is infinitely malleable and allows (existing) organizations the opportunity to become anything they want or anything their customers want them to be. However, this is much easier said than done. What we found is that companies with a strong ecosystem of value chain partners (necessary to deliver products and services) can respond faster to changing customer needs while scaling to keep up with the fast-increasing global demands. Companies such as GE, Microsoft and Samsung are just a few companies that have been able to build strong and successful ecosystems by investing heavily in partner relationships, providing extensive educational support and viable incentive structures.
How will the Digital Transformation impact and disrupt my business and industry?
Recently, we worked with over 300 executives of a global technology company to explore the seven key retail industry trends of the moment. These trends are the shifts in the market that we determined by observing and working with more than ten of the largest CPG and FMCG companies worldwide. The trends, described as “from-to” shifts, are: transactional to experiential, holding inventory to no inventory, department stores to specialty retailers, brand loyalty to brand promiscuous, mass production to mass customization, and physical store to digital store.
We worked with this group of global executives to re-imagine the future of their businesses, their customers’ business and the marketplace as a whole. The following three trends were, by and large, the most prevalent in all the sessions: transactional to experiential, physical store to digital, holding inventory to no inventory.
Next, given these trends, we asked the executives to identify the themes that will have the most significant business impact or level of disruption to their customers’ businesses and the likeliness of these themes occurring in the next 3-5 years. The following three themes were identified most consistently during all of the sessions: evolving consumer preferences, the need to control the value chain, the shift to the sharing economy.
While all three themes received a lot of focus and discussion during sessions, the one theme that emerged as the most prevalent was “the need to control the value chain.” This means creating an end-to-end consumer experience from pre-sales to post-sales, requiring retailers to take control of the entire value chain. The challenge is that the consumers’ shopping journey starts much earlier than the actual transaction and ends long after. Amazon has mastered the digital online component and is slowly expanding its physical store footprint. The opportunity for disruption comes from the retailers that can leverage their broader ecosystems to drive value to their consumers – remember, unicorns are mythical.
How do I enable my people to keep pace with new innovations and insights in order to be successful?
In times of rapid change, organizations often go into execution mode to ensure they meet the expectations of today. However, the Digital Transformation requires companies to consider how to be successful in the future. Organizations must enable their employees by providing them with the right tools and behaviors to “learn faster and govern smarter.” The number of tools and behaviors that can be referenced are plentiful and often overwhelming. To keep it simple, we identified the three great behaviors employees need to have to ensure success as well as the common pitfalls individuals and organizations fall into when trying to transform their business.
Here are the three great behaviors, and their common pitfalls:
- Inquisitive: Great employees are consistently curious and seeing learning opportunities regardless of the task on which they are working.
Common Pitfall – Employees and businesses are complacent and believe they will be “spared” by the impact of the Digital Transformation and do not take action to change fast enough. As a result, we see an increasing rate of businesses going bankrupt. If we use the retail industry as an example, there were 18 bankruptcies in the US in the last 18 months, which is higher than what was reported in 2008/2009 recession.
- Courageous: Great employees exemplify boldness and courage in facing challenges – while reality may not paint a pretty picture, it is better to know what threats you face than being caught off guard.
Common Pitfall – Employees and businesses make the conscious decision to be ignorant of external threats and be overly confident to the point of arrogance.
- 1+1=3: Great employees collaborate internally and externally – the greater success is often found when the value is increased in the entire ecosystem.
Common Pitfall – Employees and business often try to be everything to everyone.
The journey of Digital Transformation is certainly a challenge, but it is one that we all face together. By working to continuously learn and share how the digital era impacts our business, clients, and client’s customers, we will be able to evaluate current and future competitive threats, making bold moves to be the disruptor. We will continue collaborating internally and with our clients to build strong partnerships, bracing for whatever the future may hold.