Check it out: how many of your functional titles have ‘digital’ in it, today? Did you ever get the impression that there is a digital and (or even versus) a non-digital distinction building up in the thinking, speaking or acting in your organisation?
Digital, (just) to improve?
We come across many executives that approach us to help them entering the digital era. And it often starts with seemingly simple, even trivial questions like: how to sell more or increase revenue, with digital? How to decrease our cost through technology? How to leverage the presence of and on (our) digital channels? How should the IT department drive our digital strategy?
What many of these questions are often revealing is that people see and think of digital as a specific, dedicated or even separate part of their business, and approach digital as a way to improve their business (model) of today. Digital is indeed a way to (further) optimise the current way of making money, of interacting with (existing) customers, of managing (today’s) workflows or attracting talent. Digital is a set of tools that can optimise today’s business.
And that is what a lot of technology providers love to sell: if robots can help the speed and effectiveness of your warehouse management, you should consider it! If sensors optimise workflows, or website data allow to improve reaching target customers, why not work on that. And the more technology providers and executives trigger each other into ROI and discuss technology investments, the more they set themselves up for technology as an optimisation resource.
Digital, to transform?
I am afraid though, this approach overlooks another, potentially more substantial part of the question in what digital really means: with all the technology available, how can we create more and different value for today’s and tomorrow’s customers? How to leverage the potential of technology, data and AI (or even create new technologies) that build (entirely) new types of value propositions, for existing and especially for new customer types and profiles, in entirely new ways and channels, built on completely different cost and pricing schemes? In short: what is our future (technology enabled/accelerated) business model?
If you make candles, you can look at electricity as a way to optimise your production and distribution of candles; or you start thinking and working on building an electric lighting and heating business model.
If you make newspapers and magazines, you can use Internet to publish the same lot of articles; or you can look at interactive media approaches to interact with your tribes of homogeneous citizens (who are all interested to stay tuned with what ‘s happening in their – not just the – world).
If you make cranes, you can try to sell cranes online, or you can evolve your business model, gradually, to ‘lifting as a service’.
If you clean airports, you can improve the efficiency of your operations through technology, or you can, step by step, shift your proposition towards ‘promising clean airports’.
The challenge for many existing players is to not only think of digitising their current business, but also to anticipate and to imagine what could be built and created through technology in terms of future business (model). This is not the question of what the digital strategy is, but rather what the strategy is, full stop.
Bearing in mind that the paradigms of the current and the future, more digitally fuelled business might be quite different, in terms of operations, cost base and even revenue streams, and ‘normal’ (= historical) profit levels.
Balancing the optimisation and the transformation
This is not an easy process because there is no way you can predict how the market will absorb (your) new propositions, how the customers of the future (that may not even be in your reach today) will choose to interact with you, what exactly you can do with the data that you might discover you can capture from across the value chain. Do not even start calculating the ROI of making that future leap.
In our work with many incumbents, we experience how the integration of the ‘optimisation roadmap’ and ‘transformation roadmap’ is a challenge for senior leaders. It requires tapping into a different way of thinking, of deciding, of prioritizing actions and of evaluating risk and achievements. Different easily becomes conflicting.
It is the unique role of the Executive Team(s) to focus and discipline themselves in bringing the two agendas, and honouring the process of the two agendas and their decision making and action planning cycle of and in itself. Reminding yourself that optimising today will not (necessarily) make you successful for the future.
The question frames the answer
In that process, we have experienced how important it is to listen: to listen to how the question is formulated. Because the language used, the questions or concerns raised are often a symptom of the frame of mind we find ourselves in. This is to avoid that the discussion and working process gets stuck because we are dealing with two seemingly related but inherently different questions, or limiting ourselves to only one angle to the digital issue.
There is no reason not to answer your optimisation questions, such as formulated earlier, as long as they do not get in the way of the transformative questions to also get answered (and probably both in a different approach, style and even timeline).
Digital to create and capture (more/different) value
Digital is often in essence a business question, not a technological one. However, to be able to make the right strategic choices it is important that we understand the possibilities technology offers us and its impact on strategy, business model and leadership. No matter how challenging it seems for the many non-experts most of us are, the really tough part is not the technology systems, algorithms or interface part. The fundamental question that needs answering, but easily gets overlooked or glanced over is: with the technology, what value will we aim to create, for whom, and how will we capture value with this? Allow me to rephrase the question we started this blog with: what is your strategy, really?