When it comes to digital, the scales have fallen from the eyes. Digital technologies are now at the heart of the tasks performed by people and companies to create value. This both increases efficiency and generates untold quantities of shareholder value. Consequently, business leaders are in a race to adopt digitalization to keep up with the pace of market and technological changes. However, such haste often comes with a price, as many fall into the trap of confusing “doing digital” with “being digital.” All too often, bosses are merely paying lip service to the use of digital technologies, through half-hearted measures such as putting a fancy digital cover on their old business model to refreshing their website, increasing their social media followers, or sticking a mobile front-end on an existing enterprise application that underpins an industrial business process. And then they wonder why they aren’t creating value.
While doing digital has the advantages of being quick, cheap, and low-risk, it’s also like climbing a ladder to reach the stars; while you might convince yourself (and your board) that you’re making progress toward your digital goal (and, technically, you are), ultimately you will never reach your destination. The “cool and hip” approach simply won’t cut the mustard. We refer to this phenomenon as “becoming pseudo-digital”; in other words, it’s about leaders simply gluing digital solutions onto existing business models. Why spend millions of dollars setting up physical stores but assume that a mobile app can be created on a shoestring budget? Such a “spray-and-pray” approach invariably yields minimal or non-existent results. Your customers are tech-savvy and aren’t going to be fooled by a lick and a promise when it comes to digital.
Rickard Gustafson, CEO of Scandinavian AirLines (SAS), summed up the problem nicely: “For us, it’s not just about putting some lipstick on a pig and trying to portray a nice portal to the customer. You need to have efficient tools. You need to have an efficient Web offering. You need to have an app. You need to connect to your customers on these mobile platforms, but the key for us is also how you automate and digitize the inside of SAS.”
Traditional companies are stuck in a particular era; they have a base of existing processes, products, and cultural values, with roots in the industrial age. It is essential that they transition from an industrial leader to a commanding digital/industrial hybrid organization. Although profit generation within the digital realm is not rocket science, it does require an overhaul in terms of mindset, organizational structure, and investment priorities. Leaders must rethink, re-architect, and rebuild their supporting business model to embrace digitalization. To gain truly outstanding results, said model must be digital to the core, with process flows and organizational structures informed by digital, rather than industrial, principles.
The good news is that success is well within your grasp, regardless of your company’s size, complexity, and history. Digital business transformation is more an art than an exact science. Look to firms that have fruitfully remodeled themselves; GE, the only surviving member of the original Dow Jones Index of 1896, is reinventing itself as a key digital player. The company has been radically cutting costs in the old business to fund the new direction. Its SG&A expense was reduced from 18% in 2011 to a targeted 12% in 2016. The organization also altered its people’s mindset from “control” to “speed and collaboration.” Its FastWorks initiative, based on streamlined startup principles, was adopted to limit the bureaucracy surrounding innovation. For example, it eliminated annual strategic planning and performance appraisals in favor of ongoing assessments and feedback.
Although there are rules to be followed if one wishes to succeed in this new machine age, unfortunately nobody knows what they are. This is where our new book comes into its own by offering a framework termed “The AHEAD Model,” which acts as a field guide to help you survive and thrive in the digital economy. There is no one single approach to “being digital” in a corporate environment; in fact there are five – Automation, Halo, Enhancement, Abundance, and Discovery – which are thoroughly explained in the book, together with industry-relevant examples.
By making informed decisions about how to embrace technology, you can expand your business and increase ROI; however, before doing so you must be clear on why you’re turning to digital in the first place.
The traditional elements of mass production and wealth creation (capital, labor, and raw materials) are being redefined by digital elements, creating new value for businesses. The rise of the digital economy is a pivotal moment in history that will likely follow the time-honored pattern of technology adoption described by Bill Gates: “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next 10.” Don’t make the mistake of being a pseudo-digital.