More than a third of businesses today will be dead in 10 years. That was the sobering prediction made by Cisco’s then-CEO John Chamber in one of his last speeches before he retired in mid-2015. He didn’t stop there. The only ones that will survive will turn their companies into digital, techie versions of themselves, and many will fail trying, he asserted.
This thinking is why even the most analog of businesses are hard at work trying to close the digital gap. In fact, a recent North Highland-sponsored survey of 200 C-suite-level U.S. and UK business leaders found that 83 percent feel it is very or extremely important for their organization to increase its level of digitization over the next five years.
What does it mean to be a digital business? It goes far beyond using e-mail and spreadsheets and connecting to the Internet. If that were all it took, even the smallest mom-and-pop operation would be considered a digital one. There are three critical operating tenets that characterize digital companies:
1. They give authority to data, empowering it to inform short-cycle feedback loops. Digital companies invest in and build a foundation of more and better data sources. They spend more time doing than planning, reporting, or documenting, and they nurture an environment of feedback loops that provides the data needed for incremental course correction.
2. They organize around their products and objectives, not functions or geographies. Following this organizational model reduces the need for inflexible hierarchies and job descriptions. Instead, efforts and resources are focused on work that supports the value chain and steered away from activities that don’t. A digital business such as Uber illustrates this principle—by not categorizing drivers as employees, the company can redirect investments toward areas that add competitive edge, such as R&D as opposed to back-office functions such as finance.
3. They are designed to transform continuously, and travel light. Digital businesses cannot rest on their laurels. The same agility and lean operations that fueled their success also can power a rival firm. Some of the best-known digital companies are built on a purpose so aspirational that it requires constant and nimble transformation to move toward the goal. Consider Elon Musk’s SpaceX and its aim of enabling people to live on other planets, or Uber’s intention to operate flying cars by 2020. Apple is not afraid to cannibalize from within and deliberately makes its products obsolete every few years by releasing new innovations.
The notion of traveling light is key. The largest hotel company in the world, Airbnb, owns no hotels. Uber owns no cars. Facebook doesn’t create content; it just brokers it. They own only what they need to delight customers and drive employees toward greater levels of excellence.
Being a digital business will not look the same across every industry vertical. Industries with a massive physical presence and capital expenditures, such as manufacturing, will not adopt the same business model as sectors such as professional services, whose “products” are people and intellectual property, or retailers, who must use data to offer highly personalized customer service.
But that does not mean that sectors such as manufacturing cannot join the digital revolution. The advent of 3-D printing and open-source product design has enabled some of the most traditional industries, such as dentistry, to radically reduce the time it takes to produce custom-fit crowns. Henry Schein, an 84-year-old dental supply wholesaler based in Long Island, is doing just that. Another example is Boeing, which recently announced a partnership with Microsoft to build a cloud-based platform for its portfolio of commercial aviation analytics tools.
A Framework for Digital Success
Although no two companies will follow the same roadmap in their digital transformation, North Highland’s experience in leading digital transformations for clients of varying sizes and industries has revealed a short list of absolutes that can provide the framework for digital success. All of these can be empowered through employee development and change management support:
- Prepare for discomfort: Organizations doing it right get comfortable with discomfort. Be willing to just get the journey underway and power through the organizational changes required for success. Even when undertaking large organization-wide changes, breaking tasks down to incremental changes makes things more manageable and easier to measure.
- Help your leaders identify and build the right team: Disruption is like an attack on the immune system, often provoking a natural response for corporate antibodies to fight digital transformation. Long-standing high-value leadership traits are being replaced by diversity, resilience, and the capability for transformation. Help your leaders decide what capabilities they will grow versus buy—outsource every capability that is a commodity.
- Start small and prove by doing: If a large team isn’t working, recommend that the team leader reduce a project group to a smaller, more focused team. Launch and learn; don’t get bogged down by too much research and don’t hesitate to act. Trial and error in a safe, internal sandbox environment gives teams the power to execute and bring conceptual ideas to fruition.
- Recognize that this is an enterprise transformation, not an IT one: Business units responsible for products are more open to change than those responsible for operations. Line-of-business leaders are incentivized to achieve transformation; the IT department is incentivized to keep the lights on and the servers running.
Digital transformation is not an end state. It’s an ongoing revolution. It’s a revolt against business-as-usual in favor of continuous improvement, agility, automation, and transparency. But it’s the best kind of revolution, one that will make organizations stronger, products better, and customers happier. And it is a transformation that cannot happen without training and workforce development.
Ben Grinnell is managing director and global lead of the Technology and Digital Service Line at North Highland. He has spent more than 15 years working with technology leaders of FTSE 100 companies. Grinnell has extensive experience in delivering infrastructure and application architecture strategies and solutions, as well as outsourcing, insourcing, and organizational restructure. His current focus is on helping technology leaders adopt digital practices and transform large IT functions. Grinnell is a regular public speaker on IT strategy and the public sector. His ambition is to fundamentally change the way business and IT interact and to influence the way the IT director role evolves.
