Digital disruption will redefine the key factors for success in every industry. By setting a clear direction, creating a culture of experimentation, leveraging data assets, and promoting digital talent, companies can ensure they acquire the capabilities to win in the digital age.
Over the last few years, digital has moved from disrupting the low hanging fruit of industries like media and retail to a point where its potential to transform every industry is now becoming clear.
Encapsulating this shift in sentiment is industrial giant GE which has positioned itself as “The digital company. That’s also an industrial company.” And GE is not unique. A study by MIT found that 78% of companies believed digital transformation was critical to their organisations, however, 63% also found that the pace of technology change was too slow due to a “lack of urgency”.
If companies are to prosper in the coming years they will need to quickly tap the potential of digital. To do this they must first understand how digital will impact their business and identify the unique opportunities and threats it presents to them. However, given the huge scope and novelty of the digital space, there is often a lack of clarity about where and how to start.
Set the direction for digital
Before embarking on the digital journey companies need to ensure that they are traveling in the right direction. To set the correct direction we have identified five fundamental questions that every company should ask at the outset:
1. How does digital bring opportunities and threats to our business?
Firstly, businesses must ask what opportunities and threats digital presents to their company. These could be the opportunity to increase value delivery to customers, to lower the cost of delivering that value or, to tap new markets through digitally enabled products or services and digital sales channels.
Conversely, digital could create new threats by rendering existing assets and technologies redundant, undercutting the industry’s existing cost structure, enabling new entrants from other industries or, permitting the rapid scale-up of start-ups.
2. What stage of maturity has the organisation reached in digital?
Secondly, companies need to evaluate their current level of maturity in digital. When considering its digital maturity a business should look at all the dimensions of digital. These can be divided into the external customer-facing elements and the company’s internal capabilities.
The external elements include a company’s social media presence, it’s digital marketing efforts, its digitised content, and the online sales channels it operates in. The internal aspects relate to the organisation’s people and their skills in digital, the digital technology the company has developed or deployed, and the data assets it has at its disposal. Lastly, when evaluating digital maturity mobile is particularly important as it bridges both internal and external aspects through its ability to facilitate employee collaboration as well as interface with customers.
The evaluation of a company’s digital maturity can be done by first benchmarking the current capability against the digital leaders in their industry. Their digital maturity should then be benchmarked against global leaders in the digital space across sectors. This is important for two reasons: firstly, because certain industries may be slow to adopt digitalisation and secondly, because the future competition may not be part of the existing competitive set.
3. Which areas need the most attention to build digital capabilities?
The third question companies must ask is: which areas need most attention to build digital capabilities? The process of digitalising the business is a huge undertaking. Prioritising those areas that are most critical to remaining competitive in your industry is vital when aligning digital initiatives with growth objectives.
4. What are the ambitions for the short and long-term?
Fourthly, a company must ask itself what are its digital ambitions for both the short and long-term. Short-term goals are necessary to create momentum within the organisation and address critical shortcomings or imminent threats. Longer term goals will define the role the company sees digital playing in its business, directing the multi-year cultural shift and re-allocation of resources that will need to occur across the organisation.
5. What will be the challenges to overcome?
The process of digitalising the business will be a long and challenging journey, but one that is central to achieving growth in the years and decades to come. Before embarking on this journey companies should identify the challenges they expect to face so that potential pitfalls can be avoided. These challenges can come from both soft causes like cultural resistance to change or hard ones such as insufficient resources. By putting the challenges up-front, companies can ensure that action is taken in advance to compensate for the likely shortcomings. This process also helps to set the right expectations, so that morale isn’t weakened when these challenges inevitably arise.
Start small, fail fast
Given the pace of change in the digital economy, an effective strategy for India Inc. is to start small and fail fast. Trialling an idea in a concentrated timeframe can allow a company to quickly test its viability and provide key learnings. The key is to first deploy resources in a fast but frugal manner, with a willingness to commit further resources as soon as the idea has proven itself. This requires an unsentimental approach so that seemingly great ideas which fail can be quickly dropped and unforeseen successes can be doubled down on.
In an example of this tactic, Indian e-commerce pioneer Flipkart opened and shuttered its grocery delivery app Nearby over a period of only five months. It was begun on a limited basis in one city in response to the rapid rise of hyper-local delivery companies like Grofers. These new players seemed to pose a threat to e-commerce marketplaces by aggregating supply from local unorganised stores for immediate delivery. However, as the challenges of the model became clear, the new players scaled back and funding slowed. Flipkart, believing they were now less of a threat, chose to shutter the operation at little cost. However, had it proved viable, their presence would have allowed them to take a larger bet on the model much faster than would have been possible from a standing start.
Make data a strategic asset
The third aspect of embracing digital is to see companies’ burgeoning data as a strategic asset that needs to be effectively leveraged. In the 19th Century control of physical resources was critical to most companies business models. In the 20th Century ownership of brands and patents emerged as key profit drivers. However, in the 21st Century data is fast becoming companies’ most valuable asset.
This trend is not restricted to consumer industries who benefit from large volumes of transactional and customer data. Big data and analytics are also proving valuable in traditional B2B industries. For example, chemicals companies have been able to accelerate their R&D processes by integrating the data that emerges from laboratory experiments with existing chemical databases and academic literature.
More broadly, the growth of the ‘Internet of Things’ promises to bring about a revolution for manufacturers. It is being driven by smaller, cheaper and better sensors that allow a continuous flow of data from machines ranging from aircraft engines to washing machines. To deal with the coming explosion of such data, GE has developed Predix, a ’Platform as a Service’ that captures industrial data which can then be quickly analysed by a variety of different applications on the cloud.
The combination of vast amounts of real-time data with access to advanced analytics on the cloud, all at rapidly falling costs, will give digitally enabled businesses - both large and small - access to powerful insights into how customers are using their products. This will have transformational implications for how companies develop and market their products in the future.
Attract and promote digital talent
Lastly, to take advantage of the digital opportunity, companies will need to secure the right talent. To do this they will need to get clarity on the skill sets they will require across areas like big data, analytics, and social and digital media.
One option for organisations is to gain talent through acquisition. With many small specialised start-ups in the digital space, large companies can often gain both technology and talent through acquisition. Spencer’s, one of India’s leading brick & mortar grocers, acquired fledgling e-commerce player meragrocer.com to gain an e-commerce team and IT platform.
Alternatively, digital talent can be identified internally. Here, companies will need to overcome any discomfort with promoting younger or less experienced employees to more significant positions, as digital capabilities are more likely to be concentrated among this cohort. Again, given the strategic importance of digital, these roles cannot be regarded as a functional specialisation. Their inputs will be required in strategic decision-making at the highest levels of the company.
By making the effort to first set a clear direction for digital, starting small and failing fast, leveraging data assets, and identifying digital talent, companies can turn digital disruption from an existential threat to a transformational opportunity.