7 Essential Steps For Digital Transformation – Forbes
It is increasingly clear, that the spoils of value and growth are going to digital platforms and networks. Companies with outdated business modelsâasset builders that make and sell physical things, and service providers like consultants, doctors and lawyersâare quickly being supplanted by companies that use the tools of the digital age, such as technology, apps, networks, social media, crowdsourcing, and more. This trend couldnât be clearer than when it comes to the retail segment where the big losers are physical asset retailers. Best Buy, JC Penney, Sears and Macyâs have each lost more than $10 billion in market value over the past decade. On the other hand, Amazon has created more than $300 Billion in market value over the same period.
As digital advisors at OpenMatters, we have found that business model transformation is essential for legacy companies to win in a world where technology is consuming every industry under the sun. However, to implement a successful transformation from things and people to technology and networks, a company needs two essential parties working in lockstep. The two parties to which we are referring are the board, responsible for governance and capital allocation, and the executive management team, responsible for shaping the strategy and carrying out the plan.
While the end goal is for these two groups to shift capital allocation and leadership practices to support new business models, they must first accomplish a few things:
- Each party needs to have a complete understanding technology and network supported business models, and why they outperform business models based on physical assets and people;
- Each party needs to be fully committed to the journey. They most focus on creating a new future, not just managing the existing business; and
- Each party needs to be willing to reallocate their time, attention and financial and human capital to the transformation agenda.
This is not easy work. What is easy at most firms is to continue the status quo. Itâs easy to manage what you already manage, measure what you already measure, and hope somehow growth and margins will increase without changing the core business model. Itâs easy to try and make do with your existing talent and avoid recruiting new digital talent to the board and management team. This will not get you to the finish line. Instead, accept that effort and action are needed and navigate your board and executive team through the step-by-step process for digital transformation.
- Adopt an exponential mindset: digital and network-based businesses are structured and managed differently than your traditional business. The board and executive management team will need education to gain comfort with the new mindset required to build, operate, and grow a digital business.
- Build and recruit digital capabilities: the same talent and infrastructure that powers your companyâs current operations are not likely to be suitable for a digital, platform and networked future. You will need employees with new skills like machine learning and data science. Your infrastructure will also have to be adapted to provide the tools your employees need to grow into a digital world.
- Create a broad digital roadmap: small-scale digital initiatives donât form a cohesive, strategic roadmap. Start with a clean sheet and create the digital roadmap your company needs to succeed, regardless of which projects are already underway. Donât be afraid to kill or deprioritize projects that arenât aligned with a new business model.
- Inventory company âassetsâ and activities: there are likely already passionate employees at your company who have already begun small-scale digital initiatives. You probably also have valuable intangible assets that you donât actively manager or measure. Inventory everything, assess its fit with your future digital strategy, and reallocate resources from uncertain projects to strategically important ones.
- Apply business model, design thinking, not just product or service design thinking, to create your future business model: all too often, we think we can build and grow a digital business by selling the same products and services to the same customers via the same channels with a few minor tweaks. Adopt a design thinking approach to design your new digital business model that meets the needs of todayâs digitally savvy customer.
- Build digital assets: many âtraditionalâ businesses often possess or could easily access valuable digital assets. Figure out which ones your company could build, partner, or acquire, and begin transitioning from purely physical assets to more valuable and scalable digital assets.
- Adjust the org structureâstart small, then go big: the changes above will require changes to your organizationâs structure. While politics or talent gaps may prevent you from making major shifts, make the changes you can make, no matter how small. As momentum and comfort builds, you can add the bigger changes later.
Now we know that this is not an easy journey. It takes guts, perseverance, change management, and the full commitment of the executive team and board. But it is folly for any company to plan a future that doesnât include digital transformation. Digital transformation is no longer an option for companies. Digital platform companies are taking over, and technology and customer focus are central to what and who they are. The digital elite are winning and winning big. The only question is, are your board and your management team ready to do what it takes?
Barry Libert and Megan Beck are partners at OpenMatters, the leader in business model science.