I’ve just finished Leading Digital: Turning Technology Into Business Transformation by Westerman, Bonnet and McAfee (HBR & MIT Publication) and found so much of their research to be validated in our interactions with large organisations and the leadership teams that guide them.
To start with everyone knows digital technology is a powerful tool for business today. Whether that’s mobile technology, social media, sensors, big data, analytics, systems or wearables it has tremendous potential to be the engine for increasing human, organisational, and economic prosperity. The challenge to businesses is that for all these digital innovations they are useless unless the organisation can adapt and leverage them.
Digital transformation is about that adaptation. How an organisation changes it’s behaviours, processes and mindset to leverage maximum value from technology. The authors suggest, and we agree, the best way to approach digital transformation is to maintain a dual perspective on: capabilities and leadership.
Capabilities
Targeted investment in innovating customer experiences, business processes and business models, in that order enable digital businesses to invest in those things that will have the greatest impact. This is exactly what we’ve been doing with Specialized. Started by re-defining how they engage with women in the digital space and using the platform to constantly learn from their riders. Next they will innovate how they engage with customers in-store and ultimately use all of this insight to innovate their services, products and business model as a whole.
Executing this first stage of change requires the collection of qualitative research data, observing people and the market and maintaining an outside-in perspective. By behaving in this way an organisation is able to better understand and get closer to its customers, empower employees, provide a clear digital vision and priorities investments.
The big difference really is whether the organisation pays lip service to digital (e.g. tactical social campaigns, new mobile website, etc) or uses it to drive real transformative change. In our opinion this type of change can only come from engaging with customers, listening intently and applying what you learn to all aspects of product and service design.
Leadership
The second area of focus and often the part overlooked by most businesses looking for digital transformation is leadership and culture. Without a strong vision of how your organisation can leverage digital you are destined to fail. In the book the authors found a fantastic example in Asian Paints. Not a sexy business (unlike Nike who are the other example) but one that is driving efficiencies and growth in 120 global locations through thirty thousand retailers all by establishing strong digital foundations (IT systems), centralising the order process and empowering sales staff through iPad enabled CRM tools. They then used insight to change the business model to sell painted walls not tins meaning the application was perfect and drove significantly more referrals. So much so the business now has $1.8billion in revenue and has grow constantly by 15% YOY.
All of this came from a strong top-down direction, building of momentum and then ensuring the teams follow-up.
Performance Impact
The upside of digital transformation is huge. Those companies that can change the way they behave and leveraging digital technology in this way have higher revenues (+10% on industry average), are more profitable (26% on industry avg. EBIT & Net Profit margin), enhance their value proposition and improve operations by a margin of 79 percent. They are also able to add real long lasting value to customers and will ultimately see the effects being longer term profitability.
It doesn’t matter what industry you are in, how different your products, customers or visions are you can use digital technologies to drive transformative change in your business. To find out more about how read Leading Digital or get in touch.