How digital leaders outperform in every industry
We could argue that the digital revolution started with Babbage in the 1830’s and progressed to the analogue computer, but perhaps more accurately in the 1930’s the digital principal/modern computing was set out by the scientist Alan Turing.
In the 30’s and 40’s we saw the emergence of early versions of digital computers and computing. The digital revolution as with the Industrial Revolution spans many years and both have various phases of development and interventions with radical new innovations which accelerated the pace of socio-economic change.
The current change underway in society is a significant phase in the digital revolution where the level of innovation in technology and its application has reached a point where it is “just the way we do things now”.
It’s also a stage where over the recent period since the mid 80’s the pace and volume of technical innovation is advancing rapidly on the economic landscape.
These innovations are used widely by consumers and employees alike. Facebook has more than 1 billion users. There are more than 6 billion mobile phones. Employees often have better digital solutions at home than they do at work, and many are tech savvy.
Executives in every industry face a bewildering array of new digital opportunities. They are paying attention, but they have few signposts to guide them. Most stories in the business media focus on fast-moving startups or on large high-tech firms like Apple, Google, or Amazon.
Unfortunately, to many leaders, stories of these nimble and innovative firms just do not make sense for traditional companies that are older, larger and burdened with inflexible legacies.
What do fast-moving digital innovations mean for traditional companies?
A study covering more than 400 large firms found that most are taking action. They are using technologies to change their customer engagement, internal operations and even their business models.
But few firms have positioned themselves to capture the real business benefits. Research points to a real “digital advantage” to those that do.
Digital maturity matters
It matters in every industry. And the approaches that digitally mature companies use can be adopted by any company that has the leadership drive to do so.
Some companies are what we call the “Digirati”. They have the digital maturity to put smart to work, but also to drive enterprise-wide transformation. And they benefit from their actions. Digirati have significantly higher financial performance than their less digitally-mature competitors.
Digital maturity is a combination of two separate but related dimensions
The first, digital intensity, is investment in technology-enabled initiatives to change how the company operates – its customer engagements, internal operations, and even business models. A retailer used technology to improve the in-store experience and increase operational excellence. A mining operations company is using technology to improve efficiency and safety while creating new business opportunities.
Companies in all industries are investing in interesting digital initiatives. However, in many firms, these investments are uncoordinated and sometimes duplicative.
Firms maturing in the second dimension, transformation management intensity, are creating the leadership capabilities necessary to drive digital transformation in the organisation. Transformation intensity consists of the vision to shape a new future, governance and engagement to steer the course, and IT/business relationships to implement technology-based change.
The elements of transformation management intensity work together – through a combination of top-down leadership and bottom-up innovation – to drive ongoing digital transformation. However, in many companies, these elements are overly slow or conservative, preventing the company from investing in innovative opportunities.
Digital maturity matters. It matters for every industry. But how can you develop your own digital maturity? There are some common patterns for how companies have built their digital advantage. All Digirati invest in the elements of transformation management – vision, governance, and engagement. They also perform well on the digital intensity dimension. But, Digirati status is more than simply a combination of sound management and digital capability – there is something inherently different about Digirati DNA that separates them from the rest.
Digirati make strategic choices about how they will be excellent in digital intensity. They build their digital intensity through a set of common patterns that exploit complementary capabilities to deliver ever-greater levels of digital value.
Strong transformation management capabilities
There are four key transformation management practices that enable companies to align their digital efforts under a common vision and coordination structure, and engage the company in making that vision a reality.
These practices are:
Transformative vision. A strong vision helps to frame in people’s minds a picture of how the company will be different in the future. It also helps people understand what former assumptions may no longer be valid. Executives in the French yellow pages, Pages Jaunes, seeing their traditional print model lose 10% of revenues annually in the face of digital search competitors re-envisioned their business. The CEO helped employees understand they were not in the business of producing heavy yellow books. They were in the business of connecting small businesses to local customers. Books were just a technology that could be replaced by websites or location-aware smartphone apps.
Digital governance. Effective investment rules and coordination mechanisms improve efficiency and ensure digital efforts are moving in the right direction. When a Spanish media conglomerate launched its digital transformation programme, one of the first initiatives was to create a central digital unit to coordinate and assist in building digital businesses. Appointing a Chief Digital Officer, reporting directly to the CEO, was a major signal. Local CDOs were appointed in each division, coordinating with the central unit.
Engagement. When employees are engaged in a shared vision they help to make the vision a reality. They offer less resistance to change and often identify new opportunities that were not previously envisioned. Engaging employees in the digital vision is critical to succeed, but can be difficult because of the firm’s culture. Management could launch innovation contests for employees in order to foster a culture of change and innovation in the organisation
IT-Business relationships. Digital transformation is about re-defining big parts of the business, and IT is essential in doing it. In some companies, the CIO is the perfect person to suggest and even drive digital initiatives; in other cases the digital agenda will be driven by business or joint IT-business teams. In any case, shared understanding between IT and business executives is critical to success.
Digirati perform well on the four components of transformation management intensity. What separates Digirati, however, is Vision. Where others focus on control and alignment, Digirati have also developed a strong transformative vision that energises employees to make change happen.
Frame the digital challenge
As with all transformation, CEOs first need to ensure that their senior leaders have a common vision of how to proceed. They need to understand why to change, and how the future will be better than the current situation.
The first step is to understand the threats and opportunities that digital represents to the organisation. Will existing ways of working continue to be effective in a digital world? Are there new opportunities available in customer experience, operational processes or business models?
“High-performing companies have strong enterprise-level governance around their digital initiatives.”
Assess your organisations digital maturity – both digital initiatives undertaken and leadership capabilities to drive transformation. Then, you can take steps to move depending on your current maturity level. Aim to rationalise the myriad of digital initiatives and add proper transformation management practices to unite functional silos.
The future is arriving quickly. Take action now to create your own digital advantage. Talk to one of our team today to learn more about our capabilities; how we’re bringing people, business and technology together; and what this means for you.