Digital strategies have significantly different capital requirements, risk profiles, expertise and resource needs. And they have very different structures and cycles for making change. To jump and run with any of them is perhaps more dangerous than doing nothing at all. After all, executive representations are at stake.
What's the right strategy for each business? To answer this question we have to first understand what the distinctive characteristics of a digital enterprise are, and make sure we understand where the company is relative to that digital benchmark definition. Whether a company is digitally advanced or a more traditional enterprise, the critical first step is knowing where your company stands.
There are lots of great ways to look at what defines a digital company. Just a few common attributes we see called out regularly include:
They're disruptive
They're customer-focused, spectacularly so
They're innovators, especially on their business models
They have a Chief Digital Officer
One Harvard Business Review article covering GE's digital transformation suggests that becoming a digital company means shifting the executive dialogue from things like sales and products in favour of algorithms. Really? Park the shortfall in sales?
So are these some of the things that define a digital enterprise? Are they what we should try to emulate? To cut the definition down to the things that are really helpful, we have to find a way to spot the truly distinctive attributes. The things that don't show up regularly elsewhere. So let's check the above attributes to see what that might look like:
Disruptive - Companies throughout history have been very disruptive. And a lot of them have subsequently been blown out of the water. There are a few of them in my prior post, Digital Brain Freeze, if you want to spot a few. While there are big disruptions happening now, probably bigger than any time before, creating a disruption is not unique to today's revolution. So this isn't it.
Customer Focus - My barber is exceptionally customer-focused. She rushes to me and gives me a warm hug every time I approach the front door of her shop. Remembers exactly how I like my few remaining hairs cut. Somehow, she knows those days I am not up to talking much and either begins serenading me to make me laugh, or she gives me a hot towel and a shave. No, she doesn't have a mobile or laptop. But she does sport a frosted hockey mullet and cowboy boots. So not sure this is what defines a digital company either.
Innovative - A brilliant girl, from Burkina Faso. Her home had no power, no light at night. She got frustrated because she couldn't study, couldn't read her books. She noticed her brothers and friends playing soccer every day. She invented a soccer ball with a gyroscopic device in it that collects up the kinetic energy of the ball in play, and at night you pull up one of the panels and it becomes a desk lamp. Brilliant! Is she a digital enterprise? Not sure. Maybe some day. But not there, in that moment. So not sure this is it either.
Chief Digital Officer - The CDO. The ultimate marker that a company is committed. Getting real about digital. This one seems really digital and I certainly can see the logic in it. But here's the problem. I know of a few major corporations that are very digitally advanced. They don't have a CDO and none of the officers or or SVPs have "Digital" in their titles. Maybe these kind of roles are like a first signal that the change is big. We had Chief Re-engineering Officers in the late 1990s. Some of the most successful companies embracing digital don't walk around telling you how digital they are and they certainly don't put the accountability for digital success on the shoulders of one person.
So now, you might be wondering like I am (all the time) about what's really unique about a digital enterprise. All the kind of attributes above seem too general, not quite right when you dig in and compare to what businesses have done so well (and not so well) over the years. They don't really help us figure out where we are at and where to focus. How do I get more disruptive? How do I get people working together to be more innovative? How do I get more customer focused? Where can I get a good CDO? Would that do it? Is that really the best way to get going? Would my company really be digital? Would I survive this onslaught of technology?
I think about this constantly, looking at what's happening today. Looking back over all the companies I worked with on technology disruption and change over the last 20 years. I thought about the digital platform play I built too - the one that blew up spectacularly in my face, even with Silicon Valley financing. What is a digital company's DNA? How do they think, move and define themselves? From what I can figure out so far, there seem to be five characteristics that are really strong among successful digital companies. And what is interesting about them is that only two of the five focus on technology. The other three are about an ultra-relentless, sophisticated focus on business fundamentals above all else. Here they are:
Transactional DNA - Really successful digital companies are wired in every way on a transactional basis. Examples of transactions include paying for a service, checking product performance and ordering more inventory from a supplier. Digitally-oriented companies see everything and know everything at the transactional level. They can roll-up the entire business on that basis - tell you exactly how many business transactions they have engaging with customers, suppliers and all their internal resources. They can show you how those transactions behave, where they're working and breaking down. Their people come together to discover and solve problems with an awareness and attention to how transactions unfold across the enterprise. They know the value of each of those transactions and what that value means from a customer, product and operating cost perspective. They watch the business and optimize it all on that basis.
Intelligence Orientation - Building on Transactional DNA, successful digital companies also have an outright obsession with the intelligence that is needed and created on every transaction. They view that Intelligence as a strategic asset with limitless possibilities to create new value streams and beat the competition. Everything is intelligence-driven. They think of ways to find new sources of intelligence and draw that into their asset base. Customer experiences, products, services, operational workflows, supply chains are all designed and built with great emphasis on the intelligence layer or wrapper on everything about the business. Innovation focuses on intelligence and uses intelligence as the principle force to drive improved competitiveness and performance.
Network Effect - This is a big one. In addition to being strategic and meticulous about transactions and intelligence, successful digital companies focus on the network effect in everything they do. Instead of trying to win each customer one by one, they look for the triggers that create a ripple effect of demand. They build products and services that are connected, communicate and interoperate. Instead of owning and operating every individual asset, they design, build and operate their businesses with maximum leverage of assets, using the market to create maximum leverage of external assets. They discover, diagnose problems on a global scale, leveraging the maximum possible number of brains to find solutions. All considered, successful digital companies have moved on from the world that treated everything as a stand-alone consideration to tap into the joint leverage, reach and power of resources in everything they do.
Integration - Effective digital enterprises keep a constant watch for barriers, gaps and divides in every aspect of the business. They design, build and deploy business capability and resources in a way that reflects the paramount importance of integration to scalability, efficiency, service excellence and performance quality. Products are designed and built to maximize use of common resources and harness their collective strength and value. The customer experience is designed entirely, thoughtfully from the customers goals, back through their needs to align and sequence actions in a seamless flow. Inside the enterprise, workflows and management activities cut across functional lines and are richly enabled with systems and tools that prevent silo behaviour from creeping in and ensure smooth, seamless hand-offs from origination of need to completion of goals.
Hard Core Automation - As a logical extension of Strategic IT Intent, successful digital companies operate in an advanced state of automation. They take every opportunity to automate business transactions and business intelligence. They standardize customer experiences, workflows and routines with suppliers to remove the variability inherent in using human resources. They drive-up labour productivity in every way possible, automating lower-intelligence work so that human resources are maximally deployed to the creative and intimate tasks that can drive the business to higher and higher levels of competitive advantage. In doing so, they draw in more resources, more expertise than they let go. Their growth dictates that they need more technology, but they also need more advanced workers. Companies not able or willing to automate end-up relying on and trap human resources below their productivity potential. In many cases, they also put people at real risk - safety, relevance, long-term value are all traded-off for other purposes.
So these are the five distinctive attributes of digital companies I have been thinking about. What do you think? Do these make sense. Break out the sledge hammer and swing away. I'd love to hear what you think. Next time, I'll share with you an exciting new tool I developed to quickly benchmark your company to spot its digital strengths and vulnerabilities. A great way to start your digital strategy, or check how your company is progressing with its digital journey.
