Willy Wonka would be impressed. A suave young techie in a crew neck sweater and thick glasses tours a group of senior business people through a virtual factory - spurting out digital jargon as he walks. Around them, a buzz of activity. Big screens lit up with dynamic graphs and data. Busy workers walk quickly from station to station. Above them, a river of white light swiftly streams by. Colourful virtual objects rise randomly from the factory floor to join the angelic light above. A spectacular show of the new digital world so mesmerizing one can’t help but feel a just a little overwhelmed.
With a dopey grin, a chiseled gray-haired man in the group pipes up. “I have no idea what you just said.” With Star Trek speed, the tour guide whips out his smart phone. “If you’re going to compete on this (the phone), you’re going to need all of this (the dizzying software factory).” Before anyone can say a word, the guide walks away, as if abandoning their stupidity, leaving the group to ponder their digital ignorance, to soak on the fear that their next move may be there last.
Computer Associate’s ad isn’t an anomaly. It really feels like we are the deer in the headlights of a self-driving car. The insights pouring out in the media are too many, too long to scroll through, let alone read and absorb. Clearly, the digital industrial revolution is the biggest force in business today. The top 5 companies in market value are all big tech (if you ignore Saudi Aramco). In just the last five years, 200 new companies have been created and climbed to over $1 billion in value. Together they are almost three-quarters of a trillion dollars. Reacting to the overpowering digital threat, half of all Boards and CEOs now have digital transformation as their top priority. Indeed, they are facing the tough reality of adapting their business before it’s too late.
But take a step back from the current caramel cone explosion of digital technologies. Ignore the Bitcoin banners unfurling in Times Square. Park the mystic hyper-intellectualization of digital algorithms. Escape the condescending overtones and urgency doled out by some big tech companies.
There, in the heat of a fast-changing market, we find the most valuable insights of how the digital industrial revolution is already playing out – how real companies are having enviable success and learning painful lessons.
No, it’s not worth visiting or emulating the shining glory of Amazon, Google or Facebook. Today’s Internet-class companies are so advanced, operating at so great a digital scale, that there is little point in the rest of us trying to emulate their success. They are too far out of reach.
The best places for most of us to look are among every day companies reacting and adapting to the opportunities and challenges created by today’s digital revolution. Here are just three digital disasters:
Gone Fishing – In 2017, a casino suffered a major security breach. Where’d they go wrong? They were hacked through the IoT sensors in their lobby fish tank. Great, the water’s warm. Great, the fish are fed. But we just lost some of our most sensitive business information.
Missing In Action - One multi-billion dollar company I follow employs digital twins. They have some pretty cool mobile tools for their workers too. Unfortunately their website was down for 3 days straight. No redirect to another web asset. No landing page saying sorry. Just a big fat blank. And executives had no idea that their site was even down.
Elephant In The Room - Five years ago, GE, a Fortune 500 steady, announced it would become the Industrial Internet platform of choice. It would radically transform itself into a digital enterprise leader. Quite a vision. Quite a commitment. Unfortunately, GE ran up against Amazon AWS and Microsoft Azure. They are struggling to transform their legacy internal purpose software for commercial market purposes. While Amazon, Microsoft and Google surge in market cap and competitiveness, GE's struggles became clear. The company lost almost half its market value in 2017 alone.
Disrupters Disrupted - We shouldn't forget the big tech failures too. The ones that seemingly blew it, missed the opportunity to build on what they had already done to change the world. Blackberry is perhaps the biggest, missing the big advantage it had in smart phones and email on the go. Hold too tight to your own beliefs and you could get crushed like Blackberry. Remember Friendster and MySpace? They were the first pioneers of online social networks. They reached great scale and valuation. And in a blink, they were gone, lost in relevance.
While the list of digital disasters grows, traditional companies are also doing it right. Here are just a couple I really like:
Hot Stuff - Amazon, Google, Facebook and Apple might be kings of market cap, but Domino’s stock price has outperformed them all. An investment in Domino’s in 2010 has grown by over 2000%, leaving Amazon and other big tech companies far behind. What’s Domino's secret sauce? Staying focused on their core business. Using digital technologies to help customers get their favorite pizza easier, faster and hotter.
Leverage The Market - With its Foundry ecosystem, Unilever fosters innovation, sets it’s product goals, but let’s the market take care of the hard work of finding a solution. For years Unilever tried to break Gillette’s dominant market share in razor blades. No success. What did they do? Buy Dollar Shave Club (DSC). In less than 3 years, DSC and others like Harry’s took almost 10 percent market share from Gillette, turning an expensive consumer good into a beautiful online experience with a steady recurring revenue stream that saves customers significant time and money. Smooth shaving indeed.
Collectively, just these few companies give us an idea of what five strategies might be to survive and thrive in the digital enterprise age. Together, their successes and failures help us shape practical paths to greater shareholder value, even when we aren’t the digital kid on the block.
Digital Platform Play – This very high-risk play, perhaps the most difficult of all to pull off, is about creating a digital platform upon which entire markets can access services. This is the play that seeks to disrupt, own and control entire markets, entire industries. This is the play of the big SaaS providers and social networks. GE’s failing strategy to reinvent itself as a digital platform company is proof that even the biggest, most adaptive companies face the strong possibility of failure with this one. Most of us should leave this one to Silicon Valley, to the experts like Amazon and Google.
Digital Pure Play – Similar in risk and difficulty to the digital platform play, the digital pure play takes the clean-slate approach to harnessing digital technologies to create an entirely new business model venture. Starting a new venture carries very high risk, particularly for established companies where the norms, rules and silos of big companies can cause failure. Dollar Shave Club and Harry’s prove the point that even the most established, basic business models can be beaten. By focusing on one product, looking beyond the existing market norms, and using technology to create a whole new way of serving a market, great things can happen. Dollar Shave Club gets it. Unilever understands it. Gillette is learning it the hard way.
Digital Transformation Play – Domino’s is perhaps the benchmark of how a traditional company can drive incredible growth in shareholder value with a steady, thoughtful approach to using technologies to improve competitiveness. Every dollar and hour of Domino’s digital journey has been about improving the performance of its core business. Not with a tech first mindset. Not by distilling some wacky new flavour of pizza from big data. But rather, through an unflinching focus on the objectives and metrics that define their business success – how easy, fast and hot customers can get a pizza. Way to go Domino's. Keep it coming.
Digital Ecosystem Play – Not every company has what it takes to be a technology innovator and leader. Unilever understands this well. It takes tremendous courage to let go of technology prowess, and let the market innovate for you. Put your requirements out in the open market. Let the market take the risk and find a solution. That’s exactly how Unilever approaches digital evolution with Foundry. And their acquisition of Dollar Shave Club is a fine example of how established companies can achieve breakthrough business success without doing it yourself. Being smart about when to buy and build is essential to success in an era when technology is so abundant and changing so quickly.
Smart Digital Fast Follower - So many of today's seemingly mature, proven digital technologies are far from stable. So many companies are jumping in, moving on digital technologies without really knowing whether they work and more importantly whether they will work for them. There, behind the wave of companies investing on the leading edge, there are always the companies who hold back - just a little - letting their peers take the risk, burn capital, time and resource to figure it all out. And then, seemingly out of nowhere, they come with a much bigger, better play at just the right time. The Smart Fast Follower knows that change is upon us. Knows there is no going back. But they also recognize the criticality of experience and timing. We already have so many examples of this to draw from. Apple pummelling Blackberry. Samsung and Spotify cutting in big-time on Apple. Facebook blowing MySpace out of the water. Gee, even the great disrupters struggle when the Smart Fast Followers make their move.
What’s common across all these plays, is that successful companies stay focused on their core business. They don’t let technology get ahead of them. They don't let technology become the end game. They don’t start with the latest technologies and seek out a business problem. They are at the same time patient and fast. They focus on the business opportunity first. Many, with great success, rely on the market to help innovate and solve real business needs. They know their technology strengths and weaknesses. They build and buy competitive advantage with incredible effect.
What do you think? Are there any other plays you think are useful ways to think about business strategy and digital technologies? I'd love to hear about other companies making their way.
