Companies still struggle to evolve into Digital business
We are moving to 2020. This marks more than 20 years into Digital age. Many companies still struggle to embrace digital technology advances. More leaders are anxious about digital disruption. Instead of being anxious they should be eager to provide new, exciting and improving digital solutions to their customers in order to become a digital business.
According to a recent McKinsey report, big legacy companies struggle to embrace digital organizational practices. Only 26% of the sales are made through digital channels. In addition only 30% of internal operations have been digitally automated. At the same time many companies have deployed mobile apps, cloud computing and data analytics. These digital business have brought into market a variety of digital products and services. The success of digital lies in delivering new customer value propositions that anticipate and solve customer problems. Companies should not use digital just for selling portfolio of products and services.
A digital business design is defined as a holistic configuration of people, process and technology. The digital business design should define value propositions and deliver offerings made possible by the capabilities of digital technologies.
Why is Agility important?
Agility is the ability to respond rapidly to changing technologies and markets. Agility is important for companies to go digital. This involves significant changes to help companies deliver compelling value propositions. Agility can be achieved through fast cycle of decisions and actions across businesses.
The design of a digital business considers far more than technology and systems. It is merely not IT architecture. The IT leaders can help in shaping the vision for the digital business design. Successful execution of design of the business requires engagement of broader management. The digital business design is not restructuring. Organization wide restructuring is different from organization wide design.
As technologies and markets change, the business must adapt and evolve. The organization must continue to perform existing operations and deliver sold financial results. At the same time, they must also add new features and capabilities. A digital business is not an end state. It defines a direction and set up the company to adapt as the future evolves.
How to transform a legacy company to an agile digital business?
Legacy companies need to have the following capabilities to develop innovative digital offerings.
- Companies need to have access to customer insights. They should know what customers will pay for. They need to use digital technologies to meet these customer demands.
- Companies need to build a coherent set of standardized, integrated systems, processes and data supporting its operations.
- Companies need to develop a digital platform. The platform is a repository of business, data and infrastructure components used to configure innovative digital offerings.
- Companies need to design a strong accountability framework. This framework should provide distribution of responsibilities for digital offerings and components. The framework should balance autonomy and alignment.
- Companies need to develop an external developer platform. This platform should be a repository of digital components that can be accessed by the external developers.
Change cannot happen overnight
In the case of digital, change does not happen overnight. The transformation in legacy companies cannot be speedy. This is because of culture. Culture shapes long term behavior and attitude of companies. They define what is encouraged, accepted and rejected within the organization.
Introducing new technology and processes will help to redesign roles. They also help in changing the culture. A slow pace of change is beneficial for large companies. This is because most of the companies will continue to generate bulk of their financial returns from their existing service offerings.
Speeding a company’s transformation is risky. The financial returns from existing offerings can decline faster than the innovative new offerings. The new offerings will generally grow slowly in the early years. After that they will witness a sharp rise in performance.
Digital business transformation is a long journey. Hence ability to respond to rapidly changing technologies and markets is the key.