Executives must understand that the digital game never ends because the evolution of both digital tools and technologies is not going to stop.
By Suketu Gandhi
It’s no longer a topic for debate because everyone agrees: Digital matters greatly to today’s businesses. It is, in fact, one of only a few truly top-line growth tools executives have left.
During the first decade of digital disruption, businesses have had success with digital mostly through a series of one-off efforts, primarily focused on interactions outside the organization. They have, for example, developed apps and introduced multichannel marketing to more easily connect with consumers. And they have implemented narrowly focused programs to evaluate projects such as inventory turnovers, or call center performance against lifetime customer interactions.
But each effort, while successful in itself, has had an underlying central belief that digital is a one-time effort. This belief is wrong, and it significantly limits any attempt to transform a company into a digital organization.
It is wrong because digital—rather than being a one-and-done effort—is ongoing. So, instead of trying to figure out the digital endgame, executives must understand that the digital game never ends. It won’t end because the evolution of both digital tools (with their rapidly shrinking half-life) and technologies (with their always-widening breadth) is not going to stop. Therefore, the model will never be complete.
Furthermore, the behavior of the customer and the environment in which the product is used will keep evolving. Finally, the business benefits derived so far are but a small fraction of what lies ahead.
The ability to access this large potential requires a change in mindset—from looking at digital as a one-and-done effort to seeing it as iterative and ongoing—and calls for a different way of thinking about digital and how it fits into the business. Executives need to understand, for example, that digital must be explored not just at the macro level, but at the micro level, where ever-more-granular information offers increasing benefits for companies capable of harvesting value from the details. They also need to realize that digital is not its own entity or department; it's a core component that must be incorporated into every aspect of the business.
With this understanding, executives will have to react to digital by changing many aspects of how they do business—beginning with the following:
· Adopting a balance between a venture capital and a private equity approach to funding both moonshots and optimization. This funding should be an integral component of capital allocation.
· Mapping the digital efforts under way onto the classic S-curve to show where they fall on the curve’s phases of market testing, rapid growth and maturity, so they can allocate the appropriate financial and human resources.
· Changing the skill sets of their employees and how these workers are organized, because the skills needed to handle digital as a one-and-done effort are dramatically different from those needed to manage an iterative effort.
Changing to a New Operating Model
A key implication of this never-ending digital game is that executives need to change their company’s current operating model. With the historical model, they discovered a need in the market, estimated how big that need was in terms of number of widgets and their features and functionality, and then aligned all their processes to that static, set-in-stone model.
Now, as they move into the second decade of digital disruption, they need to discard this static, project-based model, replacing it with one created and factually informed by what is actually happening in the field. And they should realign their marketing, operations, distribution, product development and other processes with the new dynamic model in mind.