The old ways of running a company won’t cut it in a digital world.
Ten years ago, when we would ask senior executives or company directors what “digital” meant to them, their response would usually be something related to social media.
Today, it might be apps, Big Data, 3D printing, “the cloud” or another current example of digital technology.
All such answers are equally correct – and equally in error.
More important than the specific innovations introduced by the digital revolution is their earth-shaking cumulative impact on business and on organisations.
There is no border anymore between the pre- and post-digital worlds.
Digital is business and business is digital.
Yet, top corporate leaders are not taking charge of digitalising their organisations, as was made clear to us by a survey we conducted in 2016 – to which 1,160 managers, executives and board directors responded – that developed into a report available for free online.
We discovered that most board members lack the knowledge and awareness necessary to lead a digital transformation.
To help top management catch up, we recently issued a follow-up report – “Directing Digitalisation: Guidelines for Boards and Executives”.
It presents 11 strategic implications and recommendations (grouped into three categories), summarised below. These are based on the previous findings, our combined business and teaching experiences, and professional collaborations with organisations across multiple regions and industries.
The business environment
- Digitalisation requires an unbiased understanding of the external environment.Analogue-era frameworks such as Michael Porter’s “five forces” will need to be revisited, now that the impact of digitalisation is rapidly replacing traditional physical barriers to entry with intangible barriers (e.g. relevant purpose, resonant mission, authenticity and trust) that no amount of industry prominence or cash can overcome.
- Digitalisation may require a reformulation of the firm’s mission.The environmental shift caused by digital may challenge the very existence of individual companies, even entire industries. Boards and executives will need to question all pre-existing assumptions about the firm’s mission and industrial positioning, as well as the sustainability of its business models and methods.
- The meaning and impact of digital to the firm must be clearly stated.Digital advantage resides largely in the opportunity to customise not only products and services but also organisational strategy and structure. Rather than searching for a blueprint to guide them through digitalisation, firms should define their own digital road map. Leaders can start by developing an in-house dictionary, including entries for “digital” and all related keywords, terms and concepts. Like any other dictionary, it will need frequent updates.
- Digital understanding and capabilities are required across the firm.Digitalisation may involve a great many experts, but the ultimate responsibility for digital transformation belongs to all functions within a firm. Successful change also requires cooperation from junior contributors all the way up to the board by linking digital savvy millennials with the business experience and wisdom of senior executives and directors.