Within the next ten years, disruptive technologies such as mobile internet, cloud technology, 3D printing, and advanced robotics are expected to result in 30% GDP growth in Southeast Asia alone. There is no doubt that across industries, these emerging technologies are the biggest disruptors today. However, many organisations undergoing digital transformation are crumbling under their own weight. Business leaders are struggling to set a digital strategy, shift organisational structures, and remove the barriers that are keeping them from maximising the potential impact of new digital technologies.
One of the key determinants of digital transformation is the right business model. In this context, the business model is the process architecture, and the supporting organisational model used to run the business.
The truth is, many organisations follow business models that are too slow, too expensive or too cumbersome to achieve these very goals as they were built long before the digital age. Complexity hinders the process of digital transformation. To make the most of their digital initiatives, organisations need to implement new business models and new ways of working.
Too often, organisations take the easy way out by “doing digital” instead of “being digital.” They mistake the superficial usage of digital technology as digital transformation. Initiatives such as putting a mobile front-end on an existing enterprise application tend to be used by business leaders as examples of successful digital transformation. This jamming of fourth-generation technology into third-generation business models is quick, cheap and low risk. However, it doesn’t bring any real added value to the business.
To truly be digital, businesses must rethink, rearchitect and rebuild their supporting business models. To truly gain results, the supporting business models should be thoroughly digital, with process flows and supporting organisational structures based on digital principles. In this journey to being digital, there are three traps that companies must avoid at all costs.
Trap 1: The FANG Trap ― I want to be the next unicorn
Some enterprises try to mimic technology unicorns such as Facebook, Amazon, Netflix and Google. However, in most cases, not only does this approach not work, but it also turns out to be highly counterproductive. Different companies have different starting points, face different business challenges, and eventually have different goals and success metrics in their digital transformation journey. Traditional companies often need to go from being industrial firms to following a digital/industrial hybrid business model. That’s a different challenge from what it takes to build the likes of Airbnb that’s a digital middleman or a social media platform such as Facebook or Twitter.
Trap 2: The “Boil-the-Ocean” Trap ― I want it all, and I want it now
This trap can often be the most difficult to avoid. Many highly ambitious management teams decide to go “all in” on digital. They communicate their plans to employees, and confidently declare their intentions inside the company and out. However, a year or two down the line, people start asking basic questions: “How is the digital plan going? How has it changed core metrics, such as sales or profits? How many customers are now on the platform?”
Such questions usually induce highly uncomfortable, staring-at-shoes body language. Although well-intentioned and in many cases, very well-resourced, broad-brush change initiatives don’t work.
There are cases in which companies, due to industry structure or competitive landscape, find themselves extremely far behind in digital. In such cases, a high-risk “go big or go home” approach is warranted. However, for 80 percent of other companies, starting small with clearly defined metrics and a concrete action plan is a better approach.
Trap 3: The Denial Trap ― Closing eyes on digital
Many fall under the category of deniers, who like to believe that they will not be affected by the digital wave sweeping the world. Such thinking is dangerous because those who voice this sentiment are usually in industries that have not been fully touched by digital yet.
The digital revolution is unevenly distributed. Some industries and their supporting business models have been transformed, while others have so far emerged unscathed. There are many factors that account for this variability, including industry structure, the nature of the product or service, and the regulatory landscape. However, in this era of hyper connectivity, digital will eventually force structural change upon all industries. Deniers are in for a shock if they don’t keep up.
Digital transformation is a learning journey for all businesses and with the world changing at a tremendous pace, it is important for companies to do a self-assessment and see if there are any traps they have inadvertently fallen into.
For companies looking to drive meaningful change, it’s important to make sure that any digital initiative is aligned with changing industry dynamics and the shifting needs of their customers. Companies should also look at any new initiative through a human lens, using insights to ensure that initiatives are aligned with the new experiences that consumers and other stakeholders want. Insights can also be used to start the important work of re-thinking the company operating model and enterprise architecture. Implementing the right strategies early on can help companies to not just avoid these traps altogether, but also leap over the other traps that we have yet to uncover.
Note: This article is written by Ben Pring, Co-Director, Centre for the Future of Work, Cognizant, and Co-Author of “What to Do When Machines Do Everything: How to Get Ahead in a World of AI, Algorithms, Bots, and Big Data” (Wiley, February 2017).