Sunday, 12th July 2020

Six outdated ideas that harm your digital business

UK grocery chain Tesco generates $150 million in supply chain efficiencies via analytics. Oil and gas giant BP saves $7 billion a year with Internet of Things (IoT) sensors. Hershey saves $500,000 per batch of candy with machine learning and IoT. These examples of bottom-line benefits share a common thread — a maturing approach to digital business. By Dave Aron, Distinguished Research VP, Gartner.

These businesses show that instead of simply translating a traditional process into a digital equivalent, they changed their process by optimising it (e.g. supply ordering) or doing something that wasn’t possible before (e.g., IoT-enabled predictive maintenance). However, the problem we face is that too many businesses set their aims too low when it comes to digital ambition.

While 82% of CEOs have plans to transform, only 22% understand the need to make significant changes to their business model and that makes 60% of organisations digitally vulnerable. One source of digital vulnerability is conventional thinking and this mindset prevents leaders from embracing a transformative approach.

We outline below six outdated ideas that are hampering digital growth:

Outdated Idea 1: IT alone is responsible for digital

C-suite leaders tend to look to their CIOs for guidance on how to integrate digital approaches throughout the organisation. While the CIO has a critical role to play, IT can’t drive digital transformation alone any more than marketing can be solely responsible for the customer. Senior leadership determines corporate strategy, and then IT — along with its peer functions — pursues departmental priorities to support it.

Digital is not a self-contained project or initiative within IT, or elsewhere. Digital technology plays a role in all business activities, from who makes decisions and how they make them to the resources employees can use to collaborate and do their jobs.

We should promote holistic ideas of what digital means for the organisation and encourage business leaders to consider digital as part of every decision or initiative.

Outdated Idea 2: Global roles are fixed

Geographic stereotypes like “East Asia is the place to go for manufacturing and India for business process outsourcing” are outdated and limiting. Global economic shifts are spreading wealth, talent and industrial capabilities around the world. Successful digital businesses will think creatively about location. They’ll reach across geographic boundaries and transcend geographic stereotypes to access the talent, resources and partnerships that drive success.

We need to adopt a mindset for a multipolar world, promote broad diversity in teams and invest in multicultural awareness for all employees.

Outdated Idea 3: Growth evolves from core positions

Strategists in the past have pursued organic growth through product or brand extensions that leveraged existing core competencies but with digital capabilities evolving every day and data expanding the possibilities, we can go much further.

Just as Amazon Web Services grew out of the company’s in-house data centre, so too can legacy firms build capabilities that evolve into new business lines.

To do this, teams should look for new markets where in-house digital capabilities and data resources unlock potential opportunities. Exploring partnerships with organisations that have complementary skills for these new markets is a good place to start.

Outdated Idea 4: CX happens inside the organisation’s boundaries

Customer experience (CX) has long focused on customer interactions with a product or service however boundaries are becoming blurred as people interact with both physical and digital platforms as part of a holistic customer experience.

Take transportation as an example: A self-driving car shared by multiple owners will someday charge by distance travelled, calling for each owner to pay their share of insurance, tolls, fuel and wear-and-tear. And fees will transfer automatically via digital currency exchange. To the customer, it’s all part of getting to work. To companies, the intersection of mobility with insurance and banking requires an expanded view of the customer experience. Such cross-industry experiences will be the norm for digital businesses of the future.

The need here is to think of CX as an integrated cross-market effort. Explore opportunities through the lens of customer behaviour and accept sector overlap as a natural consequence of how customers operate in the real world, then look for opportunities to exploit it.

Outdated Idea 5: Business success is only about processes

Once upon a time, efficient execution of core business processes determined strong, or weak, performance - think automotive manufacturing or book printing. Companies that still operate with such a process focused mindset view good business activities to be predictable and repeatable.

A digital mindset requires openness to spontaneity and sometimes one-off opportunities to solve customer problems. Process thinking is not totally irrelevant in a digital context and has its much-needed place, but it has to serve products capable of flexibly serving customer needs and behaviours.

Leaders must communicate how placing too much emphasis on process can lead to rigid approaches incapable of capturing new opportunities. Integrating process and product teams to design digital products and services that take both sides into account will be a good first step.

Outdated Idea 6: Agile practices make for agile organisations

Agile development enables tech teams to deliver new functionality and still pivot quickly when new needs arise. The proven benefits have encouraged ‘agility practices’ to spread to non-IT departments like marketing and operations. However, agility itself can’t operate solely at the level of process or function. Digital businesses require agility to be applied as a mindset across strategy, culture, investments and other areas.

Overall, for agility, you must embrace a product management approach that encourages fast, incremental deliverables and the ability to shift and adapt as necessary.

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