A 10-Point Framework for the Digital Journey
In the near future, it may be
difficult to imagine a company not involved in some way in digitisation. While
Uber, Amazon and Netflix grab headlines for their growth in the platform
economy, traditional companies are also digitising. UPS uses smart routing
devices to trim millions of miles on their delivery routes. Caterpillar now
equips its tractors and diggers with internet-enabled sensors that provide data
to customers and itself for smarter maintenance and performance.
The new evolving ecosystem of
mobile computing, interactivity and data gathering presents an opportunity to
craft new value propositions. This is just as well since the era of “easy”
global growth becomes less likely to continue. While population increase and
mass consumer markets gave traditional businesses opportunities to grow in the
20th century, the wave of the future is more likely to centre on creative
recombinations of technology and people, something digitisation encapsulates.
Management waves and new
technologies have come and gone before, from cassette tapes and fax machines to
business process reengineering and Six Sigma, which makes it easy to dismiss
digitisation as a fad. But executives we recently interviewed for a research
article share a belief that despite the growing access to computers and data
over previous decades, digitisation is just starting. The managers and leaders
we interviewed were actively involved in shaping the digital future of media
companies (books, music and television). We also spoke to managers in banking,
ship building, retail and consulting to understand more from companies where
the product is less likely to be digitised.
While this work is ongoing, below
is the first of several instalments explaining the framework we see emerging:
10 checkpoints on the digital journey that companies face. In later articles,
we will expand on these points, which include skills and roles, structures and
processes, and cultural aspects. We will start and end with cultural aspects,
specifically checkpoint one, the mindset shift.
Mindset
shift
While companies need to respond
to this new reality seriously, there is no recipe for transformation. “Going
digital” or “digitisation” is often characterised as a transformation,
suggesting that organisations embark on a caterpillar-to-butterfly
metamorphosis with a clear start and finish and emerge ready to take flight as
digital leaders.
The lessons from companies well
down the road of digitisation show that framing it as a journey is a better
starting point. Our study revealed the issue of mindset as the first of 10
dimensions companies would do well to consider throughout this journey. Interviewees
for our study were willing to experiment and start early, iterate and grow in
capabilities and know-how, which are important ingredients for any organisation
looking to adapt to a fast-moving environment.
According to a theory of
organisational behaviour called “absorptive capacity”, companies who amass
foundational knowledge, skills and ideas build the capacity to absorb new ideas
faster. Absorptive capacity is defined as a company’s ability to recognise the
value of new information, assimilate it and apply it to commercial ends.
Absorptive capacity depends on prior knowledge, because knowledge is
cumulative. In the same way a student doesn’t go from learning simple algebra
to doing advanced calculus overnight, organisations can’t run before they can
walk. In short, they don’t just become digital by buying or creating a new
technology; they build ongoing capabilities and knowledge over time.
It’s not too late, or too early
An interviewee from the book
industry told us that “we’ve been producing e-books since 2000, although we
didn’t sell many of them. But it was a mini example of the whole value chain
which we looked at in more depth later. Getting the rights from authors and
agents, technically producing the e-books from today’s perspective through many
aggregators and vendors…was like a preparation phase for the business which
kicked off in about 2009.”
The good news from this example
is that it’s not too late, or indeed too early, to get involved. For the
company above, its earliest foray into e-books was not a commercial success,
but it was an invaluable learning process and set it up for the e-book wave.
It’s not about technology
It’s also important to frame
digitisation as being less about computing-based efficiencies than about
organisational effectiveness. Companies are fairly confident that the software
infrastructure will exist for them to create platforms and gather
data. What is most important is understanding the potential of
technological developments to shape consumer experiences.
One participant told us that,
“you have to digital define the way we interact, probably the way we live in
many areas. So it’s much further reaching than it was in the past. Now it’s
starting to change…business models. It might change the overall user experience…I’m
thinking a lot about how will people interact, or how will they consume
information.”
The processes organisations
should adopt to become digital are not necessarily themselves “digital”.
Technology is important but it’s not the essential component.
Our interviewees gave us the sense that they were
overwhelmed with data, not least because data have become so fine-grained and
instant. Acting on constant feedback and insights, but without jumping at every
data point, will be crucial to leveraging data effectively. In my next article,
I will expand on how organisations can leverage these bigger analytics to
derive larger meaning and what skillsets organisations will need to use such
tools effectively. As we learnt from those who see digitisation as a journey,
the focus today is less on data and storage than on analysis and ideas.
D. Charles Galunic, INSEAD Professor of Organisational Behaviour | August 2, 2017
Read more at https://knowledge.insead.edu/leadership-organisations/a-10-point-framework-for-the-digital-journey-6801?utm_source=INSEAD+Knowledge&utm_campaign=6e797fd4c8-
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