A 10-Point Framework for the Digital Journey
Digitisation is here
to stay so organisations should consider treating it as a long-term investment.
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 is a Professor
of Organisational Behaviour and the Aviva Chaired Professor of Leadership and
Responsibility at INSEAD.
Read more at https://knowledge.insead.edu/leadership-organisations/a-10-point-framework-for-the-digital-journey-6801#xSiAmciBDpcrqL13.99
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