STRATEGY, NOT TECHNOLOGY, DRIVES DIGITAL
TRANSFORMATION PART II
3 DIGITAL
STRATEGIES THAT TRANSFORM
To a great extent, digital strategy drives
digital maturity. Only 15% of respondents from companies at the early stages
say that their organizations have a clear and coherent digital strategy. (See
Figure 3.) Among the more digitally mature, the number leaps to 81%.
Effectively communicating strategy is equally important, and maturing companies
excel at it. Among respondents from companies at early stages, 63% agree or
strongly agree that they know what their companies are doing in the digital
domain. In maturing organizations, 90% do.
A digitally maturing organization follows a
clear and coherent digital strategy and effectively communicates it to
employees.
The ultimate power of a digital strategy lies
in its scope and objectives. In his oft-cited 2003 Harvard Business
Review article, “IT Doesn’t Matter,” Nicholas Carr argued that unless
a technology is proprietary to a company, it ultimately won’t provide
competitive advantage on its own. As was the case with electricity and rail
transport, many technologies will become available to all and thus provide no
inherent advantage. The trap to avoid, according to Carr, is focusing on
technology as an end in itself. Instead, technology should be a means to
strategically potent ends.
Our research found that early-stage companies
are falling into the trap of focusing on technology over strategy. Digital
strategies at early-stage entities have a decidedly operational focus.
Approximately 80% of respondents from these companies say improving efficiency
and customer experiences are objectives of their digital strategies. Only 52%
say that transforming the business is on the digital docket.
In maturing companies, on the other hand,
digital technologies are more clearly being used to achieve strategic ends.
Nearly 90% of respondents say that business transformation is a directive of
their digital strategies. The importance that these organizations place on
using digital technology to improve innovation and decision making also
reflects a broad scope beyond the technologies themselves. In companies with
low digital maturity, approximately 60% of respondents say that improving
innovation and decision making are digital strategy objectives. In digitally
maturing organizations, nearly 90% of strategies focus on improving decisions
and innovation.
Organizations across the board are using
digital to improve efficiency and the customer experience, but higher-maturity
organizations differentiate themselves by using digital to transform their
business, allowing them to move ahead of the competition.
“Senior leadership must really understand the
power of digital technologies,” says Carlos Dominguez, president and COO of
Sprinklr, an enterprise social technology provider. “This is as much a
transformation story as it is a technology one.”
Creating a Strategy That Transforms
When developing a more advanced digital
strategy, the best approach may be to turn the traditional strategy development
process on its head. Benn Konsynski, the George S. Craft Distinguished
University Professor of Information Systems & Operations Management at
Emory University’s Goizueta Business School, proposes that rather than
analyzing current capabilities and then plotting an organization’s next steps,
organizations should work backwards from a future vision.
“The future is best seen with a running
start,” Konsynski comments. “Ten years ago, we would not have predicted some of
the revolutions in social or analytics by looking at these technologies as they
existed at the time. I would rather start by rethinking business and commerce
and then work backwards. New capabilities make new solutions possible, and
needed solutions stimulate demand for new capabilities.”
As an example, Konsynski points to the spice
and flavor manufacturer McCormick & Company. Given the importance of
personalization and digital technology’s ability to provide it, McCormick
developed FlavorPrint, an algorithm representing the company’s flavors as a
vector of 50 data points. Currently, McCormick uses FlavorPrint to recommend
recipes to its consumers. But the vision is much bolder. McCormick thinks of
FlavorPrint as the Pandora of flavorings, which has prompted the organization
to see itself as a food experience company rather than a purveyor of spices.
Eventually, all McCormick flavors will be
digitized, and the company will be able to tailor them to regional, cultural
and even individual personal tastes. Although all the needed technologies are
not yet available, they likely will be in the coming years, and the strategy to
take advantage of them is already in place. The FlavorPrint product has shown
such promise that McCormick recently spun it off into its own technology
company, Vivanda, with former McCormick CIO Jerry Wolfe as its founder and CEO.
A Digital McDonald's
As it confronts changing consumer tastes,
McDonald’s is digitally revamping its restaurant experience and how the company
works. The global restaurant chain was one of the first companies to adopt the
Apple Pay mobile payments solution. Last year, it installed kiosks in select
locations that allow customers to order customized hamburgers. And it’s seeking
partnerships with startups, such as a company that embeds sensors into paper.i
McDonald’s is also integrating digital
technologies to spur the organization to work in new ways. Its ambitious
campaign during the 2015 Super Bowl football championship is an excellent
example: McDonald’s planned to give away an item related to every commercial
that aired during the game.
To respond to commercials almost
instantaneously, McDonald’s had to integrate multiple digital technologies and
reconfigure its internal communication and operational processes. The
integration came together in a digital newsroom with a cross-functional team
that included members from the company’s marketing and legal divisions,
representatives from the company’s various advertising agencies and employees
from the company’s enterprise social technology provider.
Meeting the goal required real-time reactions
and monitoring and analysis of social media trends. It also demanded
on-the-spot decision making to come up with the best decisions about which
products to give away. The effort was successful and drew 1.2 million retweets,
including some from high-profile celebrities such as Taylor Swift.
The event was part of an ongoing effort at
the fast food chain to transform itself into an organization that integrates
technologies to become more agile, experimental and collaborative. As Lainey
Garcia, manager of brand public relations and engagement at McDonald’s, put it:
“The biggest takeaway was the power of integration. You can accomplish amazing
things when you have all those pieces working together collectively in a
holistic way.”
Maturing digital organizations don’t tolerate
skill gaps. More than 75% of respondents from these companies agree or strongly
agree that their organizations are able to build the necessary skills to
capitalize on digital trends. Among low-maturity entities, the number plummets
to 19%.
Consistent with our overall findings, the
ability to conceptualize how digital technologies can impact the business is a
skill lacking in early-stage companies. Nearly 60% of respondents from these
organizations rank ability to conceptualize as one of the top three skills that
need bolstering. Only 32% of respondents from digitally maturing companies
express the same need.
The ability to adapt quickly to change also
stands out as an important capability. Perry Hewitt, chief digital officer at
Harvard University, says agility is more important than technology skills.
Emory professor Konsynski concurs: “The 21st century is about agility,
adjustment, adaptation and creating new opportunities.”
Training to fill skill gaps is increasingly
offered online and on a just-in-time basis. As part of its new approach to
learning, The Walt Disney Co., for example, has implemented a platform that
offers video, mobile and digital content to employees as needed. “Three or four
years ago, learning at Disney happened in classrooms,” says Steve Milovich,
senior vice president of global human resources and talent diversity,
Disney/ABC Television Group and also senior vice president of employee digital
media, The Walt Disney Company. “Now we offer content such as TED-like talks
featuring Disney executives that allow employees to seek knowledge when and how
they need it.”
Just as important as developing talent is
reducing the risk of losing it. On average, nearly 80% of respondents say they
want to work for a digitally enabled company or digital leader. The sentiment
crosses all age groups, from 22 to 60, nearly equally. “The myth is that
digital technology is a young person’s game,” says Scott Monty, the former
executive vice president of strategy at Shift Communications, now principal at
Scott Monty Strategies. “At one point, women over 55 represented the
fastest-growing Facebook demographic. This is about how humans interact, not
just about how Millennials do.”
Results from our research suggest companies
should rethink conventional wisdom and consider the fact that the majority of
their employees across age groups want to work for a digitally enabled
organization.
Employees of all ages are on the lookout for
the best digital companies and opportunities. Many respondents from our
research are not merely indifferent to their company’s current reaction to
digital trends, they are dissatisfied.
Businesses need to make sure they are engaging employees in service of
the organization’s digital aims. That engagement is the function of two
critical components of strategy execution: culture and leadership.
Companies in the early stages of digital
maturity should seek opportunities to generate buy-in among employees to their
digital strategy.
CONTINUES IN PART III
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