Leading thinkers in business have had their say on how managers should approach the digital transformation of their organisation, including the likes of Deloitte, Harvard Business Review, McKinsey and Company, Microsoft and MIT Sloan. They have identified various methods of driving technological change within a firm to ensure that it holds its market position and maximise profits under ever increasing competitive forces. Within these methods, there is a constant factor: an analogue approach often drives digital transformation.
What Impact does going Digital have on the Bottom Line?
Separate studies from McKinsey and Microsoft suggest that digital leaders capture disproportionate profit gains. The most successful of those companies are those that initiate digital disruptions, with fast-digital-followers closely behind. In fact, a Harvard study showed that digital leaders in the US outperformed digital laggards over a three-year period for average gross margin, operating margin and profit margin. The most striking part of this study is that there is no difference in relative capital expenditure between the leaders and laggards. It suggests that organisations cannot buy their way into digital leadership. Instead, they must engrain digital within their DNA.
Digital DNA and Mindset
An analysis of these models, along with Extech’s experience in digital transformation offers its offline approach to the modern workplace. There are four critical pillars to building an organisational culture with digital capabilities: an understanding of the value proposition, a culture of continuous change, employee empowerment and leadership commitment (see table below).
An Understanding of the Value Proposition
What does your organisation do? It might not be as easy to answer as you may think. The classic example here is the case of a tool manufacturer. Does it sell drills or holes? As Geoff Burch once wrote, what happens when a new competitor launches their ‘stick on holes’? Perhaps a more pragmatic (and digital) example of this is the famous case of Blockbuster Vs. Netflix, or perhaps the demise of Kodak. An organisation exists to satisfy a need, and understanding the fundamental principle of the solution is critical for innovation.
A Culture of Continuous Change
The markets which firms operate in are changing, and the organisations should continually evolve within it. Firms are experimenting with ways to increase their stamina for change. Leading innovators are now attempting to make their organisational structures ‘alive’ through the removal of hierarchies, self-organising, and distributing power evenly throughout the company.
Collaboration and communication at all levels of the organisation are critical. Employees have the freedom to utilise technology, innovate and fail. A bottom-up approach helps boosts productivity and enhances job satisfaction. As Peter Drucker famously said, “everyone can be the CEO”.
Finally, the leadership must commit to digital transformation. There must be a bias for action and excellent communication. Leaders must desire a digitally-led organisation, and everyone must know about it.
These four factors revolve around the digital mindset of the firm. Organisations need to think ‘digital first’ and how innovative technology can deliver the firm’s value proposition.
The cultural mindset of the firm drives digital transformation. That is a culture which is always innovating, experimenting and utilising modern tools and technology to challenge industry norms. The technology will change, but it is the analogue approach that will enable sustainable digital innovation.