Five Keys To Successful Digital Transformation
According to McKinsey & Company, digital transformation is a uniquely complex challenge, because it impacts nearly every facet of an organization. It requires “unprecedented coordination of people, processes, and technologies” and in today’s rapidly-changing business climate, it’s also crucial to survival.
So how can an organization pull it off?
In his recent book, Driving Digital Strategy, Harvard business professor Sunil Gupta explains what he learned by studying the digital approaches of not just upstarts such as Apple, Amazon, and Airbnb, but also legacy companies like GE, Best Buy, and John Deere. Here’s his blueprint for success:
Pick A Lane
It’s okay to experiment with technology, says Gupta. That can help you test fresh ideas and explore unfamiliar terrain, but you need an overall vision—one that firmly leverages your company’s assets. This includes assets that are not clearly visible to the naked eye. At Best Buy, for example, they discovered that manufacturers like Samsung are willing to pay for retail space to showcase their products. At John Deere, they capitalized on data that can help farmers better manage their land.
Don’t Sugarcoat Anything
Digital transition is a complex process. Gupta compares it to replacing a plane’s engine mid-flight. You’re going to lose altitude while installing new systems, hiring talent, and developing the requisite skills. But effective leaders take time to explain the whole process. When Adobe started selling its software via subscription instead of a one-time fee, CEO Shantanu Narayen made the risks and rewards clear to his employees and investors. No one was surprised when the firm’s net income dipped—or when it sprang back three years later.
Think Beyond P&L
Technology is great at reducing costs. That’s the most tangible benefit of digital transition, says Gupta, but don’t focus solely on efficiency. “You must make digital strategy an integral part of your overall business strategy,” he writes. “You must embed it in the operations and DNA of your organization, in a way that touches all aspects of your business.” Otherwise you leave your company open to disruption from the outside—and open to ennui on the inside. If digital transformation is too focused on lessening costs—and not enough about bettering employee experiences—your efforts will produce more resentment than excitement.
Build A Community
Any organizational transformation, corporate or otherwise, must involve a search for ways that a digital platform can provide unique value to your customers. Exhibit A: Nike’s Nike + Run Club. Exhibit B: Bank of America’s Business Advantage Small Business Community. This creates a powerful network effect, says Gupta, a vibrant community of impassioned consumers yields detailed info on product use, shifts in customer needs, and areas ripe for innovation. It gives you a low-cost way to market your goods. And, as Apple’s popular ecosystem has so clearly demonstrated, it makes it much harder for people to walk away from your products and services. Instead, they become strong advocates for your brand.
Open The Platform To Everyone
Yes, this last idea sounds crazy, but it’s hard to deny the results. Look at what happened when Apple invited developers to create apps for its phones. Or, better yet, when Amazon welcomed third-party sellers onto its marketplace. The number of offerings expanded exponentially, and those offerings drew in new customers, which then enticed more sellers. This virtuous cycle leads to rapid scaling, writes Gupta—at virtually no cost, and, in the case of Amazon, it also adds billions to the bottom line.