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10 min reading
Companies that adapt to the new digital era are producing better results. Hands down. Are you truly where you want to be with your business digitally? With all due respect: probably not. Only a handful of all businesses are what we call Digital Masters. Understanding the digital ecosystem will make you widen your views and eventually get a grasp of all the benefits that goes along with it.
So, what signifies these so called elites of digital business? For a start, they generate 9% more revenue than the average corporate competition. And how about this: when it comes to profitability, these digital innovators excel with being 26% more profitable compared to their peers. Now that's some serious numbers.
Let's glance back – to the Industrial Revolution – for a better understanding of the evolution that has led us to the rapid need of digital advancements. During this time, man labor was brought a more efficient stance; new machines changed the economy, capitalism and the whole marketplace. Companies wanting to survive had to adapt and prosper. Are you recognizing the similarities between then and now? That's right. It's truly time to act...
Today we operate in a customer-centric era. It's all about the User Experience (UX) and thus how companies make the client their center piece in most operations. At Nike, customers are able to fully customize their whole shopping experience through a fully tailored shoe selection. And how? Digital tools create opportunities to satisfy your client-base on a whole other level!
It comes down to re-inventing the digital approach. This is where Nike has been one of the front runners – especially with their FuelBand they managed to create a deeper bond when connecting with athletes digitally. Gathering data from active sportsmen granted the ability to track true user needs. Nike listened to the customer and strove to improve the digital experience from a user-centered perspective. Now that's proper UX.
The three insights above ultimately forms a Digital Master DNA. The question you need to ask yourself following the above statement is simple: how is your business using digital technologies to get ahead? In the book Leading Digital by Andrew McAfee et al., they reached out to 150 executives in 50 large corporation around the world. The objective: to find out these leaders' approaches to digital obstacles along with current usage of fresh technology.
It's not a surprise that most of the companies already were investing in new tech – ranging from Social Media to Mobility and Analytics. However, only a handful stood out from the pack: Digital Masters. So, what are they doing differently? For once, lead change is a critical factor to digital success. It's not only about what these firms chose to invest in, no, but more so focus on digital leadership. Agility and the aptitude towards digitalised activities ultimately form Digital Masters.
Let's dig a bit deeper. Since Nike, that you've touched on in the What is Digital Mastery-section above, excels both in their digital and leadership dimensions – how are other firms doing when comparing? Placing these two dimensions together, the outcome forms Digital Mastery in four scales:
Source: "The Digital Advantage: How Digital Leader Outperform Their Peers in Every Industry," Capgemini Consulting and MIT Center for Digital Business, November 2012.
How can you tell if you're classified as a Beginner according to the scale? You might just be starting out, and if so, it would be essential not to fall into a common trap: the wait-and-see strategy. This tactic from a beginner's perspective is about growing a sense of certainty before making any moves (with the methodology of that digital opportunities are better suitable for other industries and not theirs). Clearly take note on that this hesitancy can be damaging for your business and something to generally avoid. Some also lack the leadership capacity required where proper training needs to be scouted out and implemented as a company routine.
A group that are non-traditional in the sense of not waiting around but rather so buys into the new digital trends are the Fashionistas. Despite being very open-minded when it comes to digital innovation, that doesn't classify them as Masters of the Digital craft. To reach that level, leadership capabilities must cope with digital initiatives. Where there's an overflow of trendiness – discipline often falls behind.
If a company is investing in new technology, a governance and robust digital leadership must be present throughout. Otherwise, you'll just waste a lot of what you spend. Or, if there's no spending issues, it could also be a case of that Fashionistas are forced to reverse a majority of their actions which is highly cost-inefficient. Don't get me wrong here; there's nothing bad about testing out new things to find the optimal solution. However, here's why the Fashionistas' path to Digital Mastering falls short:
What about the more traditional leadership in form of conservatism? A main problem here is the opposite to that of the Fashionistas. When you're not bothered by rapid technological advancement, the tendency often falls into very careful consideration and coordination of any digital investments. Don't let this happen to your business – and of course – that's easier said than done, but entering this new era of digitalisation it's vital not to lose ground versus competitors by cutting out innovation. Framework, structure and processes are of course important – but it eventually comes down to balance. Only focusing on a structured thinking pattern could ultimately be your downfall.
If you slightly recognise yourself in the Conservative category; did you generate any doubt to your current digital approaches? We get it though. Leaders in more conservative-oriented companies are usually experienced and have seen a lot. Time is scarce (not to mention tasks and capital) and the idea of that making mistakes would waste any of those elements is unbearable to many. Too much cautiousness can create an authority trap where focus is more on standards and monitoring than making advancements. Breaking down the conservative effects on business operation would look something like this:
At the end of the day, it comes down to exceeding the difficulties that your competitors are facing. This is where Digital Masters excel. They know where to turn when it's time to invest, and their leaders commit to strong, digital guidance for what the future demands of them. Because let's face it: using your digital advantage correctly can grant you a supreme position in the industrial space.
But... how could you measure the effectiveness of digital advancement compared to your peers? Because sure, the Four Levels of Digital Mastery provides an initial indicator to where you're at, but let's put this on another piece of paper. In the book, Leading Digital, a survey was conducted involving 391 enterprises in thirty countries. This survey was narrowed down to large corporations with >$500 million in revenues.
Using statistical methods, the goal was to find out how the two vital parts of digital mastery – digital leadership and digital capabilities – are linked with various sorts of performance. Remember the increased profit and revenue you could generate from steering towards becoming a Digital Master? Think of the graph below as an elevated version of the Four Levels of Digital Mastery. You should now be able to picture the advantages very clearly:
Source: Adapted from George Westerman et. al., "The Digital Advantage: How Digital Leaders Outperform Their Peers in Every Industry"
Interesting realisation, isn't it? Compared to the average corporate marketplace, a less restrictive mindset is the way to go – at least if you'd like an extra boost in revenue generation! And the varying numbers makes sense. Digital actions can reach much farther than physical ones in a lesser time-frame and increased efficiency. Let's take e-commerce as an example. In a rapidly expanding global market, the increasing volume for goods and services that businesses are facing – nothing can handle it better than digitalised implementations. Not to mention the capacity of reaching out to people; the ability to create trends on Social Media and the use of improved call centers & mobile devices for levering sales people are significant benefits.
In the 'Profitability'-graph, we find that Digital Masters excel in hefty fashion with being 26% more profitable than their peers. However, this time around, Conservatives is the group that's on the positive spectrum, having 9% additional profit vs. the average – scuffing away even the more revenue efficient Fashionistas. It doesn't shy away form the fact though that once again – smart, digital endeavors win. This points out that strong leadership is important, but that it has to be forward-thinking as well. Keep in mind that we're talking about large firms here. With revenues of $500+ million or more, the monetary advantage could be immense down the line.
Building your digital capability can take some time. But hey – it will always be worth it. Why? Because it will make future digital initiatives and investments less risky and easier. With other words, the sooner you get the steam wheel rolling – the smoother your company will operate! It's important to understand the urgency of Digital Transformation. This is happening right now, and if you don't want to fall behind – it's high time to act!
Of course, the need to hurry is different from industry to industry. If you're in the Travel & Hospitality or Telecom field, where digital competitors have excised for years, things are moving faster. Pharmaceuticals and Manufacturing companies are however not as competitor-steep – strong threats are yet to materialise into a digital format. Ask yourself – is time truly on your side?
It might be tempting to assume that you can wait, especially if being in the Beginner quadrant of the graph. In addition, if your whole industry is slacking behind – why would you be one of the first to invest capital and effort? That's reasonable thinking. It's however wrong. With it always being worth to invest in wise tools that increases both your digital and leadership capabilities, it's rational to think that catching up with Digital Masters in the high tech industry will be a rapid journey.
How did a giant like Nike do it? It might be easy to assume that they almost were born Digital Masters. But no – this retail colossal took the path from being a Fashionista. They started developing digital aptitudes secluded from other departments. Eventually, the Nike Digital Sport unit worked as catalyst, where the company combined and added digital and leadership capabilities gained from previously isolated digital advancement development. With that being said; everyone, including yourself and your company, will have to carve out a road that works best for you.
But what if you're a Beginner? Could you still take the leap straight to becoming a Digital Master? It's unusual but sure is possible. The main issue would be your competitors that already are ahead. While you're trying to find your methods and ways – your rivals might exploit your challenges and gain ground on not going towards that same direction.
The huge fashion retailer – Burberry – took this instant leap from being a Beginner, and they did it successfully. Being in certain industries, e.g. information services, entertainment or media, you might already be at a crisis in form of standing on a "scorching platform". In these cases, the best way may be to try going for that direct leap from Beginner to Digital Master.
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