How Leading Organizations Are Using Digital for Strategic Advantage

By: Rania Kort    

 

Digital transformation efforts are underway in most organizations today as digital leaders are uncovering new opportunities that create added value and better ways to engage with customers.

Businesses are in various stages of using digital advancements to better compete. Some organizations are in the beginning stages while others are evolving into digital masters as they implement new innovative digital growth strategies to adapt to emerging trends. 

Although there are many different dimensions to digital transformation, here are some of the key areas that leaders are considering when using digital for strategic advantage.

Digital isTransforming Industries and Reinventing Organizations 

The competitive environment is in perpetual motion. Global competition and digital capabilities are blurring industry boundaries, disrupting business models, redefining products and services, and transforming customer relationships:

  1. Consider what Airbnb has done to the hotel industry and what Uber has done to intra-city transportation.
  2. Netflix, for example,transformed the movie rental industry and the way we watch movies.  It changed the game, replaced brick and mortar storefronts through a new business model and built up over 50 million subscribers through an innovative digital delivery approach.  
  3. Some companies are rethinking their value proposition and reconfiguring their delivery models for a digital age. Progressive Insurance, for instance, is creating a range of different innovative apps and reconnecting with its customers in new ways by becoming more of an insurance advisor and less of an insurance sales company. 
  1. CVS Caremark is driving innovative approaches to reinventing pharmacy and helping businesses and communities manage health in more affordable, effective ways. Through its acquisition of  MinuteClinic, Caremark and other specialty pharmacy providers, it expanded its offerings into B2B pharmacy services and primary healthcare, and is now a key healthcare ecosystem player.  It is in the process of implementing a bold digital agenda to transform healthcare and pharmacy by leveraging new emerging digital technologies, and channels to provide customers with the most relevant health information.

Digital is Changing Customer Relationships, Operations and Business Models

In the early days of digital transformation, standardization became the mantra, which, with time, created efficiency but also with time, stifled employee creativity. As a result, business flexibility actually declined for businesses digitizing their operations. Today, organizations that are gaining higher value from their digital transformations are redesigning their operations and taking advantage of digitalization by enabling innovation, creativity and collaboration among business units,employees and partners.

Digital transformation and improvements are focused in three areas:

  1. Customer Experience. This is the key area focused on building relationships with customers and engaging them in relevant, timely, valuable and meaningful ways throughout the entire customer journey.  It includes powerful new data collection, real-time feedback and analytical tools that provide deeper insights into the different customer segments.  This information in turn is used to personalize engagement with customers in marketing, sales, service, brand/product management and fulillment. 
  2. Operational Agility.  Digital is also changing the ways organizations operate.  Companies that are digitally enhancing their physical products are opening the doors to new experiences and revenue streams.  Driving operational agility and developing leaner processes are enablers to increasing speed-to-market,  improving employee productivity and engagement, and in maximizing asset utilization.  According to a Q3 2015 Forrester survey to over 400 executives, digital will continue to have the highest impacts on eCommerce, marketing, IT and sales functions in the next 24 months. 
  3. Business Model. Digital advancements are modifying or reinventing business models by redefining the value that organizations deliver to its customers.  A company’s ability to create value for its customers will depend on how easily it can digitally augment its core capabilities and realign to deliver the outcomes that customers really desire.  Digital business models are not about technology.  They are about creating new business designs that utilize digital technologies to blur the digital and physical worlds to improve the ways that an organization serves its customers, collaborates and operates. 

Digital Mastery is Transforming Organizations into Industry Leaders

There are digital maturity models that are evolving that leaders can use as planning tools to assess their digital needs, processes and standards. By using a best-practices framework, leaders can move from being tactical and reactive to the pressure of becoming more "digital" to being more proactive, innovative and strategic.

According to a study by CapGemini and MIT Research, digital masters were 26% more profitable than their peers, and generated 9% higher revenue from their physical assets.  They classified companies into four levels of digital mastery:

  • Beginners -  Organizations that are at the beginner level have some digital initiatives as experimental, but management is skeptical of the value of digital technologies. 
  • Fashionistas -  In these organizations, there are more advanced digital capabilities with initiatives in social and mobile, but they are done in silos with no overarching vision. 
  • Conservatives -  Organizations at the conservative level have an overarching digital vision, but the vision is still underdeveloped.  They also have a few advanced digital features and strong governance in silos.   
  • Digital Masters - Digital Masters have a strong overaching vision and many digital  initiatives creating value in measurable ways.  They have a strong digital culture with effective governance structure in place.  It was found that there are digital masters in every industry,   Over 30% of the organizations in the Technology, Banking, Insurance, Travel and Telecom industries were found to be digital masters.  Retail, consumer and utilites had digital masters in 20% of the organizations.  Only 12% of the organizations in the Utility industry were found to be digital masters, while the least number of digital masters was found in the Pharmaceutical industry with only 7% of the organizations having any digital mastery.   

Some barriers to digital mastery include:

  • Business units having competing metrics causing conflicts and lack of collaboration
  • Intiatives not having sufficient value that contribute to the bottom line
  • Customer data not centralized and no single view of the customer
  • Stretched resources and lower level talent because of budget cuts
  • Focus is still on pushing out products and serices vs. customer experience, desires by types of customers and outcomes  
  • Lack of alignment on strategic direction and on initiatives across the organization 
  • Silos within the organization, including business and IT groups not working as partners

Organizations who understand these barriers and take time to analyze the issues and gaps they face, can take steps to raise their maturity level and progress toward becoming digital masters.     

Digital is Creating a Paradigm Shift in Organizational Cultures and Leadership

The most effective way to undergo a digital transformation is to endorse it from the top down  To do so requires envisioning the future state, engaging the entire organization and collaborating with internal and external partners to leverage technology and digital transformation strategies. 

Companies undergoing a digital shift in leadership are creating digital leadership roles, and are determining how to best organize digital teams.to ensure the effective coordination of efforts and conversations across the company are taking place.   

Some companies like Zappos recently created a complete shift in their leadership model and moved from a model of hierarchy to one referred to as Holacracy, which distributes power to all employees and reduces bureauracy.  The model empowers employees to self-manage their work and creates a more agile and innovative environment. 

To make a shift to digital, leaders need to change their thinking in how they approach the following areas:

  • Strategy - From efficiency and cost reduction to innovation and digital transformation 
  • Leadership and Culture - From hierarchical risk averse, to flattening hierarchies, empowered roles, and a risk-taking/learning culture that fosters collaboration and innovation
  • Workforce - From low cost labor to investments that attract and retain higher skills 
  • Technology - From legacy to social, mobile, analytics and cloud  
  • Customer Relationships  - From customer relationship management to always being connected to customers and providing value beyond one's products and services  
  • Process - From controlled and rigid to agile and lean
  • IT Business Model - From servicing and supporting the business to being true business partners

Digital today requires innovation, creativity, partnerships and a shift in thinking from process-led transformation to a technology, people-led continuous improvement model.  It focuses on a customer centric value network paradigm that embraces flexibility and enables the implementation of continuous change as a competitive advantage.

Digital Success Requires Taking Action and a Forward Movement Plan

Becoming a capable leader in the digital age absolutely requires forward movement to start.  Some companies start small to focus on reshaping a specific business unit or product line to fuel innovation and digital agility.  Others have experimented by using digital models in collaboration with partners to offer a specific product or service.  

However, those that have truly transformed and are evolving into digital masters are reshaping their thinking across their business and are evolving one level at a time.  They are committing to a digital-first agile culture and are fostering new ways of working between business units and IT groups.  

Digital transformation is happening at an ever-faster pace today across all major industries in organizations. However to build digital mastery takes time. Three-dimensional printing, robotics, artificial intelligence, wearable technology and augmented reality are no longer science fiction. The Internet of Things is introducing the next evolution of the connection between people, places and things.  Mobile is taking the lead and there is a clear shift in the way digital channels are being utilized.

Commit to your digital journey as soon as possible. Evaluate your needs and issues and develop a plan to move forward based on the organization's digital maturity level.  With the proper understanding of your gaps in each of the focus areas and a shift in thinking towards a digital culture, you can make change happen one step at a time so you can reach your longer term vision and effectively succeed in time! 



 

rania-kortRania Kort is an Independent Management Consultant and Business Advisor with more than 20 years’ experience helping Fortune 100 companies successfully implement strategic initiatives. Rania has established and run PMOs and managed large-scale projects and programs in many different industries. She ran and grew an IT Management Practice for PricewaterhouseCoopers for more than seven years managing over 300 consultants. Currently, she serves as an independent consultant focusing on achieving results through collaboration and a team leadership approach that ensures alignment, accountability and trust to develop high-performance teams.

If you would like to contact her, she can be reached either through her website or through LinkedIn.



 

 

Rania Kort

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