CIO Development

Article Embrace Digital Innovation

Technology today is shredding industries wholesale. Digital innovation and the Web in particular relentlessly commoditises and rewrites the rulebook for business. We all know the stories about HMV and Amazon, Blockbuster and Netflix, Thomas Cook and Expedia, but that happens to other organisations surely, not yours?

Organisations that are seemingly well established are facing new threats from previously un-encountered opposition, and at an accelerating rate utilising technology. In many organisations, “digital” is a cacophony of disconnected, inconsistent, and sometimes incompatible activities. Companies may have simultaneous mobile marketing initiatives, conducted by different groups, using different tools and vendors, or multiple employee collaboration platforms with different rules and technologies. The problem is exacerbated as business units do their own things digitally, or as companies hire vendors who can only do things their own way. If your organisation has wildly different digital marketing activities for each division, brand, or region, this could be you.

The impact on business strategy

Digital experience delivery makes (or breaks) organisations; a great digital experience is no longer a nice-to-have. A new report points to a growing number of firms that have chosen a mobile-first approach, but then falling flat because “systems of record cannot keep up with engagement needs”. To a greater extent, customers’ impressions of a business are established through digital engagement forcing businesses to recognize that “software is the brand”. Some senior directors that we know are asking some fundamental questions such as:

The fact is, Digital transformation spans the entire organisation and requires businesses to rethink their business models, products and services. It may even involve disrupting an existing and healthy revenue stream to create a new, digitally-enabled source of income that is more sustainable in the long-term.

Creating a vision

The transformation to a digital business must start with a vision. However, what is needed is not a digital vision, but a vision for the organisation in the digital age. It is an important distinction. Digital is not an add-on to the business; it encompasses the whole organisation and beyond. The vision for digital transformation is, therefore, the vision for the organisation, it defines the type of business it needs to become to thrive in the digital age.

The board must provide the leadership and direction both during the initial transformation and on an ongoing basis to ensure the business continues to adapt and develop to the fast-paced markets that digital creates. Indeed, being a board member in the digital age requires different skills, knowledge and experience than has traditionally been required. To provide the vision and leadership required to create a digital business and to ensure that business survives and grows in dynamic markets that are driven by customers, requires a board that truly gets digital.

Consider these three key questions:

Is the board comfortable talking about technology? It is no longer acceptable for a senior executive to be a self-confessed technophobe. In a digital business every member of the senior team must be able to contribute to discussions about technology and they must also understand and be able to articulate the importance of technology to the organisation. This does not mean they need to be deeply technical or understand how the technology works. But they do need to understand its capability and how it can be applied. It is the same level of understanding that the board should have about the company’s financial accounts. Every board member should be comfortable talking about the accounts; they should be able to discuss the contents, understand the relationship between the P&L and the balance sheet, spot potential issues and debate possible solutions. But they are not expected to know all of the accounting standards or the detailed policies and processes that sit behind the preparation of the accounts – that is the job of the CFO and the Finance department. In board level discussions about the accounts the CFO acts as the subject matter expert, advising, guiding and leading their colleagues but they cannot be the only person that understands the numbers or what they are saying about the health of the organisation. The same applies to technology. The whole executive team should be capable of discussing their company’s IT investments, strategy and opportunities perhaps under the guidance and leadership of a CIO or technology leader, who by definition should be a member of that team.

Does the board understand digital? Technology is key to the digital business. But having a board that is comfortable talking about technology matters is just the starting point as there is also a lot more to being a digital business than technology. Digital is about transforming the entire organisation, it is about creating new business models, products and services, generating new revenue streams, and creating a unique customer experience. And this may involve collaborating with other partners, suppliers and even customers to create new offerings and generate value for all parties. For example, boards need to understand what it takes to create and manage ongoing digital services that generate value for the business and the customer beyond the initial transaction. This is where the real customer experience and value lies. Digital businesses take an outside-in view of their business – they look at the business from the customer’s perspective and reinvent what they do and how they do it. They then apply the right technology to achieve the transformation. If your board thinks digital is just a technology project, or it is about your organisation’s website or social media activity then it is not a board that gets digital.

Is there a digital culture at board level? Being a digital business means being a joined-up business. Digital does not stop at functional boundaries; it flows through the organisation to create integrated offerings and a seamless customer experience. Board members need to work together to identify and exploit opportunities in the digital world. The board must work together to ensure digital success. The next game-changing idea could come from any part of the organisation and through a previously untried combination of products, services, partners, suppliers, systems and/or data. The C-suite needs to have a collaborative culture; they need to be comfortable working together across functional and organisational boundaries. Digital markets move quickly, they are more dynamic than traditional markets and they can be disrupted more easily. To survive and succeed in the digital world, businesses need to be agile; they need to be able to respond quickly and easily to changing market conditions, customer preferences or competitor activity. The board of a digital business therefore needs to be capable of making quick decisions perhaps on minimal or imperfect information. And they also need to be prepared to take risks, try new things, test ideas and commission pilots in order to thrive in the digital world.

These principles also apply to the wider organisation as well as the board. Increasingly managers and staff from all areas of the organisation need to be comfortable talking about technology and have the right culture for digital. The leading digital businesses exhibit strong collaborative skills, they are agile with the ability to make quick decisions, and they are willing to try new things in order to get ahead. These characteristics need to run through your organisation if it is to be a successful digital business. However, the board sets the tone and direction for the rest of the business to follow. If the board is not up to speed with its digital leadership challenge then it is very unlikely that the rest of the organisation will be able to transform.

Conclusions

Todays’ new technology trends (consumerisation, mobile, social, cloud, big-data analytics) are creating profound risks as well as opportunities. Whether or not an organisation will survive the onslaught depends on its ability to identify and respond to the challenges. This requires the board to take the lead and a more outward orientation than many adopt today.

In some cases, change may be sudden and addressable. Technology may enable a new form of invasive competitor or technology (like Rightmove or ASOS). In such cases, given time and focus, others in a given industry can often adapt, survive or even thrive – sometimes out-disrupting (or acquiring) the disruptor. For others, the change is more fundamental. Resistance in such cases will lead to failure. The way forward is to think more clearly about your fundamental customer value propositions. Ask: “if we were starting from scratch today how would we harness technology to create an enabling business model.”

15 years ago, under the threat of Web 1.0, Jack Welch, then Chairman and CEO of General Electric initiated the famous destroy-your-business exercise that forced every company business unit to benchmark competitors, develop a Web-based business plan to erode its own customer base and then change its own business operations to respond to the threat.

It’s happening again. If you are unwilling to use technology to disrupt your business, someone else will do it for you. Is your organisation truly up to date with the changes that are being driven by technology? Do you see opportunities or threats? If you could turn back the clock and were working in IT in HMV, Blockbuster or Thomas Cook, what would you say to the CEO and board?

Sources:
Forbes Insights survey announced at Dell World, Dec 2013, Harvard Business Review Blog Should Your CIO Be Chief Digital Officer, George Westerman Aug 2013, Forrester 2014 Trends report, Peter High 2013, Disrupt IT: A new model for IT in the digital age, Ian Cox 2014.

Contact: Peter Thornton peter.thornton@ciodevelopment.com

CIO Development Ltd. is a UK-based organisation focused on developing IT executives through the delivery of open courses, bespoke in-house programmes, and individual coaching and mentoring.

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