Tag Archive: digital strategy

Four Exercises for Contemplating Digital Readiness

Published by
Jim DeLoach

Jim DeLoach

Over the next few years, the digital revolution will force many organizations to undertake radical change programs and, in some cases, completely reinvent themselves to remain relevant and competitive. Ask executives and directors what their company’s biggest threats are, and chances are the answer will include the threat of disruptive innovation. That said, is disruptive innovation sufficiently emphasized on the board agenda?

Our experience indicates that most boards do not fully grasp the opportunities and risks associated with digital transformation. There are four important activities for organizations to consider as they contemplate what digital means to their business and strategy.

1. Assess digital competencies. Protiviti’s original research has identified more than 30 competencies at which digital leaders excel. These competencies consist of empirically supported capabilities and structural characteristics that can be used to benchmark the organization. They are arrayed across six core disciplines that many traditional businesses struggle with:

  • vision, mission, and strategy;
  • management and employee culture;
  • organization, structure, and processes;
  • communication, marketing, and sales;
  • technology innovation and development;
  • and big data, analytics, and automation.

An example of a competency related to “vision, mission, and strategy” is that executive management must have a clear understanding of the potential impact of digital disruption in the industry segments in which the organization operates and be able to articulate a clear strategic vision fit for the digital age. In addition, digital strategy-setting and review should be a continuous activity for the business and in the boardroom.

Competencies can be useful when plotting the path toward digital maturity. The strategy should reflect the competencies that currently define the organization and address the absence of those which present barriers to success. This is important because the digital age is forcing organizations to radically rethink how to engage with customers and pursue design breakthroughs for improving processes and functions continuously. That means they must balance outside-the-box thinking with the practical considerations of repositioning the business. Many strategies ignore these fundamental issues, resulting in a business that is digital on the edges but not at the core. Our view is that a truly digital business has a digital core.

2. Define and refine continuously the digital vision and strategy. Organizations need to make a conscious decision about whether they are going to lead as the disrupter of the industry or, alternatively, play a waiting game, monitor the competitive landscape, and react only when neces­sary to defend market share. For many companies, the answer may be somewhere in between. For organizations choosing not to actively disrupt the status quo, their challenge is to be agile enough to react quickly as an early mover. Few are ready for that challenge, however.

A leader of the organization must own responsibility for understanding the competitive landscape, the opportunities emerging technologies present, and the threats to existing revenue streams. Management must frame the digital vision and the strategic initiatives supporting it around the enterprise’s core competencies. The vision must reflect the direction in which relevant digital technology is trending. It should express how technology can elevate the company’s differentiating core competencies and deliver unique customer experiences. With technology and regulations changing, and innovation happening so rapidly, the business needs to review and refine its digital priorities constantly.

3. Define the target operating model. Too often policies, processes, and organizational structures get in the way of a business becoming and remaining digital. The key is to empower, trust, and monitor people, not control them. That’s a different way of thinking for organizations rooted in “command and control” structures. The business should clearly define where it’s going in its vision and strategy, and management must recruit and train the right people while ensuring that the enterprise’s policies, processes, and systems are suitable to compete in a digital world.

Accordingly, management should define the processes, organization, talent, methodologies, and systems comprising a future operating model that remains true to the company’s identity and brand promise. In the rush to become digital, the importance of policies shouldn’t be forgotten to address risks and ethical questions leaders must consider.

With the current and future states defined, improvement plans should be developed to close the gaps based on industry best practices and reviewed with executive management and the board. The risks associated with the target state should be identified and assessed against the entity’s risk appetite. In this respect, management should be careful to avoid understating the hyper-scalable business model component of digital transformation. Digital thinking requires organizations to solve the problem of rapid growth and scalability to rely primarily on technology rather than people, as opposed to the traditional focus on scaling ahead of demand.

4. Align the organization with the needed change. Using digital technologies to improve products, services, and processes requires focus and discipline. To enable continuous or breakthrough change with confidence, buy-in must be obtained from executive management and the board for significant changes in strategy, processes, and systems. Support also is needed from business-line leaders, operating personnel, and process owners affected by the change. The communication of change and its implications must address why a digitally-focused culture is necessary for the entity to survive and thrive, and offer a compelling case that the interests of employees and the enterprise are inextricably tied to effecting change.

Depending on a director’s perspective, the exciting or worrisome truth is that the digital revolution is just getting started. Even when executives are aware of emerging technologies that obviously have disruptive potential, it is often difficult to have the vision or foresight to anticipate the nature and extent of change. That is why every organization must chart its own digital journey.

To that end, the board should be engaged in all of the above activities, from readiness assessment to organizational alignment. When addressing digital, directors should recognize the signs of organizational short-termism and executive management’s emotional investment in traditional business models. Ultimately, the board must ask the necessary questions to encourage management to advance the enterprise’s digital journey at a pace that will sustain the company’s sources of competitive advantage and market position.

Jim DeLoach is managing director of Protiviti. 

What’s the Best Way for a Board to Approach Digital Strategy?

Published by

Rick Chavez

Stop thinking about it.

That may sound like odd advice. After all, the whole world has gone digital—digital channels, digital stores, digital communities—and most businesses have spent the past decade thinking about almost nothing else.

But I’d argue that digital has become too pervasive to make sense as its own category. There’s no world of clicks separate from the world of bricks. There’s just a new hybrid world where people live their lives—a world in which “digital” is no longer a useful way to organize your thinking.

Boards should focus instead on a related “D” word: disruption. Thanks to digitization, all of us—at work, at home, and on the go—have new expectations about services, products, relationships, and experiences. We want higher levels of richness, relevance, convenience, and timeliness in all our interactions with companies. Disruptors like Uber Technologies, Amazon.com, and Facebook, have found ways to meet rising expectations, and in doing so they’ve defined what “good” looks like everywhere. These tech juggernauts are signaling that they intend to insert themselves anywhere they can remove friction, capture customer attention, drive out market inefficiencies, or strip away information to fuel their data and insight engines.

Most important, as digitization unfolds, power has shifted from companies to people, from supply side to demand side. That means boards need to focus on fundamental questions. They need to focus less on “where the puck is heading” and more on questions that dig in deeper: How fast can we move? Does our company have time to shift from low-growth to high-growth businesses, before disruptors steal our customers? Where do we have assets that can become the basis of new information-powered businesses? And the crucial issue in a time when customers are immersed in offers of low price and one-click convenience: How does our company stay relevant? How do we change our strategy for capturing and retaining customers’ attention?

The point isn’t to be right about the end-state—you won’t be. But you do need to encourage your management team to develop a point of view about how the future is shaping up, areas that your company has strong idea about, areas of weakness that may need more strategic thought, and options that will let you rally behind certainty and probe uncertainty. With this kind of framing, the board can take a disciplined approach to managing risk from digital disruption, instead of just trying to minimize or avoid it altogether. ‘Disruptors at your doorstep’ can become a rallying force and focusing lens —helping your team make clear choices about what to keep, what to start, and what to stop, liberating resources from declining businesses to fund growth and business reinvention. Put differently, think of imminent disruption as a crisis. As we’ve learned from times past, never waste a crisis.

The other critical conversation is about modernization of core capabilities, work approaches, and talent. Often this conversation shows up as an innovation challenge. As large incumbents, can we do new things and do things differently? Can we take a page from the playbook of digital market leaders like Amazon and Google? Some of these companies rent and assemble capabilities to get further faster, as opposed to building and managing everything on their own. They appear to work fluidly across functional and product “silos”—in fact, they have no silos to combat. And they tune their business cadence on the inside to reflect rapid changes in the external environment. In other words, they can operate in agile cycles with integrated teams.

Is your response to these thorny issues a “digital strategy”? I’d argue not. Disruption, on the other hand, requires vigorous debate to focus management energy on doing the right things, faster and with greater flexibility.

So forget about digital strategy. You’ve been losing sleep over it for too long. If you focus on the right issues, you won’t necessarily sleep better, but you’ll get a lot more value out of those wakeful hours. And value, after all, is the point.

 

Rick Chavez is a Partner and the Americas Head of Digital at Oliver Wyman.