As firms think about leveraging Digital to create competitive advantage, there are different perspectives and points of view on what enables success. I have created a ready reckoner, that I believe captures key considerations that will enable firms to successfully adopt Digital. For example, a consideration for organizations implementing Digital and AI is, to whether keep the human being in the loop or outside the loop. A driverless car replaces the human and keeps her out of the loop, while features like lane change assist, automatic collision detection & breaking, assist the human and keep her in the loop. A lot of digital that firms implement will keep the human in the loop, at least in the near future. So here are a few key points a firm can use as guideposts, while implementing digital:
1. THE ICEBERG PRINCIPLE: A common misconception about Digital is that it is mainly about the front end and user experience. User experience is key no doubt, but it is the tip of the iceberg. Organizations need to spend much more effort on digitizing their back-office functions, to ensure the power of digital is realized. For example, let’s take a consumer loan. Mobile can create a superior loan application experience bringing down the application time significantly, say 15 minutes. However, if the approval of the loan takes 15 days and requires back and forth with the applicant, on aspects like faxing support documentation, the user experience very quickly deteriorates. In fact, having a digital front-end, with a legacy back-end is more detrimental, as it raises customer expectations, only to let them down harder as the interaction progresses. Therefore, when defining a digital strategy, it is important to consider that it’s eventual realization will require you to put substantial effort in digitizing the back-office also.
2. FAIL FAST: The Fail Fast concept, always reminds me of the memorable dialogue from The Good, The Bad, The Ugly – ‘when you have to shoot, SHOOT. Don’t talk!’ Fail Fast conveys the importance of speed and an iterative and agile mindset. This enables firms to test their ideas or products quickly, without having to invest significant effort or money, reducing the cost of being wrong later in the lifecycle. There are some very good reasons why Fail Fast works today as compared to say 10 years back:
a. Tools & Technologies today allow you to be iterative and agile. Previously, launching a web based application required software licenses and hardware, which had to be requisitioned. Once bought the organizations were pretty much stuck with the investment, and therefore needed to be surer of success, which prevented the ability to be agile. Today, cloud and software as a service enables a pay by the drink model and allow ideas to be tested rapidly and at lower cost. Should the idea succeed, the technologies allow quick scaling up also. The other key factor that enables fail fast are collaboration tools like Zoom, which enable teams to get together and brainstorm an initial idea rapidly and get feedback to make it better.
b. The Rate & Amplitude of disruption is increasing: Changes in client behavior, changes in competitor’s behavior and industry disruptions are all happening faster, and when they happen, the impact is much larger. Organizations therefore need to be able to respond to business events with much more agility. In some cases, a firm may choose to be a first mover, in others a fast follower but increasingly it will be difficult for firms to remain competitive if they are neither.
c. There is greater acceptance in organizations towards fail fast. The FANG companies have shown that fail fast / iterative / agile works and the rest of the business world has slowly started embracing these concepts
3. CULTURE: As is evident in the concept of fail fast, an organization needs to change it’s culture for successfully implementing digital. As the old gold nugget goes, ‘Culture eats Strategy for lunch’. Below are aspects of culture that are pertinent to digital:
a. Create a ‘Two-Speed’ culture. Fail fast is good, but you can’t fail fast your earnings call, or a nuclear power plant. There are some activities that require thorough planning and execution and there are others that lend themselves to iteration and benefit from it. Recognizing this reality and enabling organizations to run in a two-speed mode, is an important cultural aspect organization’s should cultivate.
b. Think Big, Start Small, Scale Fast. This is another succinct way to help guide organizational mindsets. Thinking big enables a holistic vision, creates organization excitement and enables momentum. Starting small and testing quickly allows rapid improvement and iteration. And obviously scaling up a successful pilot before your competitor copies your idea, is critical too.
c. Embracing Partnerships: Business strategies have been split between having control over your supply chain viz a viz focusing on core competence. Perhaps some industries lend themselves better to one strategy over the other. The importance of partnerships today however is pronounced. The reason is simple – the types of technologies and domains are so many, that is impossible for any firm to master all the technology vectors of success. Therefore, an organization’s ability to create win-win partnerships is very critical, even with firms they have traditionally competed with. Salesforce and Microsoft partner on IOT and they compete on CRM. Microsoft’s voice assistant is Cortana and Amazon’s is Alexa. But they have both come together to strengthen each other’s product.
In part two of this article I will address 3 more points organizations should consider: 1. Taking Moonshots, 2. Data is the new Oil and 3. Information Security & Data Privacy.