We see that most companies are thinking about their digital future. Well more or less… Whilst most executives state that digital is an important issue on the company’s agenda, we see that the actual execution of digital projects, initiatives and activities does not support this statement. Forrester states that executives don’t realize yet that digital disruption is a bigger deal they really think.
In this post we discuss the four main observations we made looking at how companies behave around digital:
- Digital is a ‘side track’ next to the daily operations and common innovations.
- Digital is an add-on / nice to have to current business, meaning it is not part of current business or not even related to current business (model). Current business is not strengthened with the digital initiatives.
- Digital is a playground and most initiatives are for fun or to learn, executed by a small very enthusiastic group. The reason to be therefore in this case is that digital is seen as something that might be interesting.
- Digital is confused with online strategy. Building a new website or an app is often seen as a digital strategy.
Digital as a side track
When digital is not a part or a derivative of the overall corporate strategy, this results in misalignment of projects and customer experience. Without a clear alignment employees and customers often miss the logical reason for projects within the organisation and will be less supportive. It is hard to attract customers to the digital product or service because they don’t see the logical reason for it. Once attracted it is hard to retain them because the overall customer experience is broken. Employees find it hard to spend their time on these products because they are too far off their daily work.
Digital as an add-on
Digital is seen as an add-on or extension to the current product and service portfolio. Companies use digital to sell goods they have been selling for years. What they miss is that digital is really creating new opportunities to re-invent the business model and the product or service portfolio. Meanwhile digital is enabling the commoditisation of core offerings which leads to price pressure of current business and high pressure on the value chain.
Figure 1: New entrants in the ecosystem are threatening the business of established media companies
Real relevant digital activities are not started or being postponed because they interfere with the daily business and are perceived as risky or cannibalistic. Many brick and mortar retailers fail to deliver a good online alternative, because they feel it would take over the business in their shops. Now when new incumbents have taken over their business, it led to even greater losses.
Digital as a playground
When digital projects start, most of them are executed as pilots or as innovative projects that need be to developed far away from daily operations. This in itself may not be wrong but often leads to small attention from executives and stakeholders. Resources needed are not fully allocated, and people staffed are rapidly substituted. These projects often drift far from their original plan and therefore lack contribution to bottom line results as well as lack vision on the support of current strategy of the company. The project is not evaluated critically enough on a regular and profound basis and therefore may become very lengthy. This leads to even more difficult decision to stop or change the project.
Digital is confused with online strategy
The last observation we made is that most companies feel that building an app, improving conversion on a website, or making a processes more efficient and cheap with online channel (e.g. lowering costs in the call centres) is equal to having a digital strategy. The essential thought about having a digital strategy is to have digital at the core of the company’s strategy to drive growth. This opens up the new business models and new markets that are necessary to survive in this digital era.
So we see many established companies failing to fully see and exploit the opportunities of digital. Both lack of understanding of the power of digital (not changing the business model and not applying it to the core of the organisation) as the meaning of digital (just using an extra channel) will lead to losing position in the value chain, becoming a commodity or being replaced by new incumbents.