You may have dodged a few digital bullets recently, but don’t think you’ve side-stepped the digital battle. Far from it. The main event has barely started and if you want to survive the digital economy, there are few things you need to know.

1 – The disrupters are coming

There’s nothing any of us can do to stop them. In fact they are already in residence in many sectors and you can be sure your sector will feel their presence very soon. We are definitely in the digital age and that means we all have to do everything differently if we want to survive the digital economy.

Disrupters also sneak up on incumbent businesses. It’s no use keeping an eye on your traditional competitors. They are the least likely to transform a sector. The real threat will come from start-ups, whose lean structures and unencumbered innovation enable them to seize a sector and your customers at will.

The threat isn’t even confined to your sector. Often disrupters emerge from adjacent sectors. Even those that you wouldn’t have thought had any connection. Take the automotive industry. That’s now totally at the mercy of developers of battery technology and smart-tech. Once the automotive manufacturing sector is reinvented it will, in turn, impact distributors, servicing, insurance, cab firms, commercial vehicle drivers, the petro-chemical industry, component manufacturers, haulage and the logistics sector and literally hundreds of other seemingly disassociated sectors.

2 – Traditional business can’t compete

The point about digital technology is it enables us to do things we haven’t even considered in the past. Things that make life easier for everyone. It’s about efficiency – that fundamental difference between failure and success in the digital economy. 

Computing power, especially now that artificial intelligence has entered the game, enables a digital business to collect and analyse mountains of data in a fraction of a second with no human intervention. These businesses appreciate customer needs and can adapt processes to satisfy them in a continuous stream of updates. The on-line retailer ASOS issues thousands of tech releases (programme updates) in a year and that is increasing as they get closer to their aim of individual customer experience.

A digital business is faster, more economical than a traditional one. They can deliver exactly what customers want, more cheaply and with less fuss. This is the “more-for-less” economy and we all need to do more with less. A traditional business, by definition, simply can’t compete.

3 – Digital disrupters can own a sector in a matter of months.

Digital businesses generally have higher customer satisfaction ratings than traditional businesses are used to, but they also have infinite capacity. Their lack of reliance on staff provides them with the ability to take over a sector like nothing we have seen before.

If you don’t believe me, check out the performance of digital businesses in recent years. The critical mass that first generation businesses like FaceBook took years to reach, newcomers like Angry Birds or the new networking platform Pulse have achieved in a couple of weeks.

4 – It takes around three years for a traditional business to get in shape to survive the digital economy.

Transformation isn’t about streamlining your existing organisation. If you want to survive the digital economy, it’s about re-building your business from scratch.

There are no second chances with transformation and no near misses either. There’s a right and wrong way to tackle this and the right way takes time.

The retailer John Lewis Partnership, who understand this subject better than most, are two years into their programme and are aiming to be a “digital business” within the next three. M&S have a similar time scale.

Compare this with the speed at which a disrupter can move into your domain and you’ll start to understand the issue here.

What are you waiting for?

5 – Change and transformation are not the same thing

In 2016 a national UK survey revealed 21% of organisations believed they had completed their transformation.  In fact these are the businesses that are most at risk, mainly because they clearly don’t know what transformation is. So, let’s put that straight.

Transformation is the transition from a state of order to one of constant change. 

Because in the digital economy things change every day, plans have limited value and you are constantly re-inventing yourself. I tell my clients “you are only as good as your next big idea”. Transformation is, literally, endless.

The confusion stems from a basic misunderstanding of the digital environment and the differentiation between digitisation or “change” and “transformation”.

Change is the process of applying technology to existing processes to speed them up, make them more efficient. 

The problem with this is that most existing processes are counter-productive in the digital age. By making them more efficient many businesses actually speed up their demise by heading faster in the wrong direction.

Transformation, on the other hand, starts by understanding market needs. 

I once received a brief from a client that said just “If we were starting our business today, what would it look like?” This is the essence of transformation.

Transformation involves assessing your business’ resources and determining how they equip you to meet consumer needs now and in the future, identifying the gaps and devising a plan to fill them using today’s emerging technologies.

The outcome is always very structures and practices, often new products or services and even, occasionally, operating in a completely new sector. Even creating a new sector.

6 – A third of our traditional businesses will fail to survive the digital economy.

It’s estimated that a third of the business we know and maybe even love will be gone two years from now, simply because they failed to transform.

This failure is caused by different factors in different firms, but there are a group of “usual suspects”.

Senior managers are often cited as a reason for businesses failing to keep up. 

If you had run a business successfully for any time, or maybe even founded it, you’d be reluctant to change a formula that had brought you this far. However, the fact is, those very formulae are what will bring about your demise. They are usually the antithesis of what’s required in the digital age.

As I have mentioned in the following point, there are skills gaps too. Traditional business leaders were taught and have perpetuated business practices that simply don’t work in the new paradigm. Take those away and what use are many incumbent leaders? 

In fact they do still have a place as I explain later, but until they realise that and commit to changing their own perspective any traditional business leader who promotes change is bound to feel like a turkey voting for Xmas.

I’ve also already covered the matter of the difference between change and transformation.

The failure to appreciate this is another major contributor to failure of the business. However this often leads to another mistaken belief that transformation is an IT project. Many transformation project fail because they have been trusted to IT people . Usually, the outcome of this decision is an infrastructure that compromises innovation. Technical infrastructure should be developed to meet the needs of the business and those needs are defined by the brand. 

Encouragingly, the majority of transformation projects these days are “owned” by CEOs, but senior marketers are increasingly stepping up to the plate. In fact because transformation is very much about meeting the needs of customers and the relationship with customers is owned by marketers it makes the most sense for marketers to lead transformation.

The appointment of marketers to the task also overcomes another common factor.

Many transformations fail because they start in the wrong place. This stems from a viewpoint that transformation is “fixing a problem”. This prompts organisations to start by addressing operational issues, when what they should be doing is defining the role of the organisation in the digital age.

7 – Business leaders don’t have to be a liability.

A recent UK survey revealed the vast majority of employees feel their business leaders are holding their business back. 

This is understandable. Firstly because 61% of any workforce are now digital natives who get this stuff. Their instinct is to adopt technology. They are also today’s, customers. The “more-for-less” generation who understand what technology makes possible and aren’t prepared to settle for less.

They also are free from the constraints of convention. The way Baby Boomers were taught to do business doesn’t work any more. There are many aspects to this, but take for example the reliance older managers have on planning. In the digital economy things change so quickly most plans are obsolete before they are published. Today’s managers have to take a responsive, more agile approach. Professor Ronald Heifetz calls it “adaptive management” and it sits badly on traditional managers.

However, this doesn’t mean traditional business leaders are redundant, just that, like everyone else, they have to learn to contribute in a different way to the running of a business. Today’s successful management seniors apply their experience as facilitators. The days of “command and control” are well past. The role of a business leader today is to open doors for younger, free-thinking minds.

8 – 70-80% of transformations fail.

No, I didn’t make that up! Imagine, if you were failing at this rate in any other area of your life, you’d definitely do something about it. However, it seems , where transformation is concerned, we just keep repeating the same approach and hope for a different outcome. Someone once said that’s the definition of stupidity!

In fact, there are as many reasons given for transformation failure as there are failed projects, but when you drill into the data it becomes clear there’s a common denominator and that’s a lack of focus.

Somewhere in all these organisations there’s a divergence of thinking, understanding, effort or commitment. It might be just one area of your business, a division or even an individual, if that person wields sufficient influence. Nevertheless, resistance or tangential behaviour of any kind will hinder any transformation project. Of course, this issue isn’t confined to transitioning businesses, it’s always been a factor in the efficiency of an operation. The difference is, such weaknesses are amplified when you are trying to survive the digital economy. It’s never been more true that efficiency is the difference between failure and surviving the digital economy.

9 – Brands are the key to surviving the digital economy.

OK, so here comes the interesting bit.  There’s a solution to this that every organisation can adopt. You may have got away with ignoring your brand in the forgiving, traditional marketplace, but in the digital world you won’t. The good news is, it’s not too late to start doing things right.

Brands are at the heart of today’s successful businesses. They provide the focus that enables organisations to achieve anything, including transformation. Yet, until recently, few businesses have understood brands or how to leverage them.

I’m not talking about logos here. Logos are just badges. A brand is a community of people with shared values and beliefs. If they also share an objective and are committed to achieving it, the organisation will eliminate wasted effort, time and expense. In other words they achieve focus.

The conclusion is obvious. If you want to succeed in the digital economy you must first sort your brand out.

10 – You’ll never walk it alone

The process of transformation is complicated. Surviving the digital economy requires skills and understanding no one person would possess. These skills and the understanding are alien to most senior managers. It’s also highly unlikely you’ll find many of them within your organisation.

Furthermore, even once the brand is established, you will meet resistance requiring a neutral hand. Businesses that try to keep their transformation within the family usually fail, often because the people in the driving seat lack objectivity. 

While a CEO or ideally Marketing Director may drive the project, businesses need external leadership and diverse resources that, as demand is increasing, are becoming increasingly difficult to source. You will eventually be able to bring some core disciplines in-house – currently a quarter of employees in a typical digital business are technicians – but that will be some way down the road. To get things started you’ll be relying heavily on external consultants and specialists.

When the moment does arrive, you’ll need to train your own teams. That will demand a new approach to human resources management, especially skills training. Much of this will be digital using video, virtual reality and artificial intelligence. You simply won’t keep meet demand using traditional classroom training and you’ll have either your own team of digital training technicians and a video production resource or you’ll have to out-source to specialist digital training companies.

So, there you have it. Ten things you should know about transformation and operating a business in the digital economy. If this is a bigger deal than you previously realised you’re not alone. The majority of business leaders severely underestimate the scale of the task required to survive the digital economy and the extent of the differences between a traditional business and a digital one. 

Yes, it’s a bit of a minefield …

… but if you are still not sure what to do next I’ll be happy to advise drop me a line at phil@thefulleffect.com to schedule a conversation either on-line or in person and I’ll talk you through your concerns. Just be sure you take action though. If you haven’t already started your transformation you are late and extremely vulnerable. You definitely need to get cracking if you want to survive the digital economy.

Phil Darby
April 23, 2019

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