Technology is changing industries wholesale. Digital innovation – the web in particular – relentlessly commoditises and rewrites the rulebook for business. Everyone knows the stories about HMV and Amazon; Blockbuster and Netflix; Thomas Cook and Expedia – but many assume it only happens to other organisations.
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Businesses that are seemingly well established are facing new threats at an accelerating rate from previously unencountered opposition using technology.
In many organisations, digital is a cacophony of disconnected, inconsistent and sometimes incompatible activities. There may be simultaneous mobile marketing initiatives – conducted by different groups, using different tools and suppliers – or multiple employee collaboration platforms with different rules and technologies.
The problem is exacerbated as business units do their own things digitally, or hire suppliers that can only do things their own way. This may be the case in an organisation with wildly different digital marketing activities for each division, brand, or region.
The impact of digital transformation on business strategy
Digital experience delivery makes – or breaks – organisations and a great digital experience is now a necessity. A recent report points to a growing number of firms that have chosen a mobile-first approach, but have then fallen 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 recognise that software is the brand. As a result, senior directors are asking some fundamental questions, such as:
- What does a digital strategy look like?
- How do you integrate digital into business as usual?
- Where do you start?
- Where will the new skills required by going digital come from?
- Forbes Insights survey announced at Dell World (December 2013)
- Harvard Business Review Blog: Should Your CIO Be Chief Digital Officer (George Westerman, August 2013)
- Forrester 2014 Trends report (Peter High, 2013)
- Disrupt IT: A new model for IT in the digital age (Ian Cox, 2014)
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, this 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 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 needed to create a digital business, and to ensure that business survives and grows in dynamic markets driven by customers, requires a board that truly gets digital.
Consider these three key questions:
1. 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, as well as understand and 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 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 profit, loss 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 chief financial officer (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 leading digital businesses exhibit strong collaborative skills, they are agile with making quick decisions, and they are willing to try new things to get ahead
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.
2. 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 a lot more to being a digital business than technology.
Digital is about transforming the entire organisation; creating new business models, products and services; generating new revenue streams; and creating a unique customer experience.
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 transformation. If the board thinks digital is just a technology project, or it is about the organisation’s website or social media activity, then it is not a board that gets digital.
3. 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 collaborate 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. 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.
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The leading digital businesses exhibit strong collaborative skills, they are agile with making quick decisions, and they are willing to try new things in order to get ahead. These characteristics need to run through an 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 the rest of the organisation will be able to transform.
Digital risks and opportunities
Today's new technology trends – including 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 have 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 – Rightmove or ASOS, for example. 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 and resistance in such cases will lead to failure. The way forward for organisations is to think more clearly about their fundamental customer value propositions, behaving as if starting from scratch and harnessing technology to create an enabling business model.
Disrupt your own business
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 companies are unwilling to use technology to disrupt their business, someone else will do it for them. Businesses must be truly up to date with the changes being driven by technology, and be wary of the opportunities and threats.
Peter Thornton is director of academy programmes at CIO Development, a UK-based organisation focused on developing IT executives through the delivery of open courses, bespoke in-house programmes, and individual coaching and mentoring.
This article was created by CIO Development in conjunction with Ian Cox, author of Disrupt IT: A new model for IT in the digital age, 2014.