How to Overcome the Digital Paradox
By Marty Mrugal, Chief Innovation Officer, SAP North America
The digital economy is accelerating rapidly, yet there is uneven progress as enterprises seek to take advantage of the digital opportunity. In my experience, companies today fall into two categories: those that are surviving, and those that are thriving.
The companies that are surviving are perhaps making incremental changes to their business, but largely going about things with a business-as-usual approach typically challenged by siloed organizations, tactical plans, limited expertise and insights.
Then there are those that are thriving. These organizations are striving to reimagine their businesses and are neither content nor complacent—they know they can always be more efficient, competitive and relevant. They understand that change has never been so rapid and pervasive, that disruption never loomed so large, and that the only way to stay ahead in business is to execute against this mindset. It requires a clear definition of key capabilities across leadership, customer experience, IT, business operating models and the workforce. These “thrivers” are aware that disruption isn’t some abstract concept, but something that is always around the corner.
They have good reason to feel this way. Artificial intelligence will reshape the future of work, 3D printing will disrupt supply chains and B2C interactions, drones have already started delivering packages, social media is revolutionizing the fashion industry, autonomous vehicles will completely transform the trucking industry, and augmented reality – the human interface into the digital world – is being used for work instructions in the services domain, training of employees, and process improvements in warehouses.
In the fight to stay ahead of competitors and potential disruptors, the digital perspective is invaluable—an organization’s greatest ally. Indeed, for the organizations fully embracing digital, 85 percent have increased their market share, 80 percent increased profitability. To cite some examples, digital is the reason Zappos is running critical business processes up to 240 times faster, why a small-business like Sock It To Me can “pursue growth” and how Cisco is increasing sales.
The Digital Divide
There is a crazy paradox that exists today. Most organizations want to be thrivers—they know and understand the importance of digital. However, their actions are not backing up their ambitions. This digital divide is alarming.
According to a study by Oxford Economics we commissioned, while 78 percent of organizations say digital transformation over the next two years is critical, only 3 percent of organizations are truly committed to it. Put simply, we’re facing a digital paradox.
It’s important that we all understand this. Bear in mind, a half-baked digital strategy will do nothing but ensure you’re eating a competitor’s dust. There is no prize for merely knowing or predicting the importance of something. It’s action that matters.
From my point of view, the digital paradox presents enormous opportunity. Who wouldn’t jump at the chance to take advantage of something so many organizations are missing out on?
At the same time, I understand why it exists. There’s a lot of noise out there regarding products and solutions; it’s difficult to develop the right strategy for your organization; and it’s a significant investment—of time and money.
How do you prevent becoming a victim of the digital paradox? Well, I’ve laid out the below roadmap as a start catalyst to accelerate your own journey. Regardless of how far along your company is in your digital roadmap, these four points are, to varying degrees, necessary to developing a comprehensive digital strategy that works best for your organization.
The Roadmap to Going Digital
- Define your Digital Destiny– What are the new business models that can coexist along with your current business model? Understand your industry, the changing dynamics and identify new models that will not diverge too far from core competencies. Then consider the best approach to implement them – organically, M&A, partner, or spin off.
- Raise your Digital IQ – Invest in understanding digital capabilities and potential applications in your business. Embrace design thinking and avoid long planning cycles. Strive to quickly pilot and scale new ideas. I have worked with many companies that have successfully adopted more agile methods to execute digital strategies.
- Invest in New Technology – Upgrade your technology infrastructure with new digital capabilities. Simplify and consolidate your current landscape to free up costs. Deploy an integrated data and business process platform with the capabilities of smart analytics and real-time business. Utilize scalable and cost effective cloud infrastructure wherever possible.
- Upgrade Talent and Skills – Invest in required new capabilities and skills at all levels within the organization. Appoint executives to take responsibility for digital and hold them accountable. Develop a culture of innovation top down and bottom up and align your talent strategy to your digital strategy. Do you need data scientists, a network of strategic partners for new products, services and capabilities? Again, evaluate your needs to quickly develop a course of action to execute.
What Defines a Digital Leader?
I also think it’s worth asking the following question: Can we learn anything from the organizations that are fully embracing digital? The answer is yes. There are four ways digital leaders are setting themselves up for success:
- They are focused on true transformation. 91 percent of those fully embracing digital view it as a core business goal. Many are using purpose-built project teams to rethink business models and avoid fragmented change.
- They transform customer-facing functions first. They see a successful customer experience as the sign of a successful digital transformation. They prioritize the customer experience: 92 percent have digital strategies in place to improve the customer experience, versus 22 percent for other organizations less committed to digital.
- They invest in next-gen technology. They’re quick to not just invest in new technologies but to incorporate them. This is allowing them to get ahead of their competition and increase market share and profitability.
- They are talent-driven. They’re investing in recruiting and training to ensure they’re prepared to meet new challenges.
No doubt, organizations understand the importance of going digital. But it’s also important to understand that half-hearted digital strategy will not benefit you. It will be very difficult to realize digital’s true benefits if you do not have a strong commitment starting at the top. Follow the roadmap and learn from today’s digital leaders. Only then will you truly be able to unlock the incredible power of the latest technologies for true digital value creation across the enterprise.