How Do Digital Tools and Strategy Interact?

Gerald Marion

John and our colleagues Marta Indulska and Martie-Louise Verreynne recently collaborated with Ernst & Young on a Brisbane Digital Audit. They were trying to figure out how firms are using digital tools to execute their strategy – you can get the full report here.

While they found some exceptional firms that are taking full advantage of digital tools, overall the results weren’t great.  Here is what John said about the challenge facing the firms that are lagging behind:

Irrespective of industry sector and business size, digital is transforming business. Traditional businesses are being disrupted and new models are emerging. The challenge that businesses must rise to is not technical.

It’s about designing a differentiated end-to-end customer experience. It’s about integrating multiple channels of delivery, seamlessly, and accelerating the digitisation of business operations.

The report is well worth reading – the issue of how to best integrate digital tools with your overall strategy is critically important.  The rest of this post comes from Gerald Marion of Ernst & Young, who talks about the results of the survey:

Gerald Marion

Gerald Marion

 

The digitisation of everything is disrupting established industries and business models at an accelerated pace, making disruption the norm rather than the odd event. New winners and models are emerging, rewriting in the process, the rules of engagement and what success looks like. The centre of gravity is shifting for both government and businesses from ‘acquiring and managing scarce resources through an industrial model’ to the ‘ability to mobilise resources in an interconnected digitised ecosystem without often owning them and engaging customers as co-creators of their own experience through the creative model’.

The dominant Industrial model often referred to as the traditional economy is rapidly declining whilst the Creative economy is growing. How to stay relevant and grow in the emerging Creative economy is a business model challenge. Going digital is a means to an end, not the end. In a recent digital capability maturity study* of 500 businesses we recently conducted in collaboration with our colleague researchers from UQ Business School, we concluded that “irrespective of industry sector and business size, there is an urgent need for businesses to transform their existing business model digitally and uplift their business capability to compete. The challenge ahead is not a technology one but rather:

(i) designing a differentiated end-to-end customer experience, involving customers as co-creators
(ii) seamlessly integrating multiple channels of delivery with a focus on meaningful engagement
(iii) accelerating the digitisation of business operations including a rethink of the supply chain.”

We also conducted 25 detailed case study interviews of companies such as Virgin Australia, Flight Centre, Wotif, Domino’s, Charmhealth, Immersaview among others. While some of the case studies revealed how digital transformation can create a radical shift in their business model, most showed that digital capabilities can augment a customer- focused strategy.

table1

Think, Engage, Conquer
In thinking how best to approach your business model challenge in the creative economy, there are 6 points you should consider:

1. Rethink how value is being created: take a ‘genuine outside-in’ view rather than an ‘inside-out’ view and reset your default assumptions.

2. Engage your customers in a continuous two-way dialogue. Customers are self-educating themselves faster than businesses are.

3. Transition from ‘command and control’ to ‘open- networked innovation’ through collaborative networks. Become an ‘intelligent owner’ excelling at coordination.

4. Choose less bureaucracy, more devolved leadership: the current governance models are not adapted to an interconnected ecosystem.

5. Use data to make timely decisions: you will be judged on your ability to make good decisions on imperfect data not in building the perfect infrastructure. Data is abundant.

6. Invest in your workforce capability: the human capital disconnect is a growing risk and requires a system-wide response involving Universities and VET providers.

In conclusion: Disrupt before being disrupted.
Look beyond your industry for ideas but also for who is your next emerging competitor. The assumptions you have been operating on may not hold true for long.

* About the study: As part of the study, EY and UQ Business School collaborated to co-develop a Digital Capability Maturity Framework, composed of eight dimensions. These dimensions are ordered as follows: 1. Digital Strategy, 2.  Customer experience, 3. Design, 4. Meaningful content, 5. Channels integration, 6. Operations, 7. Governance, 8. Digital infrastructure. 800 businesses were targeted via a phone-based survey. 50 companies were identified as possible case studies and 25 were selected and interviewed face to face including companies such as Virgin Australia, Flight Centre, Wotif, ePharmacy, Terry White chemists, Domino’s among others. The research team from UQ Business School was composed of: Associate Professors Marta Indulska and John Steen, Dr Martie-Louise Verreynne.

Note: Gerald’s post originally appeared on the Morgan McKinley blog.

Student and teacher of innovation - University of Queensland Business School - links to academic papers, twitter, and so on can be found here.