The virtue of ‘virtual’ rebirth
What forces traditional companies to be reborn digital? Often, no single element of a digital company is novel or innovative by itself. It’s the convergence of multiple disruptive technologies packaged with innovative business models, transformed customer experiences and business processes that are extremely scaled, simplified and automated. This gives high business agility and value across the entire value chain. Public policies supporting digital governance, smart cities aid this further. Customer expectations of simplicity, constant engagement and transparency force even the very reluctant traditional business to embrace these new values of a digital economy.
“Digital Natives” cover the full spectrum of industries and are no longer limited to consumer purchases or media. There is digital disruption happening in such diverse industries as agriculture (Monsanto), heavy engineering (GE, Boeing, Tesla), finance, transportation and logistics, pharma and healthcare. It covers every major business function.
A fast growing global logistics company built its strategy not on owning transportation assets such as trucks, ships and planes but by smartly matching logistics demands with market supply. In other words, it’s servicing customers by using data, matching highly customised and often complex demand patterns to an ever-changing supply ecosystem. If a sales person gains visibility into profitable demand that can be matched to market capacity, the company gains profitable market share. If customers get transparency into cargo movement and customs paperwork or inspections in near real-time, it provides them an intelligent and responsive supply chain. If a storm delays the shipment of perishable goods but modern digital systems notify exceptional events and allow the redirection of the cargo while enroute it allows recovery from weather events. Profitability increases while improving customer satisfaction. In all these scenarios, the company needed systems that were well-integrated, that provide modern digital interfaces to employees and customers, and give near real-time insights and transparency to sales and operations teams. Employees could be nimble and customers serviced rapidly.
Journey of change
For these traditional companies to reinvent themselves and be reborn digital is not a one-time event accomplished in a single action. It’s a journey that breaks down the larger transformation into a series of parallel changes in culture, processes and systems powered by modern applications and technologies. The journey does not focus on just one aspect of the organisation but starts with an honest and brutal assessment inspiring an aspirational end state reached through a series of risk-managed trials. The journey touches the process fabric, the application fabric and the data fabric of the company, creating new business models delivering new products and experiences. Transforming the behaviour and culture of the company is an integral part of the journey.
When you dissect digital-born companies, many of them show the following characteristics. They are built to support and model very nimble and agile processes, demonstrating “extreme agility” to respond to customer needs and market conditions. This extreme agility is backed by applications and technologies that allow for “extreme automation.” Complex systems are composed by assembling simple, streamlined systems that are extremely scalable. The culture allows constant innovation with occasional fast failures but also focuses on scaling successful pilots into industrialised and standardised offerings. In most cases, the power of backend systems is harnessed to bring enriched customer engagement seamlessly over multiple channels (mobile, web, cloud ). Most of these new offerings and changes are powered by a data-driven culture that values data as an asset.
HBO vs Netflix
How does an established company with tremendous legacy achieve this rebirth? In the media industry, for example, a digital reborn company such as HBO successfully challenged the threat of a digital native such as Netflix. The secret is to not to walk away from the past but to understand that the assets of the past can be weapons in competing with the newbies. For example, HBO repurposed its digital assets and content to make them available to its subscribers to compete with Netflix. It allowed its channel partners such as cable companies to integrate their customer systems with HBO’s IT systems to identify subscribers and then to deliver to these customers, far richer content than could be delivered by Netflix. Most businesses can find several such hidden assets – their rich understanding of customers, market information, supply chain data to delivery contextual and transformed experiences to customers and partners.
In short, it is important to convert legacy applications, processes and operations from being a burden to an asset. This requires modernisation in appropriate doses. Without having to rip and replace existing processes, applications and systems, it is possibly to prioritise based on business benefits. Instead of trying to boil the ocean, focus on changes that improve customer intimacy, make processes simpler and agile, applications modular instead of monolithic. Use cost-efficient and modular capabilities of the cloud to integrated ecosystems in value chain and take advantage of fluid infrastructure to reshape massive capital costs into opex costs that follow business success.
While driving these changes, remember that being digital is as much about culture and behaviour as it is about technologies, applications and processes. Lead with vision, involve employees, customers and partners, allow failures and be reborn digital.
The writer is Chief Technologist, HCL Technologies