Looming threat from digital disruption? Don’t play defense.


No company is immune from digital disruption. The disruptive forces of digital even affect the most technology-savvy companies. Even companies that are current industry leaders are vulnerable to disruption. Unfortunately, many companies are still waiting to be disrupted and then they react to it. That defensive posture could be a detrimental choice, given the innovation and speed that would be necessary to counter the disruption to survive, leave alone getting ahead of the pack.

The champions of disruption are far more often the attackers than the established incumbents. The good news for incumbents is that many industries are still in the early stages of digital transformation. More often they must require acuity of foresight and a willingness to respond boldly before it is too late, which usually means acting before it is obvious they have to do so. Silver lining to all the disruptions that are looming is that the opportunities to come out ahead with innovative solutions are plenty. But time is of the essence. How ready are you to transform and run a business to benefit from the disruptive opportunities? Take a preemptive transformation stance and play offense. Transform to self-disrupt! Digital disruption leaves very little time to adapt. Bold strategies and determined leadership are the only ways to cope.

What are the signs of threats from potential disruptions?

The ominous signs of potential disruption can be spotted in every industry. Some patterns seem to emerge across industries. Increased competition with low cost offerings from challengers, that make existing offerings from incumbents a commodity or even obsolete. We also see challengers who are breaking the traditional paradigms of value & cost for a business with new & innovative offerings, processes & business models that make dramatic shifts in profit pools with significant advantage. We even see disruptive innovation emerging in the form of platforms with multi-sided business models where players of adjacent markets cannibalize traditional profit pools. Companies those who are able to spot these and other signs of threat from potential disruption, may be able to survive if they are able to respond to it fast enough. But many large incumbents are not able to respond with the required innovation and speed to neutralize the disruption once it shows at their door. So what is the alternative option?

Transform preemptively! Prepare to self-disrupt

The biggest threat to the survival of large companies may therefore come from their own lack of strategic renewal. Further complicating matters, incumbents with initially strong positions can take false comfort at early stage of disruption, because the weaker players in the industry get hit hardest first. The narrative “it is not happening to us” is all too tempting to believe. The key is to monitor closely the underlying drivers, not just the hindsight of financial outcomes. Read the writings on the wall, to transform preemptively to self-disrupt. A transformation is comprehensive by nature and not a series of incremental changes. Typically, it is a fundamental reboot that enables a business to achieve a dramatic, sustainable improvement in performance and alter the trajectory of its future. Incumbents in several industries are contending with new competitors and challengers that have lower-cost business models. Unfortunately transformations are complex endeavors, and the majority fall short of expectations for achieving their target value, coming in on time, or doing both.

Digital technology and advanced analytics are disrupting and transforming how companies work, compete, and create value. Winning at digital transformation requires strategic thinking and deep insight into business fundamentals and the dynamics of competitive advantage. The magnitude of this digital change can look overwhelming. But it becomes manageable when leaders understand that a digital transformation is not a linear journey, from a point of departure to a point of arrival; it is a voyage with many twists and turns toward a target that will shift over time. A digital transformation is not a “big-bang” initiative either. Rather, the digital transformation is a steady march forward. It happens day by day and month by month, as a flexible test-and-learn culture creates the digital solutions best suited to the company and its customers. The companies doing it best have embedded the new rules of the game deep within their cultures and operating models. Success for them means never going back to normal, but always moving forward toward a more flexible digital future.

Get ready & define the digital ambition

Start with analyzing the company’s current situation with focus interviews of all the relevant stakeholders internally and externally, including employees, customers, industry leaders and functional experts. Next, understand what kind of disruptions exists in the industry and gather information about new challengers of the business core. If any innovative business models are disrupting the industry, learn more about how they might impact the company’s business. All this analysis must point to where the company should play in the future and how to win. Determine what specific strategic elements have to be optimized, including, business definition, sources of growth, drivers of value, priority customer needs, critical capabilities, key decisions, and cost/profitability targets. Conduct a change-readiness assessment to baseline the organization. Based on all this analysis, articulate, activate and embed a compelling narrative of the purpose for digital transformation for the business that can be used to mobilize the organization. Also, use all the analysis to design a well integrated digital transformation roadmap with key milestones and expected outcomes that will improve overall performance substantially.

Implement the digital transformation program

As we start with the program implementation, small-scale pilot tests and quick wins are crucial to kick-starting the transformation: they build up institutional expertise, serve as proofs of concept, and build momentum for broader efforts. Long delivery cycles are no longer viable, especially as agile ways of working become more prevalent. Increasingly, leading companies are using agile methodologies to implement change. Done right, agile requires creating small, nimble, cross-functional teams that have been given a high degree of autonomy. These teams, which move much faster than in those traditional organization structures, promote better output, shorter time to market, and higher satisfaction among employees and customers alike.

Enroll and activate leaders at all levels to become deeply accountable for success of the initiatives they lead. Ensure that the leadership alignment to strategic imperatives is palpable, visible and maintained. They must be able to sponsor and manage the change effectively. A clear governance structure with explicit roles, processes, and decision rights, must be implemented. Establish a value-added activist PMO that provides essential support structure to the initiative. Ensure high level of confidence in initiative delivery with a portfolio approach to initiative management that supports transparency across milestones and outcomes. Follow rigorous methodologies with tools and testing where the initiatives might require it. Forward-looking views of the initiatives provide early awareness of emerging issues that must be escalated through a steering body for mitigation or resolution. Significant to the success is having an engaged broader organization with employees at every level that understand the changes, and are willing and able to manage it. All critical stakeholders must be deeply engaged with the execution of the initiatives by role modeling and reinforcing the essential behaviors. Accountability must be hard-wired in line management metrics, as well as performance management and recognition systems. While driving transformation initiatives, leaders must step back and review their overall strategy and operating model for realignment when necessary, because of shifting strategic imperatives.

Pursue bold digital strategies with innovative digital opportunities

This phase is done in parallel alongside implementation of the digital transformation program efforts. Here we launch broader initiatives to upgrade the company for the future and build sustainable performance with a focus on innovation, growth, and long-term value creation. Upgrading for the future can entail a wide range of initiatives to transform, including boosting growth, launching a new business model, revamping commercial processes or operations, building digital capabilities and ventures, and transforming critical processes, such as R&D, and internal support functions, such as IT and HR. All digital opportunities are explored while we re-imagine offerings and rethink value-chains.

As the economics of digital transformation rapidly evolve, it enables new moves that could transform entire industries. As a result, digital strategies need to continually adapt in order to seize new opportunities. This requires adjustments to the strategic imperatives that results in continuous shifts in the initiative objectives as well. We need to stay ahead of the threat of external disruptions with a self-disruption mindset, and by taking a proactive approach to implementing innovative digital solutions. Successfully integrating digital not only mitigates threats but also creates opportunities that might otherwise have been overlooked. This is where the “self-disruption” mindset will help. Take a holistic view of the customer experience journeys, including how value is created, delivered and captured at every touchpoint, and rethink the entire operating model accordingly.

People-first approach to transformation from the start

Having a deeply engaged organization at all levels, through-out digital transformation is paramount to success. Leadership must be adaptive and inspirational to lead he transformation in a way that is directive and all inclusive. Leaders must set the appropriate priorities, make rapid, high-quality decisions, mobilize and energize initiative teams, engage the broader organization, and hold themselves accountable for the results.

Organization redesign may be necessary to accommodate innovative value chains and new ways of working in the company. Ensure that the digital strategic imperatives and sources of competitive advantage are aligned to the structure, roles, collaborations, and capabilities. Be prepared for an organizational culture shift very early on during the change-readiness assessment stage. Enhance the culture, aligned with the company’s purpose, by determining which values and behaviors are required in the transformed organization, and take the actions required to reinforce these values and behaviors as a new way of working. Three elements of culture - having less risk aversion, avoiding siloed mind-sets and behaviors, and being more customer-centric – seem to be the ones on top of the list of most digital leaders across industries.

Employee engagement, that is critical for success, comes from performance disciplines that are aligned with a clear sense of purpose for the digital transformation, and personal motivators that are aligned with inspirational leaders who bring collaboration & recognition. Rigorous change management methodologies must be deployed with appropriate priorities, high-quality decisions, mobilized and energized initiative teams, engagement with the broader organization, and right levels of accountability for the results. Talent gaps must be identified early and the pipelines populated for all digital capabilities that are needed for the transformation. HR team must be a transformation partner that anticipates and addresses leadership and talent needs, supports organization redesign, and partners with leaders to develop the right culture.

Conclusion

Companies with looming threat of digital disruption will do well if they take on bold strategies and transform with innovation and speed, to self-disrupt. Having a clear contextual strategy, which is well thought through and grounded in economic reality, is as important as the new, faster, more agile execution and organizational capabilities. Those who are slower and less effective in responding may overall suffer a downturn to a stall in their business performance as a result. The commonly held strategy of wait-and-see, in this instance faced with digital disruption, may not be viable. Build the right capabilities early on, either through acquisition or through hiring, because once you get into your stride with digital, having the right people with the right experience in the company tends to be the critical success factor. Get the culture right and you will have enabled and energized people to execute with the right behavior to accelerate and sustain business results. By following a clear methodology for digital transformation will take the steps needed to make the company more adaptive and responsive, putting it on the right trajectory for success with self-disruption.

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