How Companies Become Digital

Have you ever wondered why some businesses are significantly more effective in developing digital capabilities?

Many business leaders look to the tech giants to learn how to become a more digitally and data-enabled enterprise and try to model their approach in their own business. While initial results can seem encouraging, businesses often fail to embed this change or realise their long-term digital goals.

The problem with this approach is that these technology firms have never been anything else but digital and data-driven. What works for a company that has used and monetised data from day one and has built a business around this, does not always work for a company that is rooted in and designed around more tangible products or services.

It is hard to find a company that is not currently undergoing a digital transformation. Whether it be to improve customer experience, assess risk, or in identifying trends to exploit new opportunities, the digitally-enabled business is becoming commonplace. This level of change doesn’t come easily.

What are the main reasons digitalisation attempts lose momentum? Why can’t all businesses achieve the same level of success?

Attempts to transform businesses into becoming digital often start out well, with quick adoption and success stories in areas such as Marketing, Sales and Customer Experience. Some companies even create meaningful change in Risk functions. It is at this point where most digital change initiatives run out of steam or leaders mistakenly think they have reached the limit of what digital can do to transform their business.

Through conversations with Chief Technology and Information Officers as well as heads of digital functions, one common theme emerged that decides the extent of digital adoption and sets the organisation up for either success or failure.

That common theme was the company’s approach to incorporating and developing digital in their organisational design. Where Digital capability sits, under what budget it operates and the jurisdiction it exists within had the biggest impact on success.

Where should Digital sit in your business?

Typically, business leaders will look at the organisational structure and decide where the digital function should sit without a deep understanding of the decision-making processes, the collaboration between divisions and how budget allocation impacts each department. An analysis of the ways in which your organisation operates which are unrepresented on a typical organisation chart is crucial when deciding where digital capabilities should be placed. The below should be considered:

  • Should Digital be started as a project as part of a strategy group or function, or be rolled out as a new initiative and closely monitored by the leadership team?
  • Could you build your own digital agency, investing heavily in creating a new business to allow digital capabilities to develop free from the constraints of reporting lines and shared budgets?
  • Should you hand over the reins to Marketing or a similar function, in the hope that they create the most measurable return on investment through attracting and retaining customers?
  • Do you hire a Chief Digital Officer, or Head of Digital, either within the Chief Information Officer’s team or as a direct report to the CEO?

If you think Marketing is the best option, you are among the majority. This appears to make sense. More of your customers are online and advertising has moved into the digital world, so your marketing team should follow suit. This strategy can lead to future problems, however, as digital capabilities can be monopolised by marketing projects to the detriment of the rest of the business. If left unchecked, this can lead to a perception of the business which is incongruent with the actual product or service on offer.

To counter this, some companies have made the decision to develop the digital function as a separate business or entity. This trend has been emerging in recent years, pioneered by companies that have recognised that digital capabilities will enable significant future revenue streams (such as retailers moving to eCommerce), or at the very least can transcend their existing business processes and enhance the customer experience.

This has been a focal point for airports over the last few years, with the likes of Manchester Airports Group creating MAG-O, its own technology and e-commerce start-up to ensure the airport group can introduce new technology and products to benefit the customer, both online and at the airports which the company operates.

The concept of channel agnosticism or omnichannel approach has led to companies attempting to place digital capabilities within the organisation where they are unrestricted. They want digital benefits to be realised across the business rather than just at customer contact points and realise that becoming a digital business is much more than a profitable online presence.

Can Digital thrive in a traditional business hierarchy?

This doesn’t mean that Digital needs to be entirely separate from the core business to be successful. Retail companies predominantly are taking the approach of building an in-house digital start-up environment to encourage new digital abilities that connect with their products and customers. John Lewis has taken this concept one step further with JLab, acting as a talent scout and development centre for tech companies in early development. They work with innovative start-ups that have the potential to disrupt the retail industry and guide their development to keep ahead of the curve without having to build significant in-house resource.

The end-goal for businesses should be to become digital rather than just doing digital work, and this is hard to achieve if digital is seen as a ‘bolt-on’ part of the business.

A Chief Digital Officer might be an indicator of digital immaturity

A growing number of companies have opted to appoint a Chief Digital Officer, with close to one in five large corporations now having a designated digital executive. Having a C-suite representative for Digital may feel like a step in the right direction. The role of the Chief Digital Officer can be entirely effective, particularly in driving the agenda and creating momentum. For companies such as GE where products and services can be wholly or partially digital, the Chief Digital Officer has become a necessary and permanent role.

Having a leader who is responsible for your Digital agenda is without a doubt a positive step. The appointment should exist to encourage other leaders to take accountability for the digital transformation in their own teams and provide guidance. Unfortunately, this isn’t always the case and the newly appointed CDO can quickly become either a trailblazer or a scapegoat, depending on the outcome. Digital should be a shared success or failure for the whole leadership group. For most companies, having a designated C-suite executive can undermine this.

Discussions surrounding the role of the Chief Digital Officer point to a confusion of remit, with many feeling they have blurred lines across Customer, IT, Data, Technology and Marketing. It is no surprise that most CDOs find themselves spending most of their time networking across the organisation. A successful digital transformation of a company should result in the CDO making themselves redundant, a process of devolution whereby digital becomes part of the agenda of every department.

Creating a Digital culture

Companies can have success with any of the above structures, but where Digital capability excels is when it moves from a silo or set team and becomes more ubiquitous. Rather than the business relying on a Digital team to offer them products or services, the conversation should be changed to looking at digital solutions to current problems or in the creation of new opportunities.

While a seemingly simple approach, this change of mindset can be difficult to adapt to. Most businesses approach digital innovation by trying to find a reason to use new digital tools or rely on service providers to unearth the opportunity for them.

Ingraining a digital approach to business processes is no easy task. Frequently the functions that easily take to digital ways of working such as Marketing, Sales, Customer Experience, and Customer Service end up being grouped together internally or even separated from the main business. It is no surprise that digital adoption into the business, rather than separation from it, is most frequent in matrix organisations.

The Winning Formula

As with any change, digital transformation can only be a success with a clear understanding of the motivators for change, where the appetite and resistance to change is understood and where a defined goal or measure of success is established.

To transition into a digital business, companies must consider the following:

  • Make digital success the responsibility of every leader, include digital objectives into role profiles
  • Don’t allow digital capabilities to be ringfenced within any one function
  • Keep in mind decision making, collaboration and budget allocation rather than relying on the ‘organisation chart’ approach
  • Utilise quick wins and early adoption through Marketing and Customer Experience, but don’t just focus on these areas
  • Hiring a Chief Digital Officer should be a step in the longer transformation process, and competencies should focus on building relationships and driving common vision rather than specific technical ability

 


 6 Group has been a facilitator of transformation for its clients for over a decade.

For a discussion about how we can help your business achieve your desired change, get in touch using the contact form below.

Industry news & insights

View all

Contact us online

 

The Warrant House
1 High Street
Altrincham
Cheshire
WA14 1PZ
​​​​​​​England

Telephone: +44(0)161 926 4320

Suite 6
1329 Hay Street
West Perth
WA 6005
Australia

Telephone: +61(0)8 9476 3600

Suite 216
791 Town & Country Blvd, Houston
Texas 77024
U.S.A

Telephone: +44(0)161 926 4320