The new choice in digital transformation: become a platform or disappear
For decades, technology has been the first lever of transformation for modern companies willing to improve their effectiveness, optimize processes or automate heavy and repetitive tasks. This phenomenon has been accelerating in the last 10 years as ‘data’ became so key in value creation in so many elements of the value chain in every single industry. Data platforms are key in economic growth, and more and more purely digital companies have joined the top ten of worldwide market cap: today 7 out of 10 are in the tech industry.
The success of the startup ecosystem in several countries has constantly demonstrated how new ways of approaching the market can significantly shift the profit distribution of an industry. By looking at customers’ needs with the eyes of a newcomer, and by leveraging digital assets, a small team can create a value that overperforms larger organizations‘ capitalization in just a few years : this is true in every industry. Uber, Airbnb, Netflix or Amazon are just a few very visible examples of this digital acceleration in the last decade.
As technology becomes more and more disruptive with Artificial Intelligence, Mixed reality or the Internet of Things, every company should rethink dramatically its approach to innovation. Until a few years back “digital transformation” has been applied to the optimization of single processes, trying to enrich, modify, fine tune, the human activities involved in it, with an objective of effectiveness, but often without changing the scope of these activities. For sure there has been an acceleration of this momentum over the years as the average appetite of organizations around the world for technology has been increasing. But with the speed of tech evolution, this model will soon be outdated.
A very significant portion of the GDP in every country is created by companies that were born last century. These companies usually operate with a very traditional and linear approach to the “value chain” and in general they optimize around two or three main processes by having all the other teams supporting these “core” activities. Michael Porter’s models are still leading the approach on organizational strategy. In a traditional consumer goods company, for example, the focus would be on Product Design, Manufacturing, Marketing/Advertising and Retail. All the other functions would be considered less important and would support the core processes. Most of the time even among the “core” processes some are considered more noble than others, and receive more resources: those functions are clearly perceived as “the place to be”. Hierarchy in these companies is relatively high. Decision making processes are structured but slow and constraining. The general mentality of the structure is based on “command and control” activities, often bureaucracy outshine individual leadership. The attention to the physical world largely exceeds the attention to the digital one. All employees are generally proud of the “product” more than everything else in the company, without really perceiving the end to end experience of their clients with their product and their company.
In terms of execution, the highest attention is given to the sales process, and in general, when the performance is weaker, all the innovation focus would be into restructuring the sales teams in order to increase efficiency. E-commerce is generally an addendum to traditional sales/retail channels, and when the two are well synchronized it’s already considered a success. Most of the time the mission of the company has been the same for decades.
