Digitisation: Survival of the Fittest
The business world finds itself in one of the biggest stages of transformation since industrialisation. The advancing digitisation thoroughly scrutinises existing business models.
Unique selling points disappear, value chains burst, core competencies are suddenly no longer relevant.
The boundaries of markets are blurring and redefining. The five most valuable companies worldwide are Apple, Google, Microsoft, Amazon and Facebook are all technology groups. Three of them are under 25 years old and yet they challenge traditional companies.
There are many famous and unfortunately sad examples of failing in digitisation: Kodak from the US has been hit especially hard. Despite various attempts to convert to digital photography, Kodak had to file for bankruptcy in 2012. In Germany, we find family businesses such as Neckermann and Quelle which used to be successful but ended in a similar way. Missing or inadequate ecommerce strategies led to the fact that, although the brand is still well-known, the sale has long been discontinued.
After all, 50% of German companies consider digital transformation the most important goal, as recent polls show – compared to 42% in 2016 (etventure). According to a survey by the BMWi in cooperation with TNS Infratest (2016), respondents from the sectors such as services and the energy and water industry consider the topic of digitisation to be very important or important.
The fact that most companies struggle to digitise sustainably is attributed to three factors: lack of time, lack of experience and internal resistance.
So even if external effects are the goal, the obstacles lie within the companies.
Three steps to pave the way towards digitisation
Three closely related success factors are responsible for a good outcome
- Open Culture and Agile Organisation
- Genuine Product Benefit
- Technology as a Driver
1. Open Culture and Agile Organisation
Companies are made and operated by people. Therefore, the corporate culture is crucial. Focus should be on speed, adaptability and learning ability of the leadership as well as the employees.
Values such as willingness to change and flexibility, fault tolerance, networked thinking, open communication as well as autonomous action only have their effect in a specific corporate structure and organisation. This requires flat hierarchies, cross-functional teams, flexible and simple processes and principles.
Google, for example, continues to act intelligently despite the more than 72,000 employees and makes the right decisions.
2. Genuine Product Benefit
Expectations about the user experience have changed a lot. Products and related services need to be smart, fast and flexible. They have to fit an accelerated everyday life, should be easy tointegrate into other offers and are ideally available at all times.
“Clever” contracts or intransparency are no longer a way to retain customers. Product benefits and added value are in the foreground and are transparent and comprehensible to everyone on the web. This leads to much higher acquisition costs for new customers and increases the pressure to retain customers. The life cycle of a product compared to earlier is shorter in markets that are more agile. Therefore, it is important to be in constant dialogue with your own customers, to obtain feedback and to continuously optimise it.
3. Technology as a driver
Being serious about digitisation means being technology-driven. Too little emphasis on technology and a lack of willingness to invest lead to complex, obsolete IT architectures. The high maintenance effort robs it of important time for innovations. As a result, IT departments paradoxically inhibit innovation and change.
Replacement of such systems, however, often fails because of the complexity. If you want to master it, you have to say goodbye to classic IT processes and structures.
Iterative and incremental development with short rollout and feedback cycles are the only way to become future-proof. Specialist departments need to work closely with technical teams for this and away from team structures that are characterized by specializations for databases, frontend etc. This enables teams to independently implement requirements that create added value for themselves.
Digitisation had a lot of potential for unique selling points a few years ago. Today, it is a hygiene factor and decides on future viability. A sustainable cultural change in established companies and thus a new attitude towards digitisation can spur change. This is only possible if wrong incentives are consistently abolished. This will not happen by a big bang, but is possible in a lengthy process. In the sense of the principle of “divide and rule”, germ cells were created that could carry on the cultural change within the company.
In the end, a well-old principle applies: “Survival of the fittest”. The companies that adapt best will survive. The time will tell.