Too often companies see digitalisation as a solution to current problems instead of a tool to create value in the future, writes Martin Friesl, professor in strategic management at Lancaster University Management School
Few topics are as vividly discussed in the business community as digitalisation. Depending on where you stand, digitalisation is either the Holy Grail or a poison chalice. How you feel about it is largely determined by whether you have figured out what it really means
The reason so many organisations struggle with digitalisation is that they think of it as a commodity – as if it’s something you can literally ‘plug into’ your organisation, or a kind of digital fairy dust that can be sprinkled over your business, products or services to camouflage a lack of strategic direction. If only it were that simple.
From a world of ‘things’ to a world of digital
Digital is not an object or a tool. Actually, it’s not a ‘thing’ at all, and we need to stop treating it like one. Digital is a radically different way of looking at the world that permeates our understanding of what ‘value’ is and how it is created. It also impacts our conception of who our customers are and how we interact with them.
Think of it as a multi-faceted lens through which we can look at a business in a variety of ways and from a variety of viewpoints, including:
- From an industry level, to evaluate competition;
- at an organisational level, to spot opportunities for business model transformation;
- on a cultural level to explore new ways of working;
- from a technological level to seek adoption of new technologies;
- from a customer viewpoint, to see user experience in a completely different perspective.
Digital transformation itself is the process of adapting and evolving the way you do business to keep pace with market disruptions and customer needs. Many companies fail in their digital transformation programmes precisely because they fail to understand the problem to which they are responding.
In other words, digitalisation is far more than the adoption of technology. It requires companies – and individuals – to change or reconsider how they view themselves, their role in and contribution to the wider ecosystem of relationships encountered in everyday business.
Getting it right
To move forward, companies need to take ‘digital’ out of the clouds, stop treating it like fairy dust and make it meaningful for them.
The potential of viewing the entire business from the perspective of digital value creation is enormous if organisations focus less on acquiring digital ‘stuff’ and focus more on educating themselves, their employees and clients on why the ‘stuff’ is needed in the first place – and how it can best serve the business.
Let’s consider the banking industry as an example. HSBC was an early adopter of banking apps and online banking services. This may have revolutionised banking, however, these early adopters failed to take digitalisation to the next level.
The whole idea of changing how banking works and disrupting the services offered was overlooked, allowing digital natives such as Monzo to corner that market. Now, HSBC and other leading banks are considering launching ‘digital banks’ to keep up.
A good example of digitalisation done right is that of Schibsted, a 100-year-old Norwegian media and publishing house. Instead of just going online and following the well-trodden path of an advertisement-based business model, Schibsted used digital technologies to develop a platform-based business model.
Its management took their time to really understand what digital meant for them and once the business got it right, there has been no looking back: in 2017, more than 80 per cent of revenues came from its platform.
The company didn’t view digital as a commodity that could be bought ‘off the shelf’ and integrated into the existing business. Rather, they realised the extraordinary opportunity that a digital way of working offered and exploited it to their advantage.
Looking to the future
For many businesses, digital transformation will require a strategic rethink. Therefore, an important starting point for any company is not to think about digitalisation as a solution to the problems of the present. Rather, it is about embracing digitalisation to create the company of the future.