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How Legacy Companies Can Compete in a Digital World


As the pace of technology's integration into our daily lives continues to increase at an unprecedented rate, organizations are beginning to realize that not having a digital strategy is no longer an option. Companies that do not compete directly within the technology space no longer have the luxury of maintaining the status quo, as legacy business models are continually being disrupted by recent patterns in consumer behavior driven by technological innovations. The rise of the sharing economy has shifted the power dynamics in mature industries like automotive or hospitality that once thought themselves immune to the shifts in technology. In 2016, a Reuters poll found that 25% of US adults sold or traded in their cars, with 9% replacing them with the ride-sharing services like Uber or Lyft. In 2015, Airbnb represented roughly 3.6% of room supply in the US. Goldman Sachs released a report in 2016 saying they expect that to grow to roughly 14.6% by 2020. Suddenly, the GMs of the world found themselves facing a new adversary that they didn't know how to compete with. Conversation in executive boardrooms shifted from what to do about the new Malibu to what to do about a mobile ride-hailing app.

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One of the reasons Silicon Valley unicorns like Uber and Airbnb have been so dangerous to older more established industries is that they have a comprehensive approach to data utilization. Ask virtually any executive in any industry and they will likely tell you that they use a data-driven approach to inform critical decisions. The key distinction to make is that decision-makers rarely ask themselves 'do I have the right data, and am I using it in the correct way?' Most executives who are looking to leverage data are focused on using it to do 'more of the same.' A comprehensive approach to digital strategy should focus on ensuring that your organization is capturing and utilizing the data that it needs to align products with customer value drivers.  Uber’s success in stealing market share from the auto OEMs was not based on producing cars more efficiently, but realizing they did not need to produce cars in the first place. The challenge for an industrial pump manufacturer is no longer to determine how to make their pumps more efficiently, but to establish their place in the emerging smart-house ecosystem.

The challenge for mature organizations in building a digitalization strategy was perhaps best summed up by Dan Schulman (The CEO of PayPal) when he said, "The biggest impediment to a company's future success is its past success." Our digitalized economy is changing the rules of competition, and for mature organizations that means changing offerings and business processes that were once profitable and effective. The first step to developing an effective digital strategy is recognizing the need for one. Organizations that cling to legacy business models and view digital inroads as an obstacle rather than an opportunity simply will not succeed in today's business environment. Below are the steps we believe every organization must take to secure digital success.

Understand what data you really need 

It may sound simple enough, but this is actually where many organizations fail. Each department typically has a data “wish list,” and the range of possibilities is almost endless. Successful organizations realize it’s impossible to accommodate everyone's wishes, leading to some tough decisions about where to invest. Making the decision about which data to prioritize is essential to creating an effective narrative for your digital strategy. The end result should be aligned with the organization’s overall strategy and should take into account both customers’ and competitors’ reactions. A competitive analysis of a direct peer may yield a better understanding of market drivers and trends - have they expanded their service offerings? Are they reaping the rewards of a more complete end-to-end solution? When it comes to customers, answering this question can be difficult at times because they will rarely come right out and tell you what it is they expect from you. In the famous words of Henry Ford, "If I had asked people what they wanted, they would have said faster horses." Instead, a critical analysis of sales data combined with feedback from top customers may point you in the right direction.

There is no “digital strategy” anymore, just strategy in a digital world.

Select the appropriate business intelligence tools 

Once you have identified what data you need, the next question is what tools should you be investing in to collect it. Recently, companies have been favoring 'single source' BI solutions that are capable of providing both front-end user-friendly interface as well as back-end analytics. One product several of our clients have recently had positive experience with is Sisense, a single stack end-to-end solution with a full suite of tools that affords its enterprise customers an enormous amount of flexibility and insight into their data. Single-stack solutions also offer a lower TCO solution to traditional competitors, where additional costs for data warehousing and services are often required. When deciding on the appropriate business intelligence tool, it is important for key stakeholders to utilize internal resources with knowledge of technical BI tool features. For instance, an executive in charge of building an e-commerce channel may be unaware of the fact that open API capabilities are necessary to gather data from various important point-of-sale instances.  While many reading this article will likely be familiar with the likes of Tableau, there are now several other less known solutions providers such as Sisense that offer services that may be more in line with your organization's needs (and often for a cheaper price).

update processes and ways of working

This is perhaps the most crucial step for any organization building its digital strategy and the one where most companies go wrong. Any executive who has  experienced the frustration of spending millions of dollars and years of time implementing  software tools only to deal with frustrated employees and little to no change in productivity will understand how necessary this step is. Software systems have the potential to act as powerful tools for the productivity of an organization, but they are only one side of the coin. To use a simple but powerful example, We were once asked by the head of inventory management for a multinational construction equipment OEM to figure out why the tool he had paid half a million dollars for wasn't improving forecasting accuracy. The answer? None of his employees were using the statistical features of the tool - they were all simply doing ad hoc manual updates, which had been the previous process. There was clearly a need to update the process!

functional pOc to secure cross-functional buy-in

In order for a digital strategy to be truly successful, it must be cross-functional. In the words of Keith Weed (CMO of Unilever), "We should no longer be talking about 'digital marketing' but marketing in a digital world." The issues many organizations face when implementing a full-scale digital transformation   are the same issues organizations face when they try to implement any long-term program: everyone has a day job. Decision-makers are incentivized to hit quarterly targets rather than effect long-term change. Although many key stakeholders may recognize the value of digital competence in one realm or another, at the end of the day functional heads are all held accountable to short term metrics. Successfully utilizing data to drive improvements within one function (i.e revenue generation through digital sales channels) will  create leverage to drive widespread organizational adoption. 

cultural alignment

No organization is capable of effecting change unless it recognizes that it must. Aligning company culture to the digital age does not necessarily mean creating showy positions like "Chief Digital Officer" or "Head of Digital Growth." Instead, an article in the Harvard Business Review outlines the common characteristics that it distinguished digital firms from their legacy counterparts. Attributes include rapid experimentation, heavy investment in talent, and recruiting and developing leaders who excel at soft skills. Another way of labeling a digital organization is one that perceives change as an opportunity rather than an obstacle. Digitalization presents new and exciting avenues for companies to grow and excel, and organizations that continue to disregard technology and cling to legacy models will find themselves on the way to becoming the next Blockbuster.