Less than 30 years ago, the first commercial Internet browser was born. Today, the word "digitization" has become the key to the survival of a business. In order to keep up with the pace of technological innovation, companies have increased their investment in digitalization, and the new crown epidemic has greatly accelerated this pace.
Although many companies are investing more and more money, time and energy into digital construction, hoping to catch up with their competitors, the huge digital investment has not brought them a competitive advantage, and the gap between them and their competitors is even is stretched. Whether it is sitting on an advanced e-commerce engine or applying powerful customer relationship management software, this simple digitization is no longer enough. No matter how many digital initiatives are rolled out, companies cannot build a real, long-term competitive advantage if they follow the old-fashioned way in their processes or copy what their competitors are doing.
On the contrary, enterprises need to go beyond digitization - leading enterprises usually start with some daunting challenges and achieve the goal of differentiation of their own capabilities through digitization. As they build the right differentiation capabilities, digitally driven products, services, solutions and experiences naturally follow. For example, Apple's design capabilities make it competitive in every industry it enters, and Frito Lay's rapid flavor innovation capabilities allow it to quickly introduce new flavors as it senses customer needs. Behind these capabilities, digital technology plays an important role, but these capabilities involve much more than technology. A capability is a dynamic combination of knowledge reserves, processes, technology, data, skills, culture, and organizational models that enable a business to create value in ways that others cannot.
What is the best way forward? In writing Beyond Digital, we researched more than a dozen companies whose commonalities stand in stark contrast to those that go all the way to digital. We've drawn lessons from the successes and failures of these dozen companies to identify seven strategic imperatives for going beyond digital and shaping the future.
1. Reflect on the way of value creation and imagine the positioning
To be successful in the new normal, companies need to look beyond their current business and product portfolios, but need to envision “what value to create and for whom” in the longer term. Compared to five or ten years ago, businesses can dream even bigger thanks to digital platforms and ecosystems that keep pace with the times. But no matter which new value proposition is identified, companies need to ensure that they are uniquely positioned and backed by capabilities.
Fundamentally rethinking how to create value is an art. It is not enough to simply study data trends and probe customer needs. Companies need to develop their own unique perspectives on how to assess and create value in the future, and what capabilities are needed to realize the value proposition. Instead of investing in various technology solutions at will, companies need to have a clear understanding of how each technology investment will support capacity building.
Philips, a multinational company headquartered in Amsterdam, the Netherlands, had a huge business group including audio and video consumer electronics, lighting and medical equipment a decade ago, but its performance has been below market expectations. Under the leadership of new CEO Frans van Houten, Philips has decided to transform into a healthcare technology company, combining its experience in consumer insights, medical device technology, data and artificial intelligence Together. "I realized that it was impossible to transform both the lighting and healthcare businesses at the same time. So, we made a choice," says Marriott.
Guided by its mission to go beyond digital, Philips has completed a series of major changes that have revolutionized its products. Portfolio, business model and corporate culture. The changes include exiting some businesses that have long been associated with corporate image, including television, audio and video, lighting and home appliances. Today, Philips' focus on healthcare technology has led to significant growth in profitability and shareholder value: its stock price rose 82% in the five-year period from 2016 to 2020.
2. Embrace the ecological network system and create value together
Many problems today are so complex that no single entity can deal with them alone. It requires a network system composed of enterprises and institutions to jointly deal with and solve them, and work together towards a common goal. In mobility, for example, challenges need to be addressed from a range of factors including public, shared and private transportation, infrastructure, public 5G networks, energy supply, financing, and regulations.
In the era of disruption, the only way for businesses to thrive is to partner with ecosystems and leverage capabilities built by others to deliver their value propositions quickly, flexibly, and at scale.
When a labor shortage in Japan's construction industry appeared in 2013, Komatsu tried to solve the problem by introducing intelligent construction machinery with functions such as GPS, digital maps, sensors and Internet of Things access. But leaders quickly discovered that the new equipment wasn't delivering the expected productivity gains. The reason is that there are process bottlenecks at the construction site. For example, at a highway construction site, although Komatsu's intelligent construction machinery can remove and dump 50% more muck than traditional equipment, the construction company cannot determine the number of dump trucks needed to remove muck from the site. I don't know the volume of muck that needs to be removed. Therefore, in 2015, Komatsu established a department specializing in various solutions, using the capabilities of other companies to digitally connect all people and companies involved in construction and production, and assist the entire ecosystem through highly transparent data. to collaborate and increase productivity and productivity.
In 2017, Komatsu launched the open platform Landlog to connect suppliers and construction companies to make construction sites smarter and safer. Construction site surveys, which used to take two weeks, can now be completed in four to six hours by drone. Landlog then integrates the data collected by the drone to program the autonomous bulldozer. According to customer feedback, compared with traditional methods, the current construction speed can be doubled, saving money and reducing the work intensity of construction workers.
As of the end of 2020, Komatsu has extended the ecosystem platform to more than 10,000 construction sites in Japan, and to the United States, the United Kingdom, Germany, France, Denmark and other countries.
3. Keep up with the real needs of customers and gain insights
Customers are always picky. But as the market has become more complex and diverse, customer expectations for service, stability and trust have completely changed. At the same time, opportunities for data collection, storage and analysis have exploded. Market research has always been a means for companies to understand customers, but it has not kept up with the requirements of the new era.
Building a unique insight system cannot rely solely on sourcing market research services. Businesses need to get customers to identify with their goals and gain their trust. Customers share their most useful and private information, so businesses need to provide value that resonates with customers and convince them that this data will be put to good use. From there, companies can focus on solving customers' most important problems, using this insight system to strengthen the value proposition, capability system, and products and services offered.
Building a unique system of insight has the potential to be one of the most important capabilities of a business. No matter how the world around you changes, the stronger a company's insight, the more valuable it is to customers; the more the value proposition is improved, the more trust it brings after fulfilling its promise, and the more customers it works with; the more customers The higher the trust and engagement, the more connected and important a business is to them.
Beginning in 2014, Adobe stopped bundling its popular applications (Photoshop, Illustrator, and InDesign) on CD through third-party channels, and instead offered cloud-based software-as-a-service (SaaS) solutions through direct subscriptions. Provide application services. This is just the beginning of change. Adobe aligns its operating model around the newly available data and consumer insights to better support the business. Before the transition, Adobe basically only mastered the time when customers signed up for products. After switching to the SaaS model, Adobe can understand how customers use these applications in real time.
Subsequently, Adobe made in-depth adjustments to the value creation model and organizational structure around customer insights. They found that some neglected applications are bringing huge value to customers in real life. Guided by these insights, the team began to reallocate resources to provide a new onboarding experience and provide real-time help. For example, Adobe can detect that a Photoshop user is having trouble editing an image, and the system can automatically suggest filters, repair tools, or provide tutorials.
From 2016 to 2020, company revenue rose from $5.9 billion to $12.9 billion. Adobe's leadership believes that much of this growth is due to data-driven insights. Following its success in early 2019, Adobe launched the Experience Platform, which opened up new revenue streams by selling insights systems to other companies.
4. Build results-oriented organizations and break down silos
Creating value by enhancing some of the differentiating capabilities requires new ways of working and team models. A bolder value proposition can only be realized when some capabilities are substantially improved.
Companies can’t simply pull employees out of functions and have them work 10 to 20% of their time together, or focus on six weeks or six months (known as “cross-functional teams”), but Build longer-lasting, results-driven teams that bring together the expertise, knowledge, technology, data, processes and behaviors needed across the organization.
This way of thinking will drive the transformation of companies from antiquated functions and entrenched organizations to results-oriented teams that work together across organizational boundaries. Teams will coexist with corporate headquarters, business units, functions and shared services and play an increasingly important role across the organization.
Honeywell's aerospace division produces products such as engines, brakes, navigation equipment and avionics, as well as services such as aircraft maintenance and flight information software. Back in the late 1990s, leaders in this business unit were thinking about how technological advancements in digitization, communication, and connectivity would create opportunities and began a transition toward results-oriented teams.
But Honeywell waited more than a decade for the underlying technology to catch up with the vision until 2010, when the aerospace sector began planning how to integrate products and services into a "connected aircraft" business. The "connected aircraft" business hopes to maximize customer value by offering more power, better fuel economy, more efficient predictive maintenance, more accurate flight planning, and real-time crowdsourced weather information.
Honeywell recognized that the aerospace products and services business needed a complete transformation to bring together the right people, skills and capabilities. Honeywell has long had a step-by-step manufacturing business with separate functions, but now must build solutions that span engines, avionics and electronics.
Following a radical organizational change, IT, data analytics and engineering were integrated from their original functions into one team and fully empowered to recruit people with the new skills they needed. As the transformation deepened, the new team began to rethink how to make existing products work in more application scenarios in an interconnected environment.
Today, Honeywell's connected aircraft business has revenue of $800 million, making it the market leader in the connected aircraft space in the eyes of many analysts. Honeywell's Forge IoT analytics platform was adopted by 128 airlines worldwide in its first year on the market, on more than 10,000 aircraft.
5. Shift the focus of the leadership team and work together
Building the right differentiation capabilities requires companies to act strategically, and leadership teams need new skills and mechanisms to transition to new ways of creating value. The leadership team needs to take a step back and rethink: Is the job setup reasonable? Does the talent match? Is the focus correct? Are you driving the necessary transformational changes, or are you spending most of your time responding to short-term needs? Are there effective collaborations within the leadership team?
Building digital, differentiated capabilities requires bold thinking, bold decisions, and tremendous effort. Leadership teams must transform leadership. Routine practices, such as having employees report on the work at hand and giving them input on pressing immediate needs, are no longer sufficient. Leadership teams must set bold goals and work together to accomplish big things.
In the late 2000s, Eli Lilly faced a dilemma: Patent protection for four drugs that accounted for 40% of the company's revenue was about to expire. "We're going to solve this problem through innovation," insisted then-CEO John Lechleiter. By shifting management focus, they did.
As part of the transformation of the operating model, Li Lida has carried out a large-scale reorganization of the senior team. Before 2009, the top leadership team, known as the "Policy Council," consisted of 13 members, of which nine represented the functions and only three had operational responsibilities. This imbalance is both a symptom and a cause of shortcomings in strategy and operations. Li Lida set up a new executive committee, recruited the heads of five business departments into the team, and reduced the number of heads of functional departments to five. Of the 13 members of the Executive Committee, 8 are new members, 2 of which are recruited from outside. The backgrounds of top leadership team members have thus changed dramatically.
"It's completely different," said Stephen Fry, head of human resources. "In the old policy committee, most people thought their job was just to check and balance those business leaders. In the new committee , most people took P&L and operational responsibilities, and discussions in the boardroom became more business execution-oriented.”
In 2016, Lilly returned to the path of profitable growth, and the stock price rallied over the next five years. three times.
6. Rebuild the social contract of employees and empower the front line
In the process of transformation, the participation of employees is essential, and it has a new meaning today. Given the ever-increasing reliance of businesses on competencies and the critical role that employees play in building competencies, the only way to succeed is to adopt a “citizenship-led” approach that engages people in organizations and ecosystems to continuously do Contribute and innovate.
Businesses need to educate employees about where the business is going, while also convincing them that they will play an important role in shaping the future of the business. Once employees are clear about their roles, their participation is more meaningful: connecting employee goals to business goals, ensuring they can contribute and be part of the solution, building a sense of community, and helping them acquire the skills they need and experience, and provide them with the time and resources they need to build differentiated capabilities.
Since its inception, FedEx has placed employees at the heart of corporate technology innovation and has successfully rolled out a number of innovations, including the first real-time tracking technology and the first website to allow customers to track packages. FedEx executives have always linked the company's ability to innovate to the idea of "PeopleService-Profit" (PSP) proposed in the 1970s: if the company creates a positive work environment for employees, employees will serve customers for customers. Provide better service quality, make customers want to use FedEx products and services more, and bring profit.
The most basic element of this philosophy is to cultivate and develop talent from within. For example, FedEx's GOLD program (Growth, Opportunity, Leadership, and Development) provides coaching services for employees to advance to management, while senior managers serve as mentors to front-line employees and professionals aspiring to enter management, sharing their own experience and expertise. They also offer training programs in areas such as blockchain, augmented and virtual reality, design thinking, and more through the FedEx Institute of Technology. In addition to classroom instruction, FedEx uses technologies such as virtual reality to train new employees on laborious and dangerous on-site jobs such as warehouse work.
According to Nik Puri, senior vice president of global IT at FedEx, FedEx began exploring a few years ago how to create an embrace around the two core values of learning and caring, based on the concept of "employee service profit". A culture of change, driving change, thereby helping employees advance and adapt to all forms of transformation. Pooley also said that the focus on learning and caring has benefited a lot from digital transformation.
FedEx also links the concept of "employee service profit" with the concept of "Quality-Driven Management" (QDM), is committed to continuous improvement, establishes a customer-centric thinking, emphasizes teamwork, and avoids waste. Pooley pointed out that through the combination of the above two projects, the performance of the teams in the enterprise embracing the digital transformation has increased significantly.
FedEx's performance during the COVID-19 pandemic reflects the positive impact of these initiatives: investments in optimization and automation, big data, autonomous vehicles and drones, combined with new in-house capabilities and solutions, have helped FedEx meet unprecedented demand for package delivery.
Creating value beyond the digital world inherently requires investing in huge, intricately differentiated capabilities that, in turn, rely on employees to build and deliver. Behind FedEx's successful technology implementation is the ability of FedEx employees to build and deliver.
No matter how much money and effort a company puts into new technologies and operations, if it doesn't get employees to embrace them and incorporate them into differentiating capabilities, the investment runs the risk of being wasted. The business leaders we interviewed during the study were almost in unison that they have learned that engaging with their employees is what makes a successful transformation, and that it should be at the very beginning of the transformation journey.
7. Subvert your own leadership style and embrace eclecticism
In our work with business leaders around the world, and in the research conducted for this article, we have observed that great leaders who lead successful business transformations share some common traits. These traits also run counter to the six leadership qualities described by Blair Sheppard, PwC's global lead for strategy and leadership, in his new book, Ten Years to Midnight. On a high degree of agreement.
All in all, a modern leader is a political master with both political integrity and talent, and a foresighted executive; a tech-savvy emotional intelligence expert and a humble hero; a global-minded local expert and a traditional innovator pioneer.
While the combination of these traits may seem like a chain of paradoxes, we observe that many executives are trying to strike a balance. Howard Schultz, for example, set an example of a strategy executor when he returned to Starbucks in 2008 as CEO. Staying true to Starbucks as a "third place" beyond the office and home, Schultz focused on the details: no longer using airtight packaging, every time the barista scoops and grinds coffee beans from the bean bin The aroma of coffee will permeate again and again; adjust the position of the coffee machine so that customers can see the barista making drinks; no longer put products next to the cash register, although these products can bring revenue, but they will hurt the customer experience, and This experience is what differentiates Starbucks from competitors such as McDonald's and Dunkin' Donuts.
Being acutely aware of the attributes required will help business leaders think more deeply about where the business is headed and surround themselves with people who drive leadership development.
Create an overlapping system of change
Achieving these seven strategic imperatives at the same time will require a truly overlapping set of systems that will allow companies to adapt to the challenges of transcending their digital journey. As you can imagine, if the business orientation is unclear, there will be no clear goals, and goals are the key to creating value for customers. Without clear goals, companies can't decide which partners in the ecosystem should be involved and how to work with them. Without a unique insight system with customers, companies will not be able to understand the evolution of customer needs, nor will they be able to change with it. If an organization is not results-oriented, it will be difficult for employees to break down silos and build differentiated cross-functional capabilities.
In addition, there is a mutually reinforcing relationship among these seven strategic priorities. In the ecosystem, companies can gain a deeper understanding of more customers from more perspectives, and can also work with ecological partners to provide customers with greater value. Giving the leadership team the opportunity to gain an up-close and in-depth look at how other businesses operate can also help empower the leadership team. Likewise, reinventing the social contract of employees and engaging them in transformation allows them to make a commensurate contribution to the growth of the business.
Business leaders cannot use the challenges they face as an excuse to stay complacent. Without deeper business transformation, digitalization is the road of no return. While it is not difficult to go digital and catch up with competitors, stakeholders such as shareholders, customers and employees are more demanding. Peter Drucker famously said, “Managing is doing the right thing, and leading is doing the right thing.” Stepping up, disrupting yourself, and becoming a leader in the digital age has become an imperative for executive teams.
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