CEOs of large incumbent organisations are well aware of the threat posed by today’s digital start-ups. They’ve seen market share that they have traditionally dominated gradually erode, shareholder confidence wane, and customer preferences and behaviours change entirely.
Digital is the main reason why just over half of Fortune 500 organisations have disappeared since 2000. With start-ups relentlessly and unapologetically pursuing market share, traditional industry leaders need to fight back through the power of reinvention. Yet, many are being slow to do so.
Research from Accenture Strategy suggests that 43% of European business leaders would actually prefer to be a ‘fast follower’ when it comes to implementing a digital business strategy, and another 18% are comfortable with taking a ‘wait and see’ approach. Only 19% of European business leaders would describe their organisation as being a ‘digital business’ today.
>See also: 5 fundamental elements of digital disruption
So what’s holding business leaders back? Many leaders are stuck in a state of ‘disruption paralysis’.
When fed a constant diet of disruption and hype, where risk and change are presented as the only feasible strategic options, many leaders and their board of directors become paralysed by the options available and struggle to identify, and agree on, the best path forward.
Consequently, they either stall driving a digital strategy, or succumb to ‘incremental innovation’ – essentially ‘bolting on’ digital solutions to make existing offerings better, faster or cheaper.
Examples could include developing a mobile app, devising an ‘incubator’ or ‘accelerator’ programme, or creating the role of a ‘chief digital officer’ (CDO) internally.
These are often the first steps many organisations take on their digital journey. It satisfies immediate market appetite for greater accessibility, ease and convenience, but the reality is it’s not enough for organisations to drive significant and sustained revenue growth, and stay ahead of the competition. This requires much more than doing the same old thing in a different way.
Organisations that want to thrive in the next chapter of digital need to fundamentally challenge their existing definition of digital, and embed it into every element of their mindset, culture and operations.
Winners will look beyond the traditional realms of their own business model or market confines to identify new areas of growth, reimagining the utility and value of digital resources to create new offerings and build cult-like followings amongst their customer base.
They also need to have the confidence to break a mindset that has traditionally seen them wanting to control and own everything, in order to open up their business and do things differently.
The creation of new business structures and services, the rise of partnerships with digital start-ups, creative ways of incentivising customers, new approaches to attracting digitally savvy talent, and the development of digital ecosystems for open innovation can all help organisations pivot to become inherently digital.
Adopting a new era digital mindset is easier said than done. Digital can still feel like a gamble, even for the most business savvy CEO. Indeed, it is unchartered territory, steeped in unknowns, which can feel uncomfortable for the risk-averse.
But just like disruptors are paving new paths and making up the rules as they go, large incumbents have the opportunity to do so too. The CEOs of these companies can overcome disruption paralysis in the following way.
1. Ring-fence time for creative thinking
Organisations that want to break the mould of established structures and mindsets should ring-fence time to bring brilliant thinkers from across the business together to introduce and explore new ideas.
A clearly defined goal is essential to capturing and building ideas that will push the company forward. The process of doing so is as equally disruptive as the ideas themselves.
2. Be comfortable with trial and error
Some initiatives will work, others won’t. Organisations need to be comfortable with experimentation – survival requires businesses to do this aggressively to understand what sticks in the market, and what does not. We know that digital success requires a degree of failure and so see it as a ‘test-bed’.
3. Create digital partnerships
By joining forces, particularly with digital start-ups, organisations can draw upon each other’s expertise to create innovative or complementary products and services, and extend these offerings to reach broader audiences and markets. Such partnerships allow businesses to orient themselves around the customer and deliver new experiences and value.
If done well, such partnerships can be extremely lucrative. Given the fast-changing needs of today’s consumers, thinking creatively can also mean jumping ahead of the competition and taking more market share.
4. Inject new blood
The advantage of injecting new blood into traditional businesses goes beyond bringing in practical skills and experience. Individuals from outside the business or industry come unencumbered by traditional legacy thinking.
It’s hard to undo existing thinking, so bringing in fresh people will bring a fresh perspective. Likewise, implementing initiatives to share and crowdsource ideas can also spark new energy and thinking.
5. Measure success
Critical to building any business case is measuring success. Measuring the proportion of revenue and growth that is driven by digital is essential to initiatives taking off. For example, stores are now seeing 10% of their store traffic driven by digital – it’s not digital traffic, it’s store traffic, but it’s driven by digital.
Other measures are subtler. How much more quickly and efficiently can you bring new products to market? How much more effective are you at attracting digital talent?
6. Nurture a digital mind set
Digital culture starts at the top. To achieve digital transformation on the inside (operations, culture, practices and workforce), as well as on the outside (company image and employee appeal), execution relies on the clear commitment and direction of leadership.
Identify areas of investment, specifically around skills, talent and potential acquisitions. Be practical about what other elements you need in order to turn your digital aspiration into reality.