Enter the digital business building
In the beginning, the challenge of digitization is not the adoption of any particular technology. Rather, it is the strategic integration in which companies deploy that technology in support of a digital business model. Companies should focus on building businesses that are digital and that can continue to grow, said Anand Ganapathy, who leads the EY-Parthenon Digital Business Building practice. “Digital transformation needs to happen broadly,” he said, “but the strategy of how to do it needs to be smarter, faster, cheaper, and better.”
“To remain competitive, organizations need to transform their business models to extract value from digital,” said Ganapathy. Reimagining a business in a digital environment requires strategic thinking about “how they can act like digital native companies, so they can be more agile and grow faster and consistently outperform peers and management of disruption from new entrants,” he said. “They need to understand the anatomy of a digital business to turbocharge their core and build new businesses.”
In the traditional strategy playbook, Ganapathy explained, companies take a “waterfall” approach to change where executive leadership designs a change plan and then hands it off to operations teams to will be implemented for many years. This approach fails in today’s environment of constant change. Companies must keep moving to stay ahead of competitive threats and disruption—and to profit from new opportunities. Agile working methods, which have long been used by technical teams, have become useful tools for product development and project management, because they can provide strategic change at the speed of digital business.
Building a digital business, Ganapathy explained, is a “continuous, flexible process, using agile experimentation in a rapidly changing business environment where players come and go, changing rule, and endpoints are never defined as one.” This is an important shift, he advises, because companies today cannot spend five years delivering a transformation agenda.
Build conviction
While every business is different, Ganapathy emphasizes several key principles for building a digital business. The first is building conviction across the enterprise. While strategy leaders want to focus on big ideas, Ganapathy cautioned that they must also spend time and effort building trust with their stakeholders to implement said ideas.
Startups and founders have experience in difficult, stable operating environments in their early years. Conviction seeps through them, enabling them to overcome threats, fight fires, and guide teams through uncertain waters. That gives them strength that guides them through later challenges or reforms.
Business leaders in incumbent or well-established companies, by contrast, may lack visceral experience. As a result, they may also lack the conviction to drive through a change agenda that brings risks, disruptions, and opposition, whether from shareholders, staff, or customers.
One way to build conviction in these types of businesses, says Ganapathy, is to focus on a company’s endowments. Sure, traditional businesses have some disadvantages compared to startups or digital natives: they may have to contend with legacy infrastructures, a more defensive cultural mindset, and a skills gap in digital. But they also have their own assets that they can rely on.