Disruption: trending near you.
If your organisation hasn’t been disrupted, be alert, soon it will be. That’s the reality of the digital economy. It requires businesses to continually respond to threats of new technologies and agile digital native companies. It means transforming how they work – and not just once. Organisations need to embed this ability to change into their DNA, so they can continually respond and become digitally sustainable. In this article, we explore the capabilities needed to navigate the digital age.
You’ve heard of their successes. Uber, Airbnb, Google, Amazon. Every business wants to be like the nimble digital native companies with the coolest offices in town. Their brands are like talent magnets, their lean structures allow them to continuously change and adapt, their culture invite novel ideas and risk taking. But mirroring the successes of their digital counterparts is a huge task for legacy companies that spent decades perfecting ways of working that delivered the winning results of the past. The problem is, the digital revolution has changed how we do business and organisations designed to operate in the past have no chance of surviving the new realities of the digital world.
Becoming digitally sustainable
Disruption is now the norm. It happens to markets, workforces and workplaces. It threatens the success of current products and can radically challenge strategic roadmaps. But there is a flip side – disruption is also ripe with opportunity. Often these opportunities hold the potential to drive operational efficiencies, save time and money, and explore new commercial avenues. When it’s far cheaper to build an app than a manufacturing plant, there are greater returns on offer, for significantly lower investment.
For the Googles, Ubers and Amazons of this world, facing these challenges, and harnessing these opportunities is second nature because nimble digital native companies have the ability to thrive in a continuously disrupted digital world. But for traditional firms, it’s not business as usual. For example, take a legacy company with siloed business units and a matrix organisation. These structures inhibit the free flowing of ideas and collaboration which are essential to responding to disruption with speed and agility.
So, how can traditional organisations seize the opportunities of the digital economy? To help answer this, we gathered views from leaders who are driving transformation at some of the world’s most successful organisations. This study enabled us to identify five leadership and organisational capabilities that enable digital sustainability.
5 critical capabilities
Korn Ferry believes that to achieve digital sustainability, the following five leadership and organisational capabilities are essential:
1 – Discipline and focus
Behind many of the digital economy’s success stories there is a lesson to learn on discipline and focus. Take Amazon, for example. The online retail platform’s product range is dizzyingly varied, but the underlying business model is simple: it’s a marketplace place for people to buy, pay and receive products effortlessly.
Or look at the moves by online taxi service Uber into food distribution and eventually payment systems, as well as electric car manufacturer Tesla into energy storage, space travel and hyper speed transport. These forays may seem far removed from their firms’ core offerings. But in fact, they’re right in their sweet spots: building an ecosystem within by integrating products, services, supply chain, transport and payments across the whole value chain.
That’s precisely the sort of laser focus that’s required in the digital world.
“It’s so easy to get lost in the digital landscape. People get distracted with shiny, new things like virtual reality or AI or chatbots. But those things aren’t the bread and butter of what you need to do. We worked hard to define our priorities based on what we understood of our business model and therefore our consumer journeys. These became our big bets and then they became our framework”. Rahul Asthana, Senior Director, Baby & Childcare sector, Marketing & Innovation Asia Pacific, Kimberly-Clark
2 – Agility
Digitally sustainable organisations are agile: they think fast, decide fast, execute fast, fail fast, learn fast, and scale fast. Agile businesses run planning and execution in parallel and they invest in scenario planning, so they can act promptly when opportunities arise.
They are also prepared to take risks. They create solutions based on what they already know, then evolve them as customer feedback comes in. This means streamlining reporting lines; engaging a wider group of stakeholders at the outset; sharing ideas and plans before they’re fully formulated; and seeking input along the way
Seven years ago, GE embarked on its digital transformation journey as emerging technology threatened its core business. Today, digital drives new revenues across all GE businesses and creates opportunities in new markets. Brad Surak, the COO of GE Digital, attributes much of their success to the company’s agility:
“We’ve always been ahead of our skis a little bit. It’s very unsettling because you have to take a bit of risk. But it’s worked really well for us. The pace of the transformation is very important, you have to stay ahead, always having leadership and a vision that is compelling for your people and the market. You may find non-traditional competitors that may come in and start to compete with you and these are very agile companies that are used to move fast.” Brad Surak, COO, GE Digital,
3 – Connectivity
“There’s no go it alone strategy in big companies, it doesn’t work. You can stir the pot but it doesn’t actually make change happen. You’ve got to be aligned with business units and functions and geos and you have to have a shared agenda. That takes a lot of time and persuasion and influence, but it’s really critical.” Michelle Peluso, CMO, IBM
Connected businesses create ecosystems made up of networks of people, from within and outside of the organisation, who can drive change. They’ve moved away from defined roles and traditional organisation constructs to bring multidisciplinary teams together from across the organisation with shared objectives and metrics to deliver on specific projects. Ideas and input come in from all sides and segments and across all stakeholder groups; they actively collaborate with the outside world: they co-develop solutions with clients, partners and even competitors, to help find answers and accelerate delivery in a world that moves at pace. As well as learning from the outside world, these organisations also actively contribute to the wider ecosystem, helping to grow and influence their networks of clients, partners and suppliers.
In periods of major transformation, businesses tend to concentrate on its people and processes and it’s easy to lose focus on the customer and external networks. When Vodafone New Zealand bought TelstraClear, they got tied up in managing the synergy process, which made everyone too inward-looking. “People had become very focused on the problems we were having internally,” explains Antony Welton, HR director of Vodafone New Zealand. “We needed to get them to focus externally, on the customer and the opportunity.” The company put a program in place to reconnect with the customers and place them at the heart of the change program.
4 – Openness and transparency
Lift the lid of any successful digital organisation, and you’ll find an open and transparent mindset shaping the way it works. The digital economy requires people to collaborate, solve problems, and think creatively to meet customer expectations. This means everybody has a voice.
Open businesses understand that brands are now public property. Customers and employees can find out anything they want about any business, and pass judgement on it, at the click of a mouse or the touch of a screen. Open organisations respond to this climate by being deliberately transparent about their ethics, responsibilities, decisions and practices. They leverage their own IP where they can, but are happy to find and apply IP from outside when needed.
To continue to grow, BASF in Australia and New Zealand needed to transform its operating model and culture. The chemicals giant achieved this by having a clear vision and a strategic and open approach to communication. Before the transformation had formally begun, the leadership team held a series of town halls across Australia and New Zealand. “Despite only having limited information to share at this point, we were being as transparent and open as we could,” says Eike Croucher, head of corporate affairs at BASF Australia and New Zealand. “We acknowledged that there would be significant organisational changes, which would affect our employees going forward. Importantly, we also gave a timeline for when we’d be able to tell them how they’d be impacted – and stuck to it.”
5 – Empowerment and alignment
“You really need to empower the guys on the frontlines, the leaders of the market and support them so they can make the right decisions.” Rahul Asthana, Senior Director, Baby & Childcare sector, Marketing & Innovation Asia Pacific, Kimberly-Clark
Digitally sustainable organisations empower the parts of the organisation that are closest to where value is created. And in the digital economy, value is most likely to be found in three places: customers, data and talent.
They achieve this by focusing on alignment. They ensure that everyone, from the board to the frontline, is clear on three things: what the business stands for, what it’s trying to achieve, and how this is being implemented. This enables people to make the right decisions in the moment, without the need for continuous guidance.
BASF built a new top team for its transformation journey and empowered them to drive the change. Bringing this group together allowed BASF to build a coalition of people who would become champions and leaders for the change. “It was about saying to them: what can you control? What’s actually yours to improve and what help do you need?” says Ross Pilling, chairman and managing director. “It helped them to understand what they were accountable for and empowered them to cascade the new way of working down the organisation.”
Reflecting on his own digital transformation, Brad Surak, the COO of GE Digital, advises business to empower teams that are closest to the customer. And this is exactly what Virgin Blue did on its way to becoming Virgin Australia. In the early stages of the transformation, the company focused on empowering sales and customer-facing employees. “If you can make sales people feel empowered, important or informed, the information dissemination will be much quicker,” says John Borghetti, CEO of Virgin Australia. “If you’ve got a flight attendant that’s spooked by what we’re going to do – or worse, doesn’t know what we’re going to do – they’ll behave in a very different way to a flight attendant who’s informed and reassured,” he explains.
How can traditional firms develop these five capabilities? Our new report Rebuilt to Last: The Journey to Digital Sustainability, shows the roadmap to success. Download it now.