Digital leadership - Business explores limits
Source: DataNews (May 2015); Author: Dries Van Damme
The digital world is here. Business is exploring the limits of what’s possible, while new technology simply continues to push back these limits. The digital world is causing a radical change in the competition between companies, with digital technology as the driving force behind this transformation.
There are quite a few misconceptions about digital transformation. That it supposedly is a purely technological phenomenon, for instance. As a result, companies are totally misjudging the changes in their market, letting opportunities slip through their fingers or – worse still – are, eventually, beaten by competitors whose fast rise had not even been on their radar. The digital world is in need of new perspectives. Professor Stijn Viaene of Vlerick Business School is presenting these through a framework for digital leadership. ‘This framework offers insight into the heart of digital transformation. Too often, when managers think about the digital world they do so in terms of gimmicks and gadgets: mobile apps and start-ups for far-fetched applications. But, of course, this digital transformation also has a clear impact on leading corporations.’
Short attention span
Stijn Viaene describes his framework as ‘the ExConomy’. The term refers to the key words Experience, Experimentation, Collaboration and eCosystem. ‘The starting point is the digital world as the reality of today,’ he says. ‘It is no longer the product or service that plays a pivotal part in the relationship between a company and its customers, but the experience the company can offer the customer.’ The digital world allows for products and services to be provided not only very quickly but also tailored to the customer’s wishes. Companies are able to engage in a dialogue with their customers through social media in a highly targeted manner that subsequently allows them to respond to their customers’ specific needs and, in doing so, improve their overall customer experience. This approach is in sharp contrast to the traditional one-way traffic between company and customer in the analogue world. Stijn Viaene: ‘Ultimately, customer experience is what determines the value of a product or service. A minimum functionality combined with maximum customer experience wins out over a product or service that may offer more in terms of functionality, but less in terms of customer experience.’
Additional challenge: the customer is a moving target. In the digital world, the customer’s attention span is getting shorter and shorter. Customer loyalty seems to be a relative concept. Stijn Viaene: ‘Two elements play a role in this. On the one hand, the customer is very quick to change suppliers in the digital world, because technology makes this possible. It’s easy to do and usually no charges apply. On the other hand, suppliers are also responding to this behaviour.’ In the digital world, experimenting with the range of products and services being offered is a must. Digital leaders use new technology to gain a clearer picture of the changing needs of customers to subsequently respond to this in a targeted manner. One of the ways they do this is by collecting and analysing big data on customers and their preferences and needs. Stijn Viaene: ‘In the digital world this can be done much faster and less expensive than ever before. Sure, trying new things out will not always be free of charge, but it’s clearly a lot less expensive than in the analogue world. As a result, markets in the digital world are much more dynamic.’
In the digital world, it is not just the customer’s behaviour that is changing. Digital transformation also affects the wider environment in which companies operate. ‘A digital leader is aware of his place and his role within a certain ecosystem,’ says Stijn Viaene. ‘A company not only develops its processes for its own benefit, but also takes into account the needs of its partners in the ecosystem.’ Collaboration is essential. Everything needed to win customers in the digital world – data, information, systems, technology – is not necessarily in the hands of one company. ‘You can’t take care of everything all by yourself. A close collaboration is needed between partner companies, customers, start-ups, and so forth. ‘That way, strategies and models are created to for use by entire ecosystems, with digitally connected partners who create and share value through collaboration.’ The new technologies that facilitate location-independent collaboration support this. It is a world of virtual teams, video conferences and file sharing in the cloud.
In the digital world, the key to successful digital innovation hinges upon a company’s ability to combine its unique digital assets with those of other players. Stijn Viaene: ‘The origins of the most valuable partnerships can be traced to digital ecosystems with platforms, integrative digital solutions and services available to all partners involved.’ Digital leaders see these platforms as their foundation for long-term expansion in terms of both scale and scope. With this vision, Stijn Viaene is diametrically opposed to the vague cries we often hear in the context of digital transformation. ‘Everything is supposed to be minimum viable product – product with a high ROI and a low risk,’ he says. ‘Other frequently heard advice is that of fail fast: not losing any time when something has failed and immediately launching a new attempt. I have my doubts about that. A minimum viable platform is not something you build in a couple of days. The notion of failure really isn’t of the same order in this. This doesn’t mean, however, that these platforms shouldn’t be versatile. There is often also too little attention for the complexity of the collaboration with other parties in the ecosystem.’
Back end forms the foundation
Generally, insufficient attention is also paid to the underlying systems. In this respect, Stijn Viaene stands up for the companies who consciously continued to invest in, among other things, ERP. ‘Those who took good care of back-end technology, now have systems with a wealth of data and metadata. These provide the basis for the scalability and resilience needed in the digital world.’ Integration is a key notion in this. ‘These days, we see more integration between systems than ever before, with enterprise systems as the basis. In the digital world, companies understand that the structured data from these systems comprise highly useful assets.’ By also really beginning to use these assets and making them accessible – including to partners in the ecosystem – companies are able to win the battle for the customer. ‘We shouldn’t be mistaken in thinking that digital transformation is only about technology,’ Stijn Viaene says. ‘But at the same time, I also oppose the position that digital transformation isn’t about technology. Because, however you look at it, it’s the driving force behind the ExConomy. And as this is in constant evolution, the company has to keep making important strategic IT decisions. The IT strategy is not dead, on the contrary.’
The role technology plays in digital transformation can also be described in another way. Stijn Viaene: ‘Digital transformation is exploring the limits of business, simply because the available technology is constantly pushing these back. Meanwhile, it’s important to focus just as much, if not more, attention on business than technology.’ Companies who are trying to find their way in this new reality will find something to hold onto in the four key points of the ExConomy model described. ‘We applied the framework, among other things, to a digital project that we carried out together with the VDAB. We looked closely at several services and tested them against the four key points. This showed, among other things, that, as a company, you had better first master customer experience and experimenting with products and services before dedicating yourself to a wide collaboration with ecosystem partners and the development of an ecosystem platform.’ That said, it is also important to think in terms of platforms from the start. This is something that became apparent, for instance, when the city of London, as an experiment, released all available data about underground traffic. The intention was to offer app developers the opportunity to come up with new solutions based on this data. Stijn Viaene: ‘This proved to be such a huge success that the data platform instantly crashed. This goes to show that we can’t overlook the importance of a scalable platform in the cloud.’
Digital Leadership Summer School
Want to learn more about the four pillars of the ExConomy? Digital leadership is the central theme of the Digital Leadership Summer School that Vlerick Business School is organising in collaboration with Data News. The course is intended for senior executives, transformation leaders, middle management and high potentials who help shape or lead digital transformation in their organisation. The five-day programme starts on 24 August, with a maximum of thirty participants.