7 of the Most Important Things Born-Digital Firms Can Teach Incumbents

The pace of digital transformation over the last two decades has proved to be a considerable challenge for many analog incumbents. Compared with their “born-digital” rivals—a term that broadly encompasses enterprises founded after 1995, for whom exploiting Internet-era data and leveraging new digital technologies to revolutionize business processes are central competencies—conventional companies have struggled to develop and maintain the kind of digital mindset that is second nature to organizations whose entire history has been defined and designed around rapid technological advances.

However, the business landscape is beginning to shift as more and more incumbents weave digital principles, and their associated practices, into the fabric of their corporate culture. Embracing the attitude of “If you can’t beat them, join them,” incumbents are closely observing their born-digital competitors and working hard to replicate those business and management philosophies and techniques that have made these firms so successful.

As outlined in a recent article from Gartner, some of the most valuable lessons and actions that conventional companies are drawing from born-digital firms include the following:

Clear mission statements

workplaceA typical quality of a born-digital company is that, however complex or sophisticated its operations may be, it is guided by a simple, specific, and clearly articulated mission statement that serves as a vital touchstone for all of the company’s activities. These declarative, transparent statements—for example, Uber was founded with the mission of making “transportation as reliable as running water, everywhere, for everyone”—make it much easier for everyone involved in the company, from employees to stakeholders to users, to understand the company’s direction and to fully embrace it.

Experimental business models

Born-digital companies are not hampered by tried-and-true methods; instead, they test out and experiment with different business models to find the one, or the combination of models, that best suits them. This fluid approach to business models allows for maximum tailoring and continual refinement, and it reframes “failure” simply as an important lesson in what doesn’t work for the company’s operations.

A user-focused experience

One of the biggest trends to emerge from the digital revolution is an absolutely relentless focus on the end user. This is an area where conventional companies, long accustomed to having consumers adjust their demands to match company offerings, have struggled the most. Today, the most important business principle is to create the perfect experience for the end user; born-digital companies believe, and with good reason, that taking this approach will generate the most returns.

Relative risk management

officeWhile gut feelings and intuition were a decision-making staple in the traditional business world, born-digital companies don’t like to rely on anything so unquantifiable; instead, decisions are driven by every available information tool and data set the company can access. Furthermore, when assessing risk, born-digital firms not only weigh the risk of failure, but they also consider the potential risk of an opportunity cost that can come from inaction (for example, a scenario in which a company loses out by deciding against an idea that another company goes ahead with).

Anticipating a higher failure/success ratio

Conventional companies, and their IT departments in particular, find it difficult to shake the mindset that every project must succeed. But born-digital enterprises, most of which have evolved into the success stories they are as a result of repeated trial-and-error efforts, are much more willing to embrace failure and to quickly jettison projects that look unlikely to succeed. This helps prevent companies from becoming too locked-in to efforts that are going nowhere simply because too many resources have been invested in them to let them go.

Leveraging machines for greater agility

Where conventional companies look to add people when it’s time to scale up, born-digital companies rely on software to make scaling up not only possible, but faster and more reliable. It’s important to realize here that born-digital companies are not against hiring people (see the next section, “Quality over quantity”), it’s simply that digital tools allow them to maintain maximum agility and greater responsiveness, which are particularly important qualities in an economy where the need to scale down can sometimes come right on the heels of a major scaling-up operation.

Quality over quantity

Part of the reason why born-digital firms are not interested in over-hiring is that they have learned to be very choosy about the workers whom they do engage. Experience has taught them that investing a large amount of money in a handful of people is substantially more rewarding than investing less money in a larger number of people. They also know that smaller teams made up of higher caliber performers deliver better results than bigger teams comprised of players who aren’t at the top of their game. This is partly why the number of workers at a particular company is no longer the clear indicator of company success that it once was; for example, the online content-sharing phenomenon Pinterest has just 600 employees.