leadership

How to Think Like a Disruptive Digital Leader

CEOs and other top executives today know that a major shift is needed to adapt to the dramatic changes that the digital revolution has brought to the business landscape. But all too often, they overlook one of the most important factors in achieving such a shift successfully: their own mindset.

leadership meetingAs the business world becomes increasingly driven by digital developments, two distinct categories of CEO mindsets are emerging. One is the traditionalist: these executives are strongly on the side of the incumbent marketplace, of letting solid business cases determine investment strategies, and of prioritizing predictability over speed and innovation. The other is the digital market disruptor: the type of leader who believes that innovation can lead to big wins, that embracing failure is an inevitable part of risk management, and that innovation and speed should be prioritized over predictability.

These mindsets are important because, inevitably, a leader’s mindset is their frame of reference for interpreting and acting on information, and this process is in turn directly connected to how the company itself operates. Thus, a traditional CEO may struggle to lead a company’s digital transformation successfully, not necessarily due to lack of knowledge or willingness, but simply because they have difficulty altering long-established thought and decision-making patterns that are increasingly less relevant to the real world of business today. Transforming their mindset is therefore one of the first things that leaders who become successful digital drivers must do in order to transform their company.

To find out if you’re thinking like a disruptive digital leader, check yourself against these five key mindset traits of digital disruptors, as outlined in a recent article from Gartner.

Thrive on uncertainty.

Uncertainty can be paralyzing, particularly to incumbent business leaders who are accustomed to having plenty of time to make decisions and strong business cases arguing for or against those decisions. In the digital era, however, technology and innovations are evolving so rapidly and unpredictably that uncertainty is inevitable. Disruptive digital leaders not only understand, but embrace this idea. They don’t waste time or energy trying to make the uncertain more certain. Instead, they explore what is technologically possible, what impending changes might mean to the markets, and what are the risk-reward tradeoffs, doing the best they can to establish plans that allow for change and evolution.

Focus on “leapfrogging” ideas.

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Traditional incremental thinking simply can’t keep up with the pace of change in the digital era. Disruptive digital leaders are therefore always on the lookout for breakthrough ideas—ideas that that have the potential to leapfrog ahead into a visionary new frontier and to bring dramatic, rather than step-by-step, changes to a company. Naturally, this requires a mindset that tolerates risk, given the volatility of future technologies. A true digital leader will be driven by this challenge and the possibility of creating net-new business value while still keeping a close eye on the end goal.

Master the digital-era levers.

The digital revolution has unfolded over a relatively short time frame, but it’s been long enough to demonstrate that not all new digital technologies are ready for the long haul. There are plenty of shiny innovations that look good if you’re interested in technology for technology’s sake, but won’t ever become true drivers of transformation. Digital leaders know to look beyond these distractions, seeking to master not isolated pieces of technology, but the real competitive levers of the digital era. Making long-term, strategic investments in areas like platform-based business models or customer data analytics can help companies become pioneering digital business leaders, rather than just another flash in the pan.

Start, experiment, learn, iterate.

If traditionally-minded leaders would rather wait until technology-enabled breakthroughs have been tried, tested, and proven, disruptive digital leaders know that waiting for certainty just means that another company will get in the door first. That’s why the mindset of digital leaders is focused on a start-experiment-learn-iterate approach: beginning from well-grounded strategic bets, these leaders explore and experiment with different pathways to breakthrough solutions, learning as they go rather than waiting for a sure thing before they start. The result is often a leaner approach that yields new value while still mitigating downside risk.

Innovate faster than the competition.

Speed is everything in the digital era. The current landscape is so rich in disruption and innovation that, often, the only way for companies to differentiate themselves is simply to launch their new product or service first. To achieve this goal of innovation at maximum speed, digital leaders work to establish a true culture of creativity. This means incentivizing speed, but not punishing failure—indeed, sometimes mistakes are even rewarded. This type of culture also involves breaking free of traditional industry rules, and championing and modeling risk-taking and discovery at every level of the company, from new recruits to established directors.

tech

5 Lessons from Yesterday for the Technology of Tomorrow

In this era of the Fourth Industrial Revolution, new technologies are evolving faster than ever. But some experts are concerned that the pace of progress is so rapid that there isn’t enough time for us to absorb and reflect on (and consequently avoid) some of the mistakes that have caused technological development to stumble in the past.

Hilary Sutcliffe, a responsible innovation expert and the director of SocietyInside, addresses this concern in a recent World Economic Forum article in which she looks back to the early days of nanotechnology in. In examining some of the issues that accompanied the introduction of nanotechnology, Sutcliffe identifies five important lessons that one can (and should) apply to all future forms of technological development, from artificial intelligence to gene editing.

  1. Distinguish the brand from the science.

tabletSutcliffe’s article refers to the “tyranny of the ‘ology’”—the danger of becoming overly fixated on the brand of a particular new technology rather than on the science behind it. Brands like nanotechnology or synthetic biology, in particular, have become popular buzzwords that organizations use to attract funding and academic investment, as well as to demonstrate their commitment to innovation. However, development can be compromised when the glamor surrounding a new technology, rather than how well it works or what risks are associated with it, drives discussions.

For example, the early excitement around nanotechnologies focused on the definition of nanomaterials as having features smaller than 100 nanometers. But while this size specification was an important element of “brand nano,” it proved to be a poor predictor of how these new materials actually behaved or the hazards they presented.

  1. Hype has consequences.

In the new technology sector, competition for funding, media attention, and public interest is fierce. As a result, what Sutcliffe calls an “economy of promises” has developed, in which scientists and businesses hugely exaggerate the potential benefit of their particular “ology” to boost their chances of accessing vital financial support and other resources.

But these overstated claims have repercussions that we should not overlook. One of these is the inevitable tarnishing of a technology’s reputation when it proves unable in the short term to live up to its hype. For example, the 2004 goal of the US National Cancer Institute—to use nanotechnology to eliminate death and suffering from cancer by 2015—can’t help but make us feel disappointed now, even though the technology itself may eventually lead to that desired outcome.

Another repercussion concerns the delicate world of new technology regulation and legislation. Regulators have no option but to start their process based on what scientists and businesses claim their technology will deliver, but too much hype here can distract from a thorough and accurate exploration of a technology’s very real risks and hazards.

  1. Language matters.

Closely associated with the issue of over-promising is the actual language involved in discussing and promoting new technologies. Naturally, we must devise new terms and metaphors when describing technologies and possibilities we haven’t seen before, as well as what problems they might solve, but we need to be careful to consider the impact of our chosen words. For example, many new technologies rely on military-inspired metaphors to evoke a feeling of control, dominance over nature, or extreme scientific accuracy. Not only do such terms lead to unsettling comparisons, they are also not usually reflected in reality, which compounds the problem of over-promising.

  1. Don’t start by obsessing about the backlash.

statisticsYes, new technologies can sometimes prove controversial, but when scientists launch their ideas from a place of defensiveness and confrontation, they often spark the very problems they are trying to avoid. Society does not necessarily have a widespread fear of technology itself. Instead, it has a widespread desire for engaged and collaborative discussion about what the technology is being developed for and what problems it will help solve. While it’s certainly important to think about how to address a potential backlash, imagining that such a backlash is already occurring when it isn’t can obstruct both developmental productivity and useful, forward-thinking societal dialogue.

  1. Weigh the risks and benefits thoughtfully.

One of the biggest challenges associated with the hype, as well as the sheer volume of information around new technologies, is that it can be difficult for us to accurately weigh the real evidence for either potential benefit or possible harm. So much conflicting information and opinions surface when new technologies are introduced that parties from both sides of the debate often fall back on pre-conceived ideas, cherry-picking data to prove the point they’ve already decided on. However, as a society, it’s important that we discuss and weigh the question of acceptable benefits and risks in a thoughtful and clear-headed way, especially because reports have repeatedly shown that early warning signs of disaster are often clear (as in the case of asbestos, for example), but we are held back from acting by systemic biases and behavioral reasons.

digital business

Is Your Company Vulnerable to Digital Disruption?

For established businesses facing digital disruption, it’s natural to focus first and foremost on the particular startups or new companies that might be posing an immediate threat. After all, keeping a close eye on your competitors is perhaps one of the longest-established business principles around. But, as a recent article from McKinsey & Company argues, it’s actually far more important to consider why disruption is likely to occur; that is, what incumbents really need to understand is the nature of the disruption they face, not just which specific parties might prove to be catalysts for it.

office workTo help incumbents clarify the sources of potential digital disruption, as well as the conditions under which it flourishes, McKinsey analysts have returned to the fundamental economic mechanisms of supply, demand, and market dynamics. In other words, the vital thing to understand about digitization is that it is disruptive to industries and incumbents when it results in a critical change to supply or demand (or both together).

For example, digital disruption can have the effect of exposing new supply and uncovering latent demand, and making a new market between them; one of the best illustrations of this is Airbnb, which exposed (rather than created) a previously unused supply of accommodation while at the same time revealing underlying consumer demand for more variety in accommodation choices. On the more extreme end of the scale, digital disruption can lead to the creation of new value propositions, hyperscale platforms, and reimagined business systems, all of which can change the nature of supply and demand to a significant degree.

For incumbents navigating the mechanisms of digital disruption and attempting to better understand the urgency of opportunities and threats they may be facing, McKinsey has produced a helpful “supply and demand” guide to digital disruption. Companies can use this guide as a basic organizational assessment tool to identify how vulnerable they may be to digital disruption in the following six supply and demand categories

Undistorted demand

Companies may be especially vulnerable to changes resulting from undistorted demand if the customer experience is below the current standard of “user friendliness,” both within and beyond the company’s particular industry. In other words, there is a strong risk of disruption if customers can’t get what they want at their preferred time and place, if they have no alternative but to buy the whole product or service to get the smaller part they want, if they are currently cross-subsidizing one another, or if the company’s customer identification and targeting techniques (like special pricing or advertising) are ineffective.

Unconstrained supply

Indicators of vulnerability in this category include a supply that is used unpredictably and high fixed or step costs. If customers don’t fully use a company’s product or service, or could easily become suppliers of the product or service themselves (as in the Airbnb example), then the risk of disruption is likewise high.

office

New market-making

The risk of disruption leading to new market-making is all about finding cheaper and more convenient ways of connecting supply with demand. Companies are vulnerable to disruption in this category if there is a lack of transparent information exchange between customers and suppliers, if research is costly and time-consuming with many intermediate steps and fees, and if transactions generally take a long time to complete.

New value proposition

Disruptions in this category aim to enrich a product or service and do more work for the customers on their behalf. If the experience of using a company’s product or service could be significantly enhanced through additional information or social media applications, or if a company offers a physical product that is not connected to the Internet (like appliances or thermostats), disruption that targets an enriched experience could be the result. If there is a substantial delay between when a customer purchases a product or service and when they receive it, or if they must be present in person in order to obtain the product, then disruption targeting a more convenient experience (doing more of the customer’s work for them) is likely.

Reimagined business systems

From an economic standpoint, disrupting business systems involves changing supply-side cost structure. Companies are vulnerable to such disruptions if there are multiple redundancies in the value chain, if physical distribution or retail networks are strongly entrenched, or if the industry in question has high margins compared to other industries or high variability in both cost and perceived value.

Hyperscaling platforms

Platforms are one of the major drivers of the digital economy and have been a strong disruptive force across industries. Essentially, companies are most at risk for disruption from the effect of hyperscaling platforms if their business model is based on charging customers to access information. Another clear risk indicator is the lack of any kind of dominant platform that governs interactions between industry suppliers and users. Finally, if there is strong potential for network effects related to a company’s product or service—that is, the phenomenon of a product or service gaining in value the more people use it—the risk of disruption is high.

leadership

A Look at the Top 5 Traits of Digital Transformation Leaders

businessmanFor the most part, companies are no longer wrestling, as they once did, with the question of whether or not they need a senior executive in a digital transformation leadership role. Countless corporate case studies over the past few years have demonstrated the clear need for strong leadership when it comes to designing and implementing digital strategy and transformation efforts. But now, companies are facing an even more challenging question: what exactly sets successful digital transformation leaders apart from other senior executives? In other words, what traits do these leaders have that others don’t?

To help companies answer this question, Russell Reynolds Associates (RRA), the global executive-level recruitment consulting and advisory firm, conducted an intensive assessment of 28 of the world’s most successful digital transformation leaders and compared their findings with data on other senior executives in more traditional roles. RRA’s analysis revealed a remarkable 21 different attributes unique to digital transformation leaders; indeed, RRA analysts were struck by the significant differences between this cohort of top executives and other groups. When compared with other executives, digital leaders are far more likely to have the following traits:

  1. Innovative

Innovation is perhaps the defining characteristic of top digital transformation leaders. Thinking outside the box, challenging traditional approaches, experimenting with new ideas, asking inquisitive questions—these are the hallmarks of leaders who are looking towards the future.

Digital transformation leaders are not just there to provide answers, they’re there to ask the questions that will help the company move forward and to develop solutions that are ambitious but still within the bounds of what is possible. Sometimes, conceptual or abstract thinking is what helps bring ideas into reality, and digital leaders excel at this kind of metaphorical work.

But don’t mistake these leaders for impractical dreamers; they are relentless in linking innovation to clear business outcomes, recognizing that the primary purpose of new and untested ideas is to drive revenue growth or cost-reduction goals.

  1. Disruptive

Steady-state management is not how digital transformation leaders like to operate. While many traditional executives prefer the known to the unknown, digital transformation leaders thrive on ambiguity and uncertainty, with little regard—or even tolerance—for the way things have always been done.

change

One of the main ways in which this trait manifests itself in digital leaders is in their inclination to cut through bureaucracy to speed up the pace of decision-making and action. While a certain amount of bureaucracy may be necessary, particularly at large companies, in order to properly manage risk and take advantage of economies of scale, digital leaders are adept at bureaucratic decluttering, cutting through unnecessary, long-established processes to identify what the current situation calls for.

  1. Bold

This comfort with ambiguity is perhaps what gives digital transformation leaders their reputation for boldness. Recognizing that to be a game-changer, one must be able to set direction without fear, digital leaders are more than ready to take initiative and to test and push the limits of their companies in order to unearth hidden capabilities and bold, new ideas. In addition, digital leaders are more likely than other senior executives to lead from the front, embracing the high level of public visibility that comes with being a change agent. For digital leaders and the companies they serve, it’s not only important to succeed, it’s important to be seen succeeding.

  1. Socially adept

socialThe ability to come up with innovative and disruptive ideas is all well and good, but it’s of little use without the social skills needed to be able to communicate these ideas effectively. That’s why today’s top digital transformation leaders are highly socially adept.

They know that the key to garnering support from their diverse constituencies and stakeholders is to be able to clearly and confidently share their vision, outlining how change will affect different groups and earning buy-in through careful listening and addressing questions and concerns. Digital leaders know it will be fruitless to attempt to implement change in spite of or against the will of the organization, so they have learned how to leverage their social capabilities, including the ability to adapt their communication style to different audiences, for maximum effect.

  1. Determined

The pace and demands of digital change are ruthless. In response to this, digital transformation leaders have turned determination into a fine art. The role of a digital leader is not simply to develop a vision for the future, it’s also to guide a company and its people into that future, and this requires a strong sense of commitment and a deep resolve to see things through.

Through this determination, the best digital leaders are also instrumental in helping others become transformational as well; the right combination of bravery and optimism can be infectious, creating a change-ready atmosphere and attitude within an organization that is a key ingredient for digital success.

 

By: Keith Krach

laptop

5 of the Best Practices for Digitizing Business Processes

In today’s digital world, customers want it all. Conditioned by the innovations delivered by digitally disruptive startups, today’s consumers have come to expect every company they interact with to be able to offer them a quick, seamless and, above all, immediate digital experience, whether that’s seeing a real-time online report of their electricity consumption from their utilities provider or getting pre-approved for a bank loan in just a few clicks.

computer techFor most traditional organizations, revamping operations to meet these customer expectations doesn’t simply involve automating businesses processes, it involves reinventing them. Forward-thinking organizations are not just leveraging new technologies to perform existing business processes more efficiently, they are also challenging all assumptions about those existing processes and rebuilding them from the ground up with cutting-edge digital tools.

It’s not an easy task, but companies struggling with digital transformation can learn some valuable lessons from the way other organizations have successfully approached business process digitization. As outlined by McKinsey & Company, some of these best practices include the following:

  1. Working backwards

It might seem counterintuitive, but the end state is often the best place to start when it comes to reconfiguring and digitizing business processes. This is especially true for incumbents with long-established and firmly entrenched business processes; in such cases, it can be extremely difficult to imagine alternatives without becoming overwhelmed by the constraints that stand in the way of radical change.

However, by describing the desired future state first (without regard for current constraints, as if it were already accomplished), then working backwards, it becomes easier to visualize how one might complete each step. This method also helps encourage organizations to challenge existing constraints; some are certainly real and important, but others turn out to be less of an obstacle and more of a corporate myth that can be overcome fairly easily through discussions with regulators or customers.

  1. Tackling the customer experience end-to-end

customers shoppingSome organizations approach business process digitization gradually—testing the waters, as it were, by working on one particular stage of the customer experience at a time. However, while this can certainly boost efficiency in key areas and address some of the most urgent customer issues, this kind of segmented digitization will never be able to deliver the truly seamless experience that today’s customers demand.

Instead, it’s best for companies to approach these processes holistically, making a concerted effort to tackle them and see them through from end-to-end. Many organizations that have done this successfully have leveraged the support of startup-style, cross-functional units that bring diverse colleagues from different departments together to shake up the status quo and re-envision a process from all angles.

  1. Growing capabilities

Few traditional organizations are sufficiently equipped to handle the demands of large-scale digitization. With critical digital skills in short supply in today’s competitive marketplace, successful companies are pursuing two talent-development avenues simultaneously.

One is launching programs that emphasize building in-house capabilities, seeking out and providing additional training to existing employees, in any department, demonstrating a flair for working with digital processes. Another is adding to the current in-house skill set by recruiting new talent externally, particularly for key roles like data scientists or user-experience designers.

Even when process digitization is urgently needed, companies must not overlook the critical step of taking the time to assemble the right people to both oversee and execute the digitization of business processes. Companies that embark on digitization efforts without the right team in place will simply be wasting resources and likely causing damage to their processes (and consequently their reputations) from which it may be difficult to recover.

  1. Moving quickly

The days of traditional IT-intensive programs, where returns were delivered only at the very end of the project, sometimes years after it launches, are over. Rapid delivery is the new name of the game when it comes to digitization efforts. Fortunately, when organizations tackle end-to-end processes cohesively in an appropriate sequence, improved performance can result within just a few months.

One of the keys here is for organizations to recognize what obstacles are holding up process digitization; often, delays result not from IT-related issues, but from the typically slow pace of business decision-making. Part of moving quickly, therefore, involves garnering strong board- and executive-level buy-in to be able to delegate key decisions directly to the project team.

  1. Rolling in (not rolling out)

Traditional deployment involves progressively rolling out new solutions to existing sites and user teams. But when business processes, as well as the supporting organization, have been radically changed by digitization, a new approach is often needed.

Rather than spending time and energy on changing old habits and behaviors, many companies with newly digitized business processes simply roll in a new organizational unit altogether to handle the requirements of the new digital process. Existing employees can then be gradually transitioned into this unit as the volumes it handles likewise increase. Thus, by the time the new unit is handling all process volume, all legacy unit employees will have been absorbed.

businesswoman

What Are the Qualities That Make a Digital Forerunner?

In today’s digital economy, even the most traditional businesses are finding ways to leverage the power of new technologies to gain a competitive edge, whether that’s by overhauling legacy back-office processes, boosting supply chains, or reimagining service offerings. But only some companies can truly be thought of as digital forerunners—that is, companies that set the pace of digital transformation by combining the scale advantages of incumbents with the flexibility and speed of born-digital startups. And while each of these companies has taken its own unique approach to digital transformation (we’ve seen, after all, that digitization is far from a one-size-fits-all scenario) a recent article from global management consultant Bain & Company highlights five of the most important characteristics that digital forerunners tend to share.

A disruptive vision

tech companyOne of the biggest divides in the digital economy is the one between the disruptors and the disrupted. Many companies are able, at least in some measure, to keep pace with the wave of digital disruption once it has swept over their industry, but only some have the vision needed to lead, rather than follow, that disruption. These forerunners make the digital imperative a top C-suite priority rather than relegating it to IT or another siloed department, and they work to define both a clear target for their digital strategy and a direct and actionable process for reaching that target. In other words, they view digitization as a holistic undertaking. As digital solutions are choreographed and coordinated across the value chain, the entire organization is empowered to experiment and innovate, and products and services are improved in a continuous cycle of iterations and feedback. Key to all these efforts is an appetite for risk; digital forerunners aren’t afraid of failure, because failure is what tells them where they need to do better.

A commitment to understanding customers

In order to deliver an exceptional customer experience, companies first must understand what their customers really want, why they want it, and how their wants change over time. Digital forerunners know that the key to these questions lies not in customer data alone (after all, most businesses today have more data than they know what to do with) but in how that data is analyzed to provide dynamic customer insights. Big data and advanced analytics are what make these insights possible, and digital forerunners are harnessing these tools not to only deepen their understanding of their customers’ needs, but to anticipate what they will want next and to offer a real-time, personalized experience. In addition, digital forerunners make strategic use of insights that come directly from customers themselves; by creating opportunities for one-to-one dialogue between brand and customer, companies recognize the importance of each individual customer in the value creation process, and leverage direct and contextual feedback to deliver a more satisfying product or service.

An integrated customer experience

customer support experienceA seamless, omni-channel experience is something that every customer wants and that digital forerunners deliver. Digital forerunners know that customers today expect to be able to easily navigate a fluid ecosystem that minimizes friction at every touchpoint. Customers certainly care about the product or service itself, but they also put value on other, less tangible things, such as whether they can get the product right now, how it will integrate with products they already own, and whether they can be sure that the product featured on the website is the same one they’ll find in the store. Digital forerunners understand these values, and they work to create an integrated strategy that blends physical and digital assets and touchpoints to deliver the most convenient, differentiated, and personalized customer experience possible.

Speed and innovation

No matter how well established an incumbent it might be, a digital forerunner thinks like a startup when it comes to innovation. Digital forerunners foster a collaborative culture of experimentation that operates along a swift cycle of test-learn-test. Rapid prototyping and small-scale trials help these companies learn quickly and iterate progressively toward the best solution. Failure is embraced, and calculated risk-taking is rewarded.

Cross-boundary capabilities

The traditional organizational silos that were once a hallmark of well-run companies have no place in the world of a digital forerunner. Using digital technology to boost customer responsiveness and increase the pace of innovation requires collaboration across all areas of a business. Consequently, a common practice among digital forerunners is to break down silos, restructure roles, and reimagine communication and interaction between different teams. Most digital forerunners facilitate this process by empowering a senior leader to “direct traffic,” or ensure that organizational realignment proceeds smoothly, and to minimize confusion about authority or accountability. Having an overseer in this role also allows digital forerunners to quickly identify and fill any clear capability gaps that might arise as long-standing roles are shuffled.

Business

Spotlight on B2B Strategy in a Digital World

There’s no question that B2B companies have a lot to learn from B2C innovators when it comes to devising and implementing digital strategy. However, the subtleties that distinguish these two realms from each other are often overlooked in favor of simplified, direct comparisons (which tend to ignore the fact that it isn’t always possible to translate what works in the consumer sphere to a B2B context). The truth is, while there are certainly important lessons and opportunities to take from groundbreaking B2C companies, B2B nevertheless requires a different approach to digital strategy in determining the transformational path that is best suited to an industrial setting.

So how can B2B companies get digital strategy development right? According to a recent article from global management consulting firm Bain & Company, the first step is to understand some of the following key assumptions about what it means to do business in the B2B world today.

The difference between current and prior eras is measurable and dramatic.

e-commerceIt might be tempting for B2B businesses struggling with digital transformation to buy into the comforting notion that the buzz around digital technology in the marketplace is more hype than anything else, but it’s hard to ignore the fact that businesses today have changed at every organizational level due to the confluence of technologies like smart devices, low-cost networks, and powerful cloud-based computing. We now have four times more connected devices than we did just five years ago, leading to a corresponding 40-fold increase in data generation. There is no longer a clear line between products and services, and the boundary between individual customers and business customers is becoming equally blurred. Against this backdrop, dreaming big is not only possible, but it’s essential to a business’ very survival.

Disruption follows knowable directions.

The rapidly paced and dynamic changes that characterize our current era are certainly disruptive, but they don’t have to be disorienting. Actual disruption rarely comes out of nowhere; most often, there are discernable signs along the way. Innovations like smart buildings or autonomous vehicles, for example, were visible and widely discussed long before the technology was in place to make them a reality. In such a climate, it therefore becomes the job of digital leaders to read these trends, understand the impact they could have on the industry, and transform that insight into an actionable perspective on the future. It’s not an easy task, but the ability to define the direction of disruption means that there is one less uncontrolled variable to deal with in the digital equation.

Ecosystems must be taken into account.

airportThe complexity of the business ecosystems within which today’s B2B companies operate must not be overlooked. A digital strategy that favors an idealistic vision while ignoring the facts will ultimately prove to be unworkable. In the aviation industry, for example, it’s not difficult to imagine a best-case digital scenario, where integrated IT systems support state-of-the-art air traffic control systems and cutting-edge, fuel-efficient aircraft while also driving dramatic improvements to the customer experience. But pragmatically, the pace and scope of innovation is limited by many factors, including regulation, the expense of replacing aircraft before the end of their life cycle, and concerns about how digital innovation will affect safety and security. When it comes to digital strategy, therefore, leaders and executives have difficult decisions to make about how to achieve real progress in the face of systemic complexity.

Profit pools are shifting.

tractorIt’s not clear when, but ultimately, digital innovation is going to change which players in our economy are making the most money—as well as the ways in which they are making it. In the agricultural sphere, for example, there is a great deal of speculation as to whether the profits currently going to traditional equipment makers will ultimately be diverted to the producers of connected machines and the cloud-based infrastructure that runs and supports them. Consequently, B2B companies across all industries are struggling to figure out how to tap into the most profitable segments of their changing sectors to avoid being left behind.

So where does this leave the B2B leaders responsible for digital strategy? According to Bain & Company, the biggest challenge involved in building a strong, enduring digital strategy lies in striking the right balance between vision and pragmatism. To achieve this balance, Bain recommends three key principles:

Narrowing the field of vision—To keep digital initiatives actionable, it’s important to define both the company’s starting point and their long-term digital destination, then determine what investments are necessary to get from one to the other. Concentrating on a clear road map like this helps avoid the chaos that can come from trying to do too many things at once.

Making gradual progress with stepping stones—The general rule of thumb for any complex task is to break it into smaller, more manageable pieces, and digital strategy development is no exception. Companies should focus on moving step by step, launching one wave of initiatives and assessing its impact before moving on to the next.

Organizing along pathways—When digital activity is carefully coordinated along a handful of key pathways, companies have the best chance for building and keeping momentum. Operations, products and services, and the customer experience are some of the most important focus areas, and concentrating on these will help companies integrate digital initiatives into the foundation of their business.