For four years I led global sales and marketing for a large IT Services company, and experienced first-hand the powerful impacts of digital transformation. To deal with digital initiatives, many of the CIOs with whom I worked grappled with the choice between buy/subscribe versus build/operate.
This experience really emphasized for me that digital transformation redefines the nature of any underlying business, and changes the nature of services partnerships. This is not outsourcing as the industry previously defined it.
In most cases, companies must increase their proficiency in the use of services partners (i.e. buy/subscribe), because the very nature of Digital business models demands agility and networked ecosystems.
Getting comfortable with the structuring of external partnerships and a central strategy for driving a Digital agenda is no small feat. Here are five lessons I tallied during my operating experience:
1) Digital is a Business Model, not a Technology. Companies that are well established in their markets recognize that digital enables new operating structures. This doesn’t just mean mobile; many others are emerging quickly, including social networks, multi-modal communications, edge computing, sensor-based data models, in-memory database processing, and others.
Beyond the established organizations, look at the new entrants that are building their operations around a digital ecosystem. Both start-ups and carve-outs, many fueled by venture capital and private equity, insist on running their business via digital operating models; they are leaving behind the organizations and systems that defined business of yesterday.
The Internet-of-Things (IoT) conversation is a business model discussion, not a technology discussion.
2) Digital is Everyone’s Business. Even the most mundane industry segments are faced with digital threats and opportunities. If you’re a manufacturer, or a distributor, or a maintenance company, or a services entity … you’re likely spending time considering new ways to develop, sell, and service your customers using digital techniques.
I’ve been impressed by some otherwise traditional business segments that have teams of people working to conceive new sources of operations through the use of emerging digital techniques. Many are using crowd-sourcing ideation programs to engage their employees in this process – a testament to the urgency of bringing everyone along on the journey of change.
3) Digital is a New Muscle. Most of the companies that I work with readily admit that they are lacking in the expertise to transform their business via digital. The expertise they need is well beyond technological skills. They are missing a fundamental understanding how to conceive and operate new digital business models.
In most case, two realities fuel a burning ambition. First is the competitive threat that exists across industries from more nimble entrants who are more aggressive in embracing digital operating models. But the more powerful forcing function comes from reimagining how customers want to do business. When you apply an outside-in perspective, it’s often a liberating experience for employees who can see new ways to operate the business.
4) Digital is Holistic. Unlike the era of Enterprise Resource Planning (ERP) platforms that focused on efficiencies in back-office operations, the digital promise touches on every aspect of the business cycle. It’s about how you win the right to serve your customers, all the way through the management of your supply chain.
5) Digital Requires Partners. If you buy into the shift to digital in how business is conducted, then you are implicitly buying into the need for a robust eco-system of partners. Digital, by definition, implies the knitting together of buyers and providers through platforms and channels of commerce.
This last point resonates most intimately with my own background in shared services and outsourcing. Executives are looking to their existing back-office service resources through the lens of enabling a digital ambition. Can the current shared services organization acquire the skills, orient the service model, and reach forward through the business? Can the current outsourced service providers bring purposeful investments to bear through leveraged services in a digital business model?
It is the responsibility of executive leadership to mandate service partners to foster innovation in the delivery of front-office, mid-office, and back-office innovations. They can do this through automation, analytics, interconnectivity, and all of the other features of a digital business model. Digital is as much how as it is what.
The excellence of your service partners, and in the dynamic use of built-for-purpose solutions, is what will enable your business to be a leader in digital transformation.
Peter Allen has many years of operating experience as a top executive of rapidly-growing multi-billion dollar companies and in assessing sales and marketing effectiveness. He is now a Boston-based Managing Director at Alvarez & Marsal.