Future Ready: The Four Pathways to Capturing Digital Value
This book offers a guide to digital transformation, helping businesses thrive in the digital economy. It outlines four pathways to become "future-ready," focusing on improving operational efficiency and customer experience. Packed with examples and assessments, it's a playbook for leaders navigating digital change.
Expected Outcomes:
- Learn a step-by-step guide through the perilous journey of digital transformation.
- Discover best digital strategy and culture for success.
- Capability transformations will be helpful for senior managers everywhere.
Core Content:
1. Four distinct pathways to becoming "future-ready":
- Pathway 1: Industrialize: Focus on operational efficiency by digitizing core capabilities (crown jewels). Ideal when customer experience is adequate.
- Building a platform mindset is essential. Think API-enabled services accessible across the enterprise.
- Example - Danske Bank: Focused on operational efficiency and reuse, leading to cost reductions and a popular shared platform (MobilePay).
- Pathway 2: Delight Customers First: Prioritize improving customer experience across silos. Choose this when competitive pressure is high.
- Often involves developing new offers, mobile apps, and better customer service. The challenge is controlling costs as complexity increases.
- Example - mBank: Launched as Poland’s first digital-only bank, focusing on innovative offerings that boosted customer experience.
- Pathway 3: Alternate the Focus, like Stair Steps: Alternate between improving customer experience and operational efficiency. Suitable for balanced progress.
- Requires a roadmap and synchronization between initiatives. Governance, communication, and inertia are key challenges.
- Example - BBVA: Alternated between enhancing customer experience (mobile app) and improving efficiency (global digital platforms).
- Pathway 4: Create a New Unit: Establish a new "born-digital" unit separate from the existing organization. Suitable for radical innovation or to leverage opportunities without legacy constraints.
- New entity doesn’t need to deal with legacy systems.
- Goal is to innovate value by creating new customer offers.
- Example - ING Direct: Pioneered a direct banking model in new markets, operating independently with low operational costs
2. The importance of managing "organizational explosions":
- These are significant, disruptive changes necessary for digital transformation. Address changes carefully, with their impacts anticipated and managed.
- Decision Rights: Clarify who makes and is accountable for key decisions in the digital realm.
- Separating "what to do" from "how to do it" decision rights is crucial.
- New Ways of Working: Rethink and redesign how employees work, empowering them with new challenges.
- Include co-creation with customers, test-and-learn approaches, and agile cross-functional teams.
- Platform Mindset: Recognize the power of reusable digital services for innovation and scaling operations.
- Digitize core capabilities, integrate silos, standardize processes, and automate where possible.
- Organizational Surgery: Restructure to remove organizational complexity and better focus on customer offerings.
- Involves reworking business processes and flattening hierarchies.
3. Importance from accumulating different kinds of value:
- To know where you are requires two types of measures— those that indicate transformation suc- cess by showing what value is captured and those that track effec- tiveness at building the future- ready capabilities to show how value is created
- Value from Operations: Reduce costs, increase efficiency and speed.
- Value from Customers: Increase revenue through cross-selling and new products. Build customer loyalty.
- Value from Ecosystems: Offer go-to destinations with partners, increasing reach and product range.
Larger firms can learn from SMEs about capturing value, especially value from customers and value from ecosystems. There is no significant difference in how much value from oper- ations SMEs and large firms capture.
Q&A
Q: What are the key differences between the four pathways?
A: The pathways differ in their primary focus: Pathway 1 prioritizes operational efficiency, Pathway 2 emphasizes customer experience, Pathway 3 alternates between the two, and Pathway 4 creates a separate, future-ready unit. The choice depends on the company's competitive situation and strategic goals.
Q: What is a platform mindset, and why is it important?
A: A platform mindset is about recognizing the value of reusable digital services for faster innovation and scaling. Digitizing core capabilities to serve multiple clients/ purposed through integration and standardization and also automation.
Q: What are the typical "organizational explosions" firms face during digital transformation?
A: The four explosions are: Decision Rights (clarifying decision-making roles), New Ways of Working (adopting more agile, customer-centric approaches), Platform Mindset (building reusable digital services), and Organizational Surgery (restructuring for better alignment).
