Digital transformation: No industry is safe from creative destruction

Successfully navigating your own company through the process of digital transformation – a challenge that every top manager is currently facing. Klaus Schwab, an expert in digital strategy consulting, is presenting four proven maxims that will boost your future viability in the digital age.

What’s the best way to guarantee and boost your own future viability in the digital age? The core tasks of every company and brand are to recognise and make commercial use of the opportunities brought about by digitalisation, and to understand and overcome the challenges.

If you believe that future viability or digital transformation is primarily about technologies or platforms, you’re not looking at the bigger picture. We are experiencing a constant, increasingly faster transformation, which has meanwhile become the norm for us. What is highly relevant for users and defines their everyday lives today, might already be outdated by tomorrow. Technologies that are disruptive and turning whole sectors on their heads might soon become standard – or disappear again. No industry is immune to this development. Its strong momentum is also reflected by the fact that companies which until recently were still challenging the established players, are today having to fight to stay afloat.

The only companies that can survive in these highly dynamic times are those that put the focus on their people: their current and future customers or users on the one hand, and their own employees on the other. So the bottom line is that there is no correct recipe for success for the digital transformation. Drawing on twenty years of consulting experience in the digital sector for noteworthy national and international companies, I have discerned four central maxims that have proven to help corporations, brands and organisations secure and develop their own future viability during the digital era.

Maxims part I: Focus on agility

Innovation and competition are becoming increasingly dynamic and no one can predict how the future will develop. The basic requirement for success in the digital age is therefore to adapt an agile way of thinking and working, and to accept that constant change has become the new normal.

This is placing completely new demands on companies – on their flexibility and willingness to experiment, as well as their ability to adapt and react. The following specific approaches can help you to implement the principles.

Promote a self-sufficient work culture

In a classic hierarchical structure with traditional linear processes, it will certainly prove difficult to bring agility to life. This way of working is simply too rigid and slow. The self-reliant work culture approach is based on abolishing rigid processes as far as possible and instead giving employees more responsibility and freedom and, above all, providing the optimum parameters. And in keeping with this, your own understanding of leadership also has to change.

Self-reliant teams that want to work with a high level of freedom will usually thank you for this vote of confidence by showing lots of motivation and taking on more responsibility.

Implement agile methods

Digital transformation presents major challenges for companies. But neither the desired results nor the steps taken to get there are very clear. In many cases, it isn’t even clear what the task involves in the first place. The use of agile working methods, which have long since become standard in software development, helps companies adapt to these circumstances.

Whether Scrum, Kaban or Lean – depending on the task, team composition and project framework, another agile method might be appropriate. But the principle is always similar and very simple: large tasks are divided into manageable work packages, prioritised and carried out in short sprints of one to two weeks. After every sprint, the team members give each other updates, look back together, make a point of sharing what they have learnt and plan the next sprint. This is how you maximise speed, transparency and employee responsibility, and achieve the end result in efficient phases, step by step.

Create a suitable working environment

Innovative approaches seldom evolve in a strict atmosphere defined by compulsory working hours, assigned desks and a routine that always takes place in the same constellations. Other ways to improve agility are flexible work models and time management, changes from the daily routine and suitably designed offices.

Establish an agile satellite

If you’re unsure whether it will be possible to increase the agility of your entire organisation within the necessary timeframe, it can make sense to establish an agile satellite. For example, by setting up a department that works with a small team of experts, in spatial and organisational terms, beyond the company’s fixed structures and can fully concentrate on the development of new solutions.

A decisive prerequisite, however, is functioning communication lines and efficient interfaces between this department and the parent organisation. Only then will it be possible to achieve the important goal of transferring the innovations and the associated culture to the corporation.

Maxims part II: Consistently put the focus on the customers

The internet is the backbone of digitalisation. It increases the power and self-reliance of its users. Everything it offers is accessible worldwide on one platform, 24/7. The exclusivity of the offers therefore decreases, while transparency and comparability increase. For every offer there are one or more alternatives that are literally just a click away, which makes it much easier for us to change our minds at short notice.

Relevance is therefore the biggest success factor for attention and loyalty. On the one hand this comes from usability, i.e. user friendliness, and on the other from utility, the noticeable added value of an offer for customers. To be able to develop promising offers, you have to put the customers and their needs at the focus of your own thinking and actions. For many industries, this means making a paradigm change: previously, the aim was to implement what is technically feasible as far as possible, but now customers should become the starting point of development.

Find out who your customers are and try to understand them

Very few companies have a clear idea of exactly who their customers are. Valuable data is often not being adequately analysed and used across departments. And this is despite the fact that there is so much valuable information to be mined from the composition of customer groups and their development over time, which could be used for the development of innovative ideas. There is therefore huge potential in professional quantitative and qualitative target group analysis and segmentation. Who are my customers? Why are they my customers? What are their preferences and needs? etc.

Listen to your customers and enter into a dialogue with them

The significance of social media for product and purchasing decisions is constantly increasing, both in the B2C as well as in the B2B sector. For companies, regardless of which sector they come from, it’s going to become increasingly important to find out what people are saying about them online. A simple formula for dealing with this phenomenon is: listen, learn and act. By listening, i.e. social media monitoring, you can find out a lot about the needs of your target groups and where, how and how much they are talking about something. If you know that, you can evaluate for yourself whether it makes sense to build up your own presence that will allow you to participate in these digital conversations. But one thing should be clear in your mind: people are going to talk about you online whether you participate in the conversations or not.

Always start developing offers from the customer’s perspective

To be able to develop relevant offers, it’s important to put the customers and their needs at the focus. One of the best examples of a company that has consistently aligned itself to customer needs is Amazon. The entire company is based around the user and their needs and consistently further developed. In the last edition of his annual letter to Amazon shareholders, founder Jeff Bezos explained this attitude: “[…] Customers are always beautifully, wonderfully dissatisfied, even when they report being happy and business is great. Even when they don’t yet know it, customers want something better, and your desire to delight customers will drive you to invent on their behalf. No customer ever asked Amazon to create the Prime membership programme, but it sure turns out they wanted it.”

Understand yourself as a platform and complement that with attractive added value

You can make your own offer more relevant with attractive added values like product upgrades and services. But being in the digital age means you don’t always have to develop this yourself. Instead, one strategic option could be to open up your own offering and integrate partner solutions, depending on the need and potential. This would make it possible to flexibly shape your own portfolio like a modular system. But it’s important to maintain your own relevance with your customers and not just take a back seat to the partner offers.

Personalise your offers

The next stage of increasing relevance is the personalisation of your offers. On the one hand, this is possible by actively involving your customers. The NikeiD service, for example, allows customers to choose the colour of their trainers themselves and have them “tailor-made”.  Another option is to individualise products and services without customers getting actively involved by precisely observing their behaviour, collecting the relevant data and evaluating and strategically using it to provide real added value.

Maxims part III: Utilise the power of collaboration

Answers to complex, multifaceted digitalisation challenges are rarely found in separate, independently operating departments. Long-term success is only possible through horizontal cooperation. It is imperative that you bring together different disciplines, approaches and skills in order to be able to consider and deal with questions from different perspectives.

Encourage interdisciplinary exchange

The bedrock of cooperation is that employees from different departments are able to know about, understand and respect each other and each other’s work. Only then is it possible to develop and understand another perspective and see the potential added values for your own work.

Digital tools can help to encourage an interdisciplinary approach, and bring departments closer together. The most widespread is Slack, but there are meanwhile also similar services from Facebook (“Workplace”) and Microsoft (“Teams”). In principle, the offers are similar: a central chat reduces e-mail volume and avoids data silos by saving documents in the cloud and giving every member access. It’s important that managers set an example by widely using these tools themselves, in accordance with simple and clear rules.

Teach and adapt collaborative working methods and techniques

Collaboration should not just be limited to digital exchange and the provision of relevant data. There will only be a real understanding of the power of interdisciplinary cooperation when you work together in direct dialogue and achieve joint results.

An effective and simple tool for this is design thinking, which is meanwhile regarded as a standard for coming up with creative ideas in many companies, mostly in the form of workshops. This follows the mindset of designers, whose work is mainly based on empathy. The core of this approach is to understand who your own target groups are and what they really need. Based on this, tailormade solutions are developed, instead of relying on assumptions and past values.

Work with carefully selected teams of specialists

This effect is even stronger when departments work in project teams for the long term. The clearer the goal, the more promising the solutions usually are. What is crucial here is that the team is composed of people with the right expertise, experience and insights.

Involve your customers

Depending on the task, it can be productive to involve your end customers in the development process. With innovations in particular, it helps to include future users in the process as early on as possible.

If you want to go one step further, you can use your customers’ expertise in order to also optimise your customer service. An exciting approach is service communities that function like topic forums under the official label of companies. As well as the company’s service staff, selected customers also answer other customers’ questions and therefore provide personal assistance. Already answered questions are documented so they are visible to all users and therefore act as a self-developing and optimising FAQ system. This creates trust and increases the credibility of brands. At the same time, service communities make it possible, in the mid-term, to generate valuable customer insights, reduce service costs and make help processes efficient.

Maxims part IV: Prototyping – Think quickly in terms of solutions

In the digital age, customer requirements, markets and competitors are developing at an ever-increasing pace. For innovation management, this means that speed is becoming an increasingly important success factor. The reason for this is simple: if you take too long to specify and implement an idea, there’s a good chance that your competitor will be faster. In the worst case, you might end up developing a product over a long period of time that in the end no longer suits the needs of your customers and is therefore doomed to fail from the outset.

Make ideas tangible with simple prototypes

The method of choice for developing target-oriented solutions in a short time is called rapid prototyping. By this we mean the fast development of a model. And this can have very different forms. But the goal is always to make an idea easy to grasp and experience. Even complex ideas can be sketched or crafted with the simplest means. Whether a pencil drawing, paper model or LEGO® project, the main thing is that you manage to clearly show what a possible solution to a certain problem might look like. Due to the simplicity, it is possible to take off the pressure of perfection for those involved and to make the development fun. In prototyping workshops, we regularly experience established managers explaining their vision of a new product or even the reorientation of a line of business on the basis of something they have made by hand. Once the idea has been understood and well received, it is developed in further detail in the next step.

Use testing and iteration to optimise

A prototype can easily be shared with others, discussed and, above all, tested. Here it quickly becomes clear where the strengths and weaknesses lie, in which direction it can be further developed and what should be optimised. This results in an iterative process in which you can keep on testing, optimising, testing and optimising again until you get closer to the best possible solution.

Depending on the topics and task, it might also make sense to call in the opinion of the end customer. If it turns out that they don’t think the idea is relevant or don’t understand it, it can be adapted at a very early stage, or even given up completely if necessary.

Use prototyping for the strategy development

For this, the task definition and goals of a project have to first be clearly defined. And then, in a core team in a clearly defined (short) period of time, the first possible strategic solution should be drafted. This creates a common understanding, orientation and a strategic goal.

In this way, it becomes clear in which subject areas more in-depth analyses would make sense and which topics you no longer have to deal with. This means that with a challenge as complex as digitalisation, for example, resources can be used more efficiently. Experience shows: once you have the right experts at the table, it is possible to create a strategy prototype that already contains the essential elements of the end result. But prototyping isn’t a panacea, of course. But extending and combining classic methods with new working methods and ways of thinking will bring success.

Develop a bold and brave learning culture

A central reason why many companies are too slow is their fear of failure. In many traditional structures, the general opinion is still that deliverables have to be perfect and tested multiple times before they are presented to superiors.

It’s not perfection that counts, but the courage to try things out and to accept that the risk of failure is high. But it’s not about readily accepting mistakes. It’s about establishing resilience as a skill, optimising the way you deal with mistakes and learning as much as possible from them to ensure you do things better in the future. A quote from Max Levchin, the former CTO of PayPal, sums up this attitude perfectly: “The very first company I started failed with a great bang. The second one failed a little bit less, but still failed. The third one, you know, proper failed, but it was kind of okay. I recovered quickly. Number four almost didn’t fail. It still didn’t really feel great, but it did okay. Number five was PayPal.”

Illustrations: André Gottschalk

Klaus Schwab

Managing Partner Plan.Net Gruppe Holding

Before joining the ranks of the Plan.Net Group in 2016, Klaus Schwab was Managing Director of digital strategy consultancy bemorrow, which he established in 2014. bemorrow is now independently managed under the umbrella of the Serviceplan Consulting Group. Today, the qualified media manager is the managing partner at the helm of the Plan.Net Group. In this position he is responsible for strategy, consultancy, business development and marketing. He also passes on his extensive knowledge as a driver of innovative ideas, business angel, speaker and guest lecturer. Klaus Schwab not only has many years of experience in the agency industry under his belt, but also in strategy consulting and the field of digital transformation. Together with Plan.Net, the digital native advises clients on how to ensure and develop their future viability in the digital age. Klaus’ advice to his clients: “Digital transformation begins and ends with people – customers at one end of the spectrum, and your own employees at the other.”

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