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Innovation, Innovation, Strategy, Technology, Book synthesis

20 September 2019

Book synthesis

Digital transformation: you have unique advantages

Are Silicon Valley’s new barbarians reshuffling the cards in your industry? Well, you do have the means to deal with them: leverage the core resources of your company to make a success of your digital transformation and regain (or maintain) the upper hand.

What do you think will happen if you continue to rely on your current core business, your cash cows? Some firms have paid dearly for doing just this, with entire swathes of the US retail industry collapsing in the face of competition from Amazon and others. Barnes and Noble, Toys R Us, and Sears — all supposedly unsinkable — have gone bankrupt, while Blockbuster was torpedoed by Netflix. The list of established companies that have been swept away by Silicon Valley’s start-ups is long. Having said that, how serious do you need to be about your digital transformation? At least a little, because there is still room to fight back. On the other hand, you shouldn’t transform your company by simply aping the practices of digital upstarts, since they will always win at their own game. You should rely instead on the unique strengths and assets of your company so you can cannibalize your declining business smartly and develop new growth opportunities. You do have the power to turn things around to your advantage.

Reverse the trend with digital transformation

Which company today, in your opinion, is the most advanced when it comes to new automobile technology? Which was the first to invest in a major player in car sharing? Which is allowed to test more autonomous vehicles on the roads of California than all its competitors? Which is the pioneer in affordable electric cars, whose business model was devised to thrive in a world where there will be fewer and fewer car owners? Was it Tesla? Uber? No. It was General Motors, founded in 1908, a company that was on the verge of bankruptcy 10 years ago but which has managed to bounce back by embracing the digital transformation. So it is possible to disrupt the disruptors, as long as you start now.

The status quo is a risky option because the cards are being reshuffled too quickly to wait around. But few traditional companies have really committed to transformation. Authors Todd Hewlin and Scott Snyder argue that you have between three and five years to see your digital transition through to its end. And if your first attempts aren’t conclusive, it’s not a problem. Quite the opposite, in fact: your initial “failures“ will fuel your learning curve. The point is, you should not rush headlong into trying to copy the success of new digital start-ups. The authors recommend keeping a balance between your short-term profitability, which is guaranteed by your traditional activities, and your disruptive digital investments.

You have unique advantages you can showcase

Traditional companies have firepower that is the envy of the bigshots in Silicon Valley. At the same time, you have to be aware of them to use them intelligently. Your assets include your ability to self-finance your innovations using revenue from your cash cows. Microsoft succeeded in developing Azure, its platform for outsourcing computing resources in the highly competitive cloud market, using the war chest generated by its Office and Windows software, which totals in the billions of dollars.

Excerpt from Business Digest N°299, September 2019

Published by Françoise Tollet

She spent 12 years in industry, working for Bolloré Technologies, among others. She co-founded Business Digest in 1992 and has been running the company since 1998. And she took the Internet plunge in 1996, even before coming on board as part of the BD team. 