Mind the Gaps

 Concerns over technological disruption, globalization, growing inequality, and the environment are ubiquitous. Despite these challenges, we believe businesses can sustain growth at an affordable cost, not just to the business but to society and the planet as well if the (growth) gaps are closed.

Our motto: Profit can be meaningful, provided that it serves a purpose.

ROUNDMAP™ IS A CREATION OF EDWIN KORVER, CEO OF CROSS-SILO BV, THE NETHERLANDS

2.1 - CLOSING THE GAPS

Studies show that 80% of organizations fail to achieve their desired growth targets in terms of revenue and profitability. Closing the growth gap ─ the gap between growth aspirations and growth activation ─ is one of the applications of the ROUNDMAP.

A growth gap may occur due to:

• Inadequate considerations of the opportunities for growth, i.e., the attainability of growth.
• The limited capacity of the organizational infrastructure to support successful execution, i.e., the serviceability of growth.
• Adversarial forces inside or outside the organization ─ think of Porter’s Five Forces.
• So-called growth traps ─ deeply embedded assumptions that can lead firms into misconceptions about growth opportunities.
• Fleeting competitive advantages ─ reducing the growth cycle, forcing firms to rotate through the cycle much more quickly.

2.2 - GROWTH PROJECTIONS

Let’s have a look at a typical growth cycle (bell curve) of a single line of business:

To appreciate a level of growth that is both attainable as well as serviceable, we’ll have to make sure that any misconceptions about growth, the growth traps, often caused by inadequate market research, are removed from the equation. This will give us the green line. If current growth does not match the green line, we’ll need to consider what causes the growth gaps (the misconfigurations).

By assessing the operation, ROUNDMAP Certified Professionals will be able to reveal what causes these gaps. This brings forth an actionable plan which may include changes to be made to the infrastructure, business strategy, business model, market segmentation, partnerships, revenue streams, marketing strategy, cross-functional collaboration, individual mindsets, or the customer development process.

2.3 - STANDING AT THE EDGE OF A CLIFF

Additionally, we need to account for disruption, whether due to fleeting competitive advantages, gradual changes in demand, or even shock effects like a virus outbreak, as it makes no sense to work toward a discontinuous future.

While the Corona crisis may be a once in a lifetime occurrence, shock effects are far from exceptional. During one of our assignments, we identified a single point of failure (SPoF) in our customer’s value chain: the company sold 90% of its merchandise via one channel. We were able to convince the CEO to mitigate the risk and offered to transform the out of date website into a fully integrated webshop. When the SPoF gave way, revenue dropped by 90% and everyone panicked. But we came prepared and sales rebounded within days.

About 10 years before the event, we had to deal with a similar shock effect ourselves. As a serviceprovider, we rented a large number of server racks in a datacenter, some IP-space, and an internet uplink; all from one supplier. When we received a call from the datacenter that our supplier had filed for bankruptcy, all hell broke loose. It took five days and nights of relentless efforts and a lot of capital, to untangle our operation and make it out of this trap alive. It was a tough lesson to learn but since then, SPoF’s are a red alert on our radar.

2.4 - EQUITABLE GROWTH

As forementioned, ROUNDMAP is designed to drive sustainable growth. The difference between sustaining and sustainable growth is that sustaining growth means to keep growth at a certain rate, regardless of the costs, while sustainable growth is the ability to sustain growth at a rate that doesn’t require the firm to sell its stakeholders short ─ we prefer to call this EQuitable Growth.

EQuitable Growth aims to:

• Identify and develop growth opportunities,
• Identify and mitigate threats/risks,
• Close growth gaps (misconfigurations),
• Elimate growth traps (misconceptions),
• Account for interruptions (scenario planning and simulation),
• Uncover what makes a brand or product relevant (now) and significant (future),
• Increase awareness of a firm’s Corporate Social Responsibility,

by means of:

• Encouraging experimentation with active senior-level sponsorship,
• Assuring a growth mindset with steadfast cross-company alignment,
• Reskilling the workforce to match the rules of the digital economy,
• Rethinking the business model to create a better future for all stakeholders,
• Repurposing resources to allow idle capacity to be put to good use,
• Replicating succcessful business models to create new lines of business,
• Designing nimble and agile operating lines.

By encouraging frequent experimentation in small groups, companies deemed ‘excellent’ by Peters and Waterman, authors of In Search of Excellence, managed to create an abundance of opportunities while mitigating threats before becoming manifest.

2.5 - HORIZON MODEL

Both McKinsey and IFF* encourage senior executives to pay equal attention to ‘Three Horizons of Growth’ (Horizon model):

1. Horizon 1 = ‘Keeping the lights on‘ ─ driven by optimization and sustaining innovation (change).
2. Horizon 2 = ‘Building future ventures‘ ─ driven by disruptive innovation, operating in known markets.
3. Horizon 3 = ‘Imagining the future‘ ─ driven by disruptive innovation, entering uncharted waters.

See image below:

(*) The Three Horizons of Growth framework has two sources. One is a collaborative effort by the IFF (International Futures Forum), published in the book Three Horizons by Bill Sharpe. The other source points to McKinsey, published in the book The Alchemy of Growth by Mehrdad Baghai et al.

2.6 - SITUATIONAL GROWTH™

Our perception of growth is slightly different. We believe growth should be perceived as ‘situational’ ─ given the internal and external forces ─ which has led to the belief that Situational Growth™ (compare: Situational Leadership) has four ways of manifesting itself:

1. EXPLORATION ─ Discover new product-market fits and business models
2. EXPLOITATION ─ Scale the operation, benefit from economies of scale, and increase market share
3. EXPANSION/EXTENSION ─ Find new markets while optimizing performance and reducing costs
4. EXPIRATION ─ Delay expiration for as long as possible while looking for new opportunities for growth

During each of these manifestations, a gap may occur: we may overlook profitable revenue streams, try to expand the wrong ones, or start change-initiatives while we should initiate transformation, and so on.

While the primary concern of management is to operate existing product-market centers as cost-effective as possible, ensuring predictable outcomes (high quality, a responsive customer service, etc.), revenue may suddenly turn south, changing the situation we’re in. During Expiration phase, it is the responsibility of leadership, besides defending existing revenue streams, to encourage creatives and fund innovators, operating at the edges (Red Monkey by Jef Staes) of the organization, to explore new opportunities for growth.

Mastering Situational Growth™ or Situational Mastery™ focuses on developing transactional and situational awareness to drive corporate Performance Readiness, while Situational Leadership®, developed in the eighties by Paul Hersey and Ken Blanchard, focuses on the relationship between leaders and followers, to increase individual Performance Readiness.

To select the most effective style of corporate leadership, we’re using the term Conditional Leadership™. It suggests that to lead a company in a certain timeframe, and given the internal and external conditions that may influence the business, the style of leadership needs to adapt.

These two frameworks, Conditional Leadership™ and Situational Leadership®, will greatly determine a firm’s capacity for Growth Activation™ *.

(*) We’ve derived the term Growth Activation™ from the term Marketing Activation (the execution of the marketing mix as part of the marketing process) and Customer Activation (motivating customers to move to the next stage of their lifecycle faster than they would on their own).

2.7 - MIND THE GAPS

Growth gaps are often the result of a series of misconfigurations. We’ve addressed some of these gaps in more detail here: Mind the Growth Gaps. It is important to realize that every gap has an adverse effect on the desired outcome that will not go away until it’s identified and dealt with. Compare: Growth traps are misconceptions about growth opportunities.

m

2.8 - VENTURE DESIGN

Even if you are not familiar with the (eight) principles of excellence, mentioned in In Search of Excellence by Peters and Waterman (1982), you shouldn’t be surprised to learn that the way successful companies operate today resembles those that were researched by the authors. Indeed, as the renown economists, Schumpeter and Kondratieff uncovered, history tends to repeat itself in so-called business cycles.

The organizations that were deemed ‘excellent’, such as Texas Instruments, IBM, McDonald’s, and Hewlett-Packard, were extremely nimble and entrepreneurial, had a strong culture, were customer-driven and human-centric, highly disruptive, and often very effective ─ they were true frontrunners; much like their present counterparts, Microsoft, Google, eBay, Amazon, Netflix, and Tencent.

Today, we’re seeing a similar approach, driven by fleeting competitive advantages, which is now referred to a Venture Design (VX):

The VX-approach is to intentionally set out to conquer a market, based on opportunities for growth that have not been explored before ─ by anyone. It doesn’t perceive the core competences as a holy grail. On the contrary, employees are allowed to explore any opportunity, as long as it serves a real customer need and is highly scalable.

Compared to the Horizon Model: these brave companies choose to ignore Horizon 2 and jump straight in Horizon 3, with Agility, Creativity, Determination, and Courage (AC/DC).

In Systems Theory: “A system is said to be in a transient state when a process variable or variables have been changed and the system has not yet reached a steady state.” In other words: a system is in a transient state as long as it is in a change state.

Before you jump on the VX-bandwagon, consider the fact that a multi-core operation does increase complexity dramatically. More on this subject can be found here: Where to find future growth?

"Fast and roughly-right decision-making will replace deliberations that are precise but slow."

~ Rita McGrath, Harvard Business Review

https://bit.ly/3wM9OTS

Self-Disrupt or Be Disrupted

 With uncommon qualities and characteristics, these future-ready leaders will drive organizations to adapt, collaborate, and excel in disruptive times.

To ensure organizations succeed in a rapidly changing business world in the years ahead, a new kind of future-ready leader must take priority. Current models of leadership go some way to answering this, but research by the Korn Ferry Institute reveals the ideal leader for tomorrow’s disruptive business environment: The Self-Disruptive Leader.

This new model of high-performing leader incorporates and builds on existing concepts of agile, digital, and inclusive leadership, but also highlights the importance of leaders who are experts in the creation of opportunity and the capitalization of the flow of knowledge. In this model, the new source of competitive advantage is a leader who can connect resources and people adeptly to build an innovation ecosystem. This enables them to bring robust ideas to market at a rapid pace and, crucially, to adapt quickly to change by disrupting themselves again and again.

ABOUT
THIS STUDY

This study reveals the skills that leaders will need in the future of business—and in today’s increasingly disruptive environment. We uncover how many leaders are performing highly in these areas and where there is a pressing need for improvement. By analyzing the leadership profiles of 150,000 leaders from the Korn Ferry Institute’s proprietary data, the study underlines the five key qualities of effective, future-focused leadership—qualities which correlate with a country’s ability to innovate and which correlate with a company’s likelihood of being an acclaimed brand. It also reveals how well leaders in 18 key global markets are performing in each dimension, and where improvement is urgently needed.

Additionally, the study uses opinion research from 795 investors and analysts to model the gap between the current supply of these high-performance behaviors and the market’s demand for them, to reveal just how wide leadership skills shortages are globally and by market.

FUTURE PROOF
YOURSELF

Leaders of the future will need to retain a self-disruptive outlook as a central feature of their leadership style to prosper.

WHY
ADAPT?

With 67% of investors insisting that the current leadership pool is not fit for the future, it’s no surprise then that investor confidence in current leadership styles and organizations is wavering. Organizations could be faced with a double bind if they fail to develop self-disruptive behaviors. Not only will they be less able to adapt to the changing business environment, they may face a penalty from those who evaluate their businesses.

FOR LEADERS
TO SUCCEED IN THE
FUTURE OF WORK,
THEY MUST ADAPT:

Anticipate:

Demonstrate contextual intelligence to make quick judgments and create opportunities; focus on the societal needs that the organization wants to serve; provide a direction to unify collective efforts even among disoriented environments.

Drive:

Energize people by fostering a sense of purpose; manage the mental and physical energy of themselves and others; nurture a positive environment to keep people hopeful, optimistic, and intrinsically motivated.

Accelerate:

Manage the flow of knowledge to produce constant innovation and desired business outcomes; use agile processes, quick prototyping, and iterative approaches to rapidly implement and commercialize ideas.

Partner:

Connect and form partnerships across increasingly permeable functional and organizational boundaries; enable the exchange of ideas; combine complementary capabilities to enable high performance.

Trust:

Form a new relationship between the organization and the individual that centers on mutual growth; integrate diverse perspectives and values; help individuals to uncover their sense of purpose and facilitate them in providing their maximum contribution.

LEADERS NEED TO
CLOSE THE GAP

Each of the five dimensions qualify as the top priority for leadership development in at least one economy, according to the gap between the ADAPT qualities leaders possess and the qualities investors demand.

ANTICIPATE

Bringing clarity in times of volatility and ambiguity. These are leaders who are not going to wait for luck to find them. They are motivated by challenge and obstacles—all they see is opportunity!

DRIVE

Energizing people who are change-weary, and yet must re-skill themselves for an uncertain future. They also nurture positivity and hope, through optimism, to foster a sense of renewal.

ACCELERATE

Leading by managing the flow of knowledge using principles of design thinking and Lean, but letting go—doing it without the need for control.

PARTNER

Collaborating without sole ownership of the issue, leading a distributed, non-hierarchical organization—interdependencies are voluntary and transitory.

TRUST

Bringing people together with a tremendous amount of diversity, secure their commitment, and recognize they have their own purpose, ambitions, and self-expression.

DO YOU HAVE WHAT
IT TAKES TO BECOME A
SELF-DISRUPTIVE
LEADER?

Becoming a Self-Disruptive Leader is not subject to the development or enhancement of a set of skills. It’s a mindset and the ability to constantly challenge your own beliefs and assumptions. Your mindset helps you organize your belief system and sets the course for behaviors and actions. We believe that the future of work demands a new mindset and a new course of behaviors and actions, and only those leaders who have the courage to challenge themselves have a chance to effectively lead their organizations into the future.

This short quiz has been designed to introduce the concepts of the Self-Disruptive Leader and generate initial curiosity about yourself. It doesn’t intend to be a substitute for psychometric assessment. If you are interested in getting more reliable results and receiving feedback, please contact credible resources for professional services.

CULTIVATING
AN INVALUABLE
TALENT

The pursuit of Self-Disruptive Leaders will mean seeking them out in unusual places, and it is crucial that talented people are not blocked because they do not fit traditional training or personality criteria. As a group, tomorrow’s leaders will look and act differently to current directors and C-suite executives. They will have attended a variety of schools and come from a range of different places, and many will have risen to the top through non-traditional paths. Diversity and inclusion will become more imperative than ever, and talent assessment—with true insight, objectivity, and value—will be vital.

To tackle this complex and multilateral issue, organizations need to think about talent as a system—including recruitment, compensation, training, development, and succession planning. These functions and programs may need a full revamp to ensure that organizations widen and maintain a flow of diverse talent, especially of hard-to-find Self-Disruptive Leaders.

THE
FINAL WORD

To create opportunities in an ever-fluctuating world, organizations need Self-Disruptive Leaders—people who are engines of change, but also generate it from within, at the pace of their business. Traditional training routes aren’t equipped to solve the leadership crisis, often producing outmoded mindsets that can’t keep up with the rate of change. Instead, a revolution in how companies develop leaders is vital for closing the leadership pipeline gap.

To capitalize on an increasingly disruptive world, companies must accelerate their identification, recruitment, retention, development, and promotion of leaders with self-disruptive potential at all levels of the business. Organizations must develop a culture that empowers everyone within them to challenge their own thinking and disrupt themselves. This final point underpins the solution to the leadership crisis. Leadership can no longer be isolated and inscrutable: by cascading ADAPT proficiencies throughout the organization, companies will develop a self-perpetuating ecosystem of leaders, ready for whatever the future of work brings.

https://bit.ly/351b7Bi

Core of Disruption

From disrupted to disruptor: Reinventing your business by transforming the core

By Peter Dahlström, Liz Ericson, Somesh Khanna, and Jürgen Meffert

Companies must be open to radical reinvention to find new, significant, and sustainable sources of revenue.

When Madonna burst onto the scene in the early 1980s, there was little reason to suspect that she’d have more than her allotted 15 minutes of fame. But in the three decades since her debut album, she has managed to remain a media icon.

Her secret? “Madonna is the perfect example of reinvention,” Janice Dickinson, renowned talent agent, has said. Fittingly, the name of Madonna’s sixth concert tour was “Reinvention.”

Madonna may seem like an unlikely touchstone for modern businesses, but her ability to adapt to new trends and set some others offers a lesson for companies struggling with their own digital revolutions. That’s because the digital age rewards change and punishes stasis. Companies must be open to radical reinvention to find new, significant, and sustainable sources of revenue. Incremental adjustments or building something new outside of the core business can provide real benefits and, in many cases, are a crucial first step for a digital transformation. But if these initiatives don’t lead to more profound changes to the core business and avoid the real work of rearchitecting how the business makes money, the benefits can be fleeting and too insignificant to avert a steady march to oblivion.

Simply taking an existing product line and putting it on an e-commerce site or digitizing a customer experience is not a digital reinvention. Reinvention is a rethinking of the business itself. Companies need to ask fundamental questions, such as, “Are we a manufacturer, or are we a company that enables customers to perform tasks with our equipment wherever and whenever they need to?” If it’s the latter, then logistics and service operations may suddenly become more important than the factory line. Netflix’s evolution from a company that rented DVDs to a company that streams entertainment for a monthly subscription to one that now creates its own content is a well-known example of continuous reinvention.

Reinvention, as the term implies, requires a significant commitment. From our Digital Quotient® research, we know that digital success requires not only that investment be aligned closely with strategy but also that it be at sufficient scale. And digital leaders have a high threshold for risk and are willing to make bold decisions.1But companies don’t have to wait far in the future to realize those benefits. We’ve found that 60 to 80 percent of total improvement targets can be achieved within about three years while also laying the foundation for future growth.

For all the fundamental change that digital reinvention demands, it’s worth emphasizing that it doesn’t call for a “throw it all out” approach. An engine-parts company, for example, will still likely make engine parts after a digital reinvention, but may do so in a way that’s much more agile and analytically driven, or the company may open up new lines of business by leveraging existing assets. Apple, with its move from computer manufacturer to music and lifestyle brand through its iPhone and iTunes ecosystem, reinvented itself—even as it continued to build computers. John Deere created a whole series of online services for farmers even as it continued to sell tractors and farm equipment.

There are many elements to a transformation, from end-to-end journey redesign and embedding analytics into processes to open tech platforms. They require a myriad of capabilities, from artificial intelligence and agile operations to data lakes, cloud-based infrastructure, and new talent. Many of these elements have been written about extensively, and each can absorb a significant amount of executive time. What’s often missing, however, is a comprehensive view of how an organization sets the right ambition, how to architect the right elements for the transformation, then how to systematically and holistically undertake the change journey.

What the ‘core’ is and why it needs to change

“Think of your core muscles as the sturdy central link in a chain connecting your upper and lower body.”2That was the guidance from Harvard Medical School on how to stay in shape. The authors defined the core as the central set of muscles that helps a body maintain its power, balance, and overall health.

That’s the essence of what we mean when we talk about changing the core of the business—the set of capabilities that allows the entire business to run effectively. A company’s core is the value proposition of its business grounded in strategy as enabled by its people, processes, and technology. These elements are so intrinsic that any transformation that doesn’t address them will ultimately underwhelm and fizzle because the legacy organization will inevitably exert a gravitational pull back to established practices.

Value proposition: Any digital reinvention must address the value the company provides to customers (whether existing or new) through its products and/or services. Inevitably this is based on a clear strategy that articulates where value is being created, shifted, or destroyed. Crucial to getting this right is identifying and evaluating existing assets that are most important and understanding what customers actually want or need. This can be surprisingly difficult to do in practice. The value that Amazon originally provided, for example, wasn’t selling books online but rather providing convenience and unheard-of selection. Understanding the real source of its value allowed Amazon to expand exponentially beyond books.

People: Of course talent is important, but a reinvention needs to involve more than just hiring a CDO or a few designers. Talent priorities should be based on a clear understanding of the skills needed at all levels of the business. This requires investing in building relevant digital capabilities that fit with the strategy and keep pace with customers as they change the way they consider and make purchases. At the same time, targeted hiring should be tied to those capabilities that actually drive financial performance. (For more on talent, please read “Raising your Digital Quotient.”)

Enabling that talent to thrive requires a digital culture, i.e., one that is customer centric and project based, with a bias for speed and continuous learning. In fact, cultural and organizational issues can lead to the squandering of up to 85 percent of the value at stake.3Making sure the new culture sticks requires rebuilding programs that reward and encourage new behaviors, such as performance management, promotion criteria, and incentive systems.

Processes: Rewiring the mechanisms for making decisions and getting things done is what enables the digital machine to run. Digitizing or automating supply chains and information-intensive processes as well as building new capabilities like robotic process automation or advanced analytics, for example, can rapidly increase the business’s clock speed and cut costs by up to 90 percent.4

One temptation is to focus on simply digitizing existing processes rather than really rethinking them. Often, the most productive way to tackle this issue is to identify the customer journeys that matter most to the business and then map out the touchpoints, processes, and capabilities required to deliver on them—without regard to what is already in place. Rearchitecting processes requires establishing governance and decision rights to provide clarity and accountability, as well as embedding advanced analytics, automation, and machine-learning capabilities. (For more, please read “Accelerating the digitization of business processes.”)

Technology: While digital reinvention is more than just a technology overhaul, technology is crucial to it. Leaders need to ensure that each IT investment responds to clear and robust business needs, and does not devolve into “tech for tech’s sake.” They also need to identify how best to work within an ecosystem of partners and vendors, and assess which legacy systems to keep, which to mothball, and—critically—determine how to help legacy technology work in a digital world.

Reinvention requires a proven, systematic approach

Because of the complexity involved, most reinventions fall short of their original goals. In our experience, extracting the full value from digital requires a carefully coordinated approach across four “Ds”: Discover what your digital ambition is (based on where the value is); Design programs that target profitable customer experience journeys; Deliver the change through an ecosystem of partners; and De-risk the process by thoughtfully sequencing steps (exhibit).

Exhibit

While this approach may seem self-evident, we find that most companies fall short in the execution. There are myriad reasons for this, but the most common are that the business either underinvests in the capabilities needed or doesn’t drive the transformation program sufficiently across all four of the “Ds.” A company may invest tens of millions of dollars to “Discover” great insights, for example, but if its “Deliver” strategy is inadequate, those insights are for naught.

1. Discover: Shape your digital ambition, strategy, and business case

In this phase, companies develop a clear view of where value is being created and destroyed as the basis for a clear business strategy. That requires an analysis of their business, sector, customer-behavior trends, and the larger economy to identify and quantify both threats and opportunities. These kinds of digital opportunity scans should be sorted by short- and long-term pockets of value. (For more on this, please read “The economic essentials of digital strategy.”)

At the same time, companies need to engage in a sober analysis of their own digital capabilities and resources. Capabilities that build foundations for other key processes and activities (e.g., modular IT and agile technology platforms) are particularly important. And while leadership matters, our DQ™ research has shown that midlevel talent is the most critical element for a company’s digital success.

With this understanding in hand, companies then determine what their strategic ambition is, whether retooling the existing business or something more radical, such as plunging into a new market or innovating a business model. They develop a detailed road map for addressing capability gaps, and recruiting, developing, incentivizing, and retaining the necessary talent. The goal is to develop a tight business case for change based on facts.

3. Deliver: Develop a network of partners who can rapidly scale your ambition

Getting the speed and scale necessary for a reinvention increasingly requires an ecosystem of external teams, partners, suppliers, and customers. In practice, this means working with a mix of platform players, delivery specialists, and niche players. These are the relationships that companies can call on to provide specific skills and capabilities quickly.

This reality has made ecosystem management an important competency, especially understanding how to find and plug into the right mix of complementary capabilities. One national bookseller, for example, built out a digital offer by partnering with a telecom company for its technology and with a range of retailers to build up a marketplace. This approach allowed it to rapidly hit the marketplace and increase revenue 78 percent in a year.

As companies push to scale their digital reinvention throughout the organization, the crucial role of seasoned change managers comes into focus. These leaders not only play “air traffic controller” to the many moving parts, but also have the business credibility and skill to solve real business problems. They must maintain an accelerated pace of change and drive accountability across the business. The change leaders will look across the entire enterprise, examining organizational structure, data governance, talent recruitment, performance management, and IT systems for areas of opportunity, making decisions that balance efficiency and speed with outcome.

The “agility coach” is an example of this type of role. This person has strong communications and influencing skills, can create and roll out plans to support agile processes across the business, and can put in place KPIs and metrics to track progress.

4. De-risking: Structuring the process to minimize risk

One of the most common reasons digital transformations fail is that the organization develops “change exhaustion” and funds start to dry up. To mitigate this risk, it’s important to focus on quick wins that not only build momentum but also generate cost savings that can be reinvested in the next round of transformations. One global e-tailer, for example, focused on quick wins (such as increasing conversion rates) and was able to deliver $350 million in new revenue in just five months, which funded further changes and provided tangible results to further excite the business about the journey. This sequencing approach applies to tech as well. Many companies choose to invest first in “horizontal” components, such as business-process management (BPM) layers or central administration platforms that can be shared across many initiatives, while balancing them with more “visible” elements to provide the proof of concept.

Technology risks, especially cybersecurity, will also require increased attention as companies digitize more operations and processes. Organizations can mitigate these risks by automating tests on software, establishing systems in which failures can be rolled back in minutes, and establishing build environments in which fixes can be made without putting significant parts of the business at risk. Senior leaders in particular need to focus on the structural and organizational issues—from building cybersecurity into all business functions to changing user behavior—that hamper the ability to manage cyber risk.

One risk senior leaders often overlook is losing ownership over sources of value. These might include the company’s data, customer relationships, or other assets. Having a clear understanding of where the value is coming from allows businesses to navigate ecosystem relationships profitably. In evaluating which partners to work with, the bookseller mentioned above, for example, declined to work with a storefront partner because it feared losing its most valuable asset: its direct relationship with its customers.

2. Design: Create and prototype breakthrough experiences

Actually acting on a digital ambition can be daunting. We have found that the most successful companies start by focusing on the most important customer journeys, then work back from there to design and build out breakthrough customer experiences. Using design thinking and skills, these companies define each journey, looking especially for the pain points and potential missed connections. The change team can then map out, screen by screen, models for a new interface. In this phase, the company must avoid getting caught in endless rounds of planning but instead rapidly build prototypes, translating concepts into minimum viable products to test and iterate in the market before scaling.

This phase also includes building out rapid delivery approaches and an IT infrastructure that blends the legacy systems with microservices and modular plug-and-play elements). While agile IT has become standard, more digital businesses are embracing DevOps (integrated development and operations teams) and continuous delivery so that software can be developed, tested, and deployed quickly to consumers and end users.

On the organization side, the fluid nature of cross-functional collaboration, rapid decision making, and iterative development means that the business should focus on the enablers for this kind of teamwork. These include effective metrics and scorecards to evaluate digital performance and incentive structures to drive the right behaviors, mind-sets and outcomes. The CDO at one multinational pharma company addressed this issue by establishing a “digital council,” which was tasked specifically with breaking down organizational silos to enable transformational change across all business lines. The initiative was credited with significantly contributing to a 12 percent increase in sales.

Sidebar

Critical questions

Digital reinvention will put new demands on leadership. Here are some crucial questions leaders should ask themselves:

• Where have our past transformations succeeded or broken down?
• What do our customers say about their experience with our company?
• Do we understand what the next sources of value are and are we ready for them?
• Are we investing in the right places and at the right levels to reinvent ourselves?

Companies can both rise and fall with astonishing speed as new customer needs are uncovered and new ways of meeting them are developed. We strongly believe that companies that are able to adapt, learn, and find new solutions quickly can do more than just retain market position; they can thrive, whatever disruptions come their way. As Madonna once said: “You have to reinvent to stay in the game.”