If digital is the answer, what’s the question?

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Over the last months (sorry it’s been ages since I posted) I’ve been meeting with senior executives around the globe to discuss digital and how it can help drive business performance. Encouragingly, there is a clear shift in interest levels from CEOs and other business leaders. A year or two ago digital was a top agenda item for executives in media, and some forward thinking executives in other sectors.  Now, every business leader wants to understand what digital can do for their organisation.  Many are sponsoring digital investments.  Some are driving extensive and expensive programs.

The interest and activity is clear. What is less clear is whether all this effort and expenditure will drive real value to the bottom-line. One executive I met described a wide ranging suite of investments that included changes to products, channels, core processes, systems and skills. But he could not describe how all this activity would help the company deliver its strategic goals and create value for stakeholders.

The issue is that digital is rapidly becoming the next ‘hammer looking for a nail’. Instead of being viewed as a tool that can help to drive business objectives (such as growth, cost, or customer satisfaction) it’s become an end in itself.  Like core process redesign, value-based management and so many other tools before it, digital is a terrific tool, but a tool that needs to be applied thoughtfully and precisely to solve a clear problem.

The companies that are driving real value from digital can clearly articulate the question to which digital is the answer. They have consciously or unconsciously answered the following:

1. How is the context in which we operate changing?  Digital is one factor that drives context but there are other factors too, such as regulation, macro-economics, competitor behaviour and customer demands. All factors should be considered in unison to create an integrated picture of the context

2. How will we compete in this new context?  Competing in the new context may require operational changes, such as moving to a lower cost structure, or strengthening controls. It may also require strategic changes such as re-balancing geographic footprint or shifting resources to higher growth businesses

3. How can digital help me to drive these changes? Digital is one of the tools available to drive these changes. For example, digitisation of core processes can dramatically reduce costs and strengthen controls. Digital channels can facilitate rapid shifts in geographic mix. Importantly, digital alone rarely drives value. Digitisation needs to be combined with other changes for example to incentives, skills and core processes.

Digital is an extraordinary tool. But only when it’s applied to achieve a clear business objective. Before declaring that digital is the answer, make sure you have clearly defined the question.

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