By Chris Outram
These ten principles for success will steer the most digitally ambitious organisations (pure-play or hybrid) safely along on the road to digital success.
In the world of digital business, the line between strategy and tactics is blurring. Traditionally, large companies would adopt strategic frameworks with three to five-year timescales, while many digital start-ups had little interest in comprehensive and rigorous strategic processes. They simply set themselves a vision and worked out how to get there empirically.
In today’s digital economy, even large established companies are finding that, as digital becomes an important part of their future, their planning process is increasingly being measured in months rather than years or quarters. On the other hand, investors are becoming more savvy and are less swayed by the excitement of ‘digital’ and expect harder planning from start-ups.
As a result, while the empirical process of learning by doing is becoming part of traditional companies’ strategy processes, digital pure-plays are no longer just making it up as they go along. In short – on the battlefield of online, strategy is blending with tactics, while at the same time distinctions between digital pure-plays and hybrid companies are blurring as new business models emerge.
In speaking with over 80 entrepreneurs, CEOs and chairmen of both hybrid and pure-play companies, we have unearthed ten principles which will steer the most digitally ambitious organisations (pure-play or hybrid) safely along on the road to success.[ms-protect-content id=”9932″]
1. Start with vision and purpose
In a business landscape where so much is in flux and new ways of operating are being developed all the time, never before has the need for an inspiring vision and audacious goals been greater. Such visions have a dramatic effect on the ability of companies to attract people and finance in equal order. For example, Moneysupermarket oriented itself around saving the UK £1bn in 2012, which translates into 500,000 households saving £200 each. This created an organisation motivated by helping people to save money.
The most compelling visions and purposes are surprisingly simple, straight-forward and encapsulate what the company is about – this is why they are sometimes so difficult to craft. In the pure-play, digital space they are often the product of one individual’s desire to create something new and different. For corporates to emulate this they need to avoid trying to create vision-by-committee and back the vision of single individuals at the top of the organisation – preferably the CEO – who can make it happen.
Some great examples from the pure play world include:
• Amazon: “be Earth’s most customer-centric company”
• TripAdvisor: “help people around the world plan and have the perfect trip”
• Facebook: “give people the power to share and make the world’s more open and connected”
• Google: “organise the world’s information and make it universally accessible and useful”
2. Be obsessed by customers and consumers and their behaviours
John Roberts, CEO of AO (an electrical goods pure-play) in the UK, summed it up well when he said: “The web hasn’t changed what customers want, it has empowered them. We want to consistently be the best in how we treat our customers.”
The competitive battleground in digital businesses is, rightly, around capturing the hearts and minds of consumers. Unless you can inspire and retain large numbers of them – and simultaneously very high market shares – you’ll gain only modest recognition in the digital world. Pure plays have the upper hand here over hybrids. Our analysis of the wording of annual company reports found that among pure-plays the most frequently used words were “customer”, “user”, “services”, “products” and “information”; whereas for hybrids, “stores”, “retail”, “fast expansion” and “merchandise” dominate. Pure-plays clearly focussed on the consumer; hybrids on their business system. Which approach is right?
Aspiring to be customer centric may seem like an obvious tenet for businesses to live by – however really being customer centric is much more difficult to successfully execute. In a digital world, this means using data in the best possible way – collecting it and using it to co-create with your customer. One of the key learnings that emerged from our interviews was that understanding customers is not only about the pure statistical data, but also about qualitative real-time customer feedback that helps companies constantly refine and optimise what they offer.
3. Embed the right planning horizons
On speaking to any pure-play entrepreneur, you will quickly learn that they have a very ambitious vision of what they are trying to achieve, but seldom do they have detailed plans on how they are going to get there.
Given that the digital world and its underpinning technologies are developing so quickly, it is entirely defensible to have a business model that is experimental and empirical. In fact, many argue that this greater flexibility is key to pure plays’ success.
Having said this, the key is not throwing planning out of the window altogether. It’s still absolutely crucial to build the organisations’ ‘thinking’ processes – but also ensuring they’re fit for purpose. In the digital world, this means far more frequent staging points and milestones. Matt Brittin, VP of Google Northern and Central Europe, said: “In the digital world, the three-to-five-year-plan would be redundant the moment you wrote it. However, assessing top to bottom objectives and key results every quarter gives us the ability to stay focused and also pivot where we see greater opportunity.”
4. Understand and invest in competitive differentiation and advantage
In the digital world, competitive differentiation and advantage can be delivered through a combination of factors such as a low-cost business model, the brand itself, unique technology, supply chain, rate of innovation – the list goes on.
It is essential that entrepreneurs are honest and self-critical in order to ensure that their advantage is real and applicable to the marketplace in which they compete.
A good test of this is the best-in-breed benchmark as defined by Andy Street, MD of the John Lewis Partnership, when he said: “focus on beating the best, even if they are not your most direct competitors, because it makes you stronger.” This will require experimentation which will inevitably mean a few failures along the way, but tolerance and a learning culture have long been shown capable of turning ‘failure’ into sustainable success.
5. Harness technology effectively
Don’t make the mistake of believing that “IT” is what we mean by “technology” in the digital age. The sort of technology which makes digital businesses work is not the same as the technology (IT) that is at the core of many traditional businesses. It is much more consumer oriented and is as much about consumer interface as it is about transaction or supply chain management or flows of massive amounts of information. We should think more about “Customer Technology” (CT) rather than IT.
The cost of poor or slow consumer facing technology is very high. That’s a lesson hybrids are better off learning early, but one that is hard for hybrids to learn. The highest level of commitment and ambition will be required in order to drive the inevitable cultural and organisational needed. What is more, such changes need to be made with pace otherwise someone will definitely be eating your breakfast!
6. Build a robust business model which encompasses an ecosystem of staff, suppliers, and customers
In the early years of the digital era, hybrids often placed their e-commerce or online teams in separate organisational entities in order to avoid polluting the mainstream of their business with radical and often disruptive ideas and/or to prevent the mainstream smothering new ideas. As a result, at the same time that pure-plays were outstanding at front-end consumer interface issues, they were sometimes naïvely incompetent in management of the supply chain.
Nowadays, both pure-plays and hybrids understand the need to have a fully integrated business model. By engaging with consumers in co-creation, getting suppliers to provide inventory (and even delivery) systems and ensuring your own organisation has capabilities which span a multichannel model, the added value of integrating digital assets of a business with its physical assets becomes very clear.
7. Do not tolerate mediocrity
In the digital world, the quality of your people and the culture in which they operate can translate into a massive competitive advantage. Creating a culture of openness so that even the most junior people can influence the direction of the digital business makes all the difference.
The greatest challenge – as it is across all industries – is employing and retaining the right talent. The CEO of AO.com John Roberts, said: “My number one preoccupation in the medium-term is on getting the right quality of individuals into the business and focusing on how they work together… A focus on identifying brilliant people with the right culture and DNA means that when we need to scale, we can scale quickly.”
Insight and creativity is no longer bound up with experience. Pure-plays translate this into true competitive advantage by organising to get the most out of a talented workforce who are used to building apace. Small teams focussed on tough problems can make rapid inroads – an all-important characteristic for success in the fast-moving digital world.
8. Reinvent yourself frequently
One of the truisms of the digital world is, of course, that nothing stands still for very long. Hybrids in particular find the need to reinvent themselves a big challenge. Frederik Nieuwenhuys, a serial digital entrepreneur from the Netherlands put it well when he said: “Incumbents are still lagging – the age of their management teams and their fear of cannibalisation are major hurdles for them. In addition, most are not succeeding in reinventing themselves but merely continue to pursue their traditional (and very complex) processes and systems.”
Knowing this, it is incumbent upon the leadership of any business to make sure that management is constantly questioning itself on whether its business continues to be fit for purpose and is responding to customer and competitive requirements. If not, it needs to reinvent itself rapidly.
9. Design a fit-for-purpose governance model
Although organisational shape has been transformed in the digital era, governance remains key and can make or break a business’ success. The push for corporate transparency and integrity is only likely to hasten the need to reflect this in your business model. It is vital, therefore, that both hybrids and pure-plays design a corporate governance model which will help unlock value in a competitive environment. This should include:
• shareholders with long term conviction
• an informed board
• an inspired leadership
• a motivated management.
10. Build a fit-for-purpose organisation
It has been found time and again that simply dropping a group of digitally competent individuals into the middle of the traditional organisation will not work. Tissue rejection – which happens quickly and brutally – usually smothers and discourages even the most motivated group of digitally oriented individuals. In order to get the best out of this talent, companies need to build an agile culture of experimentation and learning through failure – they should take decisions at speed, encourage experimentation and tolerate (a degree of) failure.
These ten principles for success are designed to help your company safely navigate the road to digital success. Yes, the speed of transit has increased exponentially; yes you might get a flat tyre or two along the way; and yes you may change course and end up somewhere entirely different than where you originally planned. But in no way does this mean you should tear up the guide book completely. Be bold, move quickly and adjust frequently!
Adapted from the author’s book, Digital Stractics: How Strategy Met Tactics and Killed the Strategic Plan, which is published by Palgrave Macmillan.
About the Author
Chris Outram has been a strategy consultant for more than 30 years and is the founder and Chairman Emeritus of OC&C Strategy Consultants. He is the author of Digital Stractics: How Strategy Met Tactics and Killed the Strategic Plan, which is published by Palgrave Macmillan and is available now.