That was the not-so-subtle assessment recently made by a senior executive regarding the impact of digital on the future of his business. But he wasn't referring to disruptive new digital technology, a new mobile app, a competitor's new website or even the consumerization of his industry, although all were top of mind.
He was talking about his company's culture. And his view—albeit dramatic—succinctly captures the biggest (digital) business challenge facing companies 2013.
- eCommerce? Who owns the P&L? What about channel shift?
- Omni-Channel? Is store operations ready to use retail locations as showrooms for online sales?
- Social Media? Are you ready to abandon lengthy review and approval process? Is legal?
- Mobile Aps? Is your company ready to be a software developer?
- Sales? Will your reps share customer relationships? And lists? And Compensation?
- Global? Which region gets investment first? US? EMEA? Emerging? And what about China?
- Customer-centric? Are your BU leaders willing to transform to portfolios that cross multiple brands and product lines?
- Industry Leader? Are you ready to make strategic 2-3 year investments? Create entirely new businesses? Disrupt old ones?
“People focus on technology, but it’s just an enabler.”
So said William Lynch, CEO Barnes & Noble speaking at a Forrester conference in 2011. While his keynote address was about the transformation of Barnes & Noble from a traditional book company to a digital business, clearly the biggest challenge was organizational change, not technology.
A recent McKinsey survey echoed this, finding that six of the eight "Most significant challenges faced in meeting digital business priorities" were organizational or resource issues, not technology. The single biggest challenge was "Organizational structure not designed to take advantage of priorities" (52%).
And while 51% noted "lack of technology infrastructure and IT systems" as a key challenge, only 14 percent say their company's IT functions are spearheading new digital-business efforts. In fact, one-third said IT is supportive but lacks the capabilities, one-quarter say these executives to deliver on goals, and another 25% said IT executives was "are not engaged at all."
Two years ago we wrote about the Three Forces Shaping the Digital Future Fragmentation, Convergence and Acceleration. We were (mostly) writing about dramatic changes in technology, but those same forces are the same that are driving organizational challenges today.
Fragmentation -- The acceleration of digital innovation is creating need for new talents, experience and management. With no clear owner (or under-resourced capabilities), multiple initiatives are randomly springing to life across BUs, markets, and services. Brands racing ahead of IT to purchase content and commerce platforms. IT deploying communications and marketing platforms with little business participation. Marketing struggles to keep pace and justify its value beyond customer acquisition.
Convergence -- Organizational silos. No phrase creates nearly the eye rolls and knowing nods as this. Business operations exist largely as they have for decades...driven my discrete markets, channels and product lines. In tomorrow's customer-centric, Omni-channel digital marketplace, companies struggle to determine ownership and operations.
Acceleration -- The pace of innovation and change will increase. As examples:
- Mint.com’s user base has ballooned 5x in three years and today more than 70% of users are accessing their accounts mobile devices.
- Harvard Business Review reports that digital already influences of 50% of purchases, and will soon reach 80%.
- Accenture reports that from 2010 to 2011 feature phone ownership dropped 20% while smartphone ownership grew by 25%.
"We're in the
middle of a global eCommerce roll-out
and we don't even know who owns this on the business side."
-- Enterprise Architect of leading consumer manufacturing company.
and we don't even know who owns this on the business side."
-- Enterprise Architect of leading consumer manufacturing company.
Gartner recently predicted that "Through 2015, 80% of multichannel implementations will fail, because retailers will retain product and channel-centric strategies." In our experience, it's easy to expect similar success rates as likely in the B2B space as manufacturers and distributors struggle with channel conflict, lack of scalable product management and pricing, disruption of direct sales and a technology-centric approach to business needs.
- Digitizing the Business: The expanding influence of digital on the core business has lead many executives to rely on traditional business disciplines such as Enterprise Governance, Business Architecture, Change Management and Program Management to lead the transformation of the organization. While the change is triggered by digital capabilities, it is driven by business strategy, planning, alignment and management.
- Innovation Islands: Some executive leaders have determined that Digital business is so significantly different from their traditional business, they are choosing to establish new locations for the Digital business. A leading B2B distribution company recently opened new offices on a floor of a consulting firm with the goal of completely redesigning the business from the ground up. The head of digital strategy at Discovery Communications recently spoke about why all digital operations are run in Chicago offices, far away from the corporate headquarters in Silver Spring, Maryland, following the lead of Barnes & Noble that did that same.
- New Co: In an increasingly common decision, the CEO at a traditional financial services organization decided to create an entirely separate company focused on digital business innovation, new revenue creation and market disruption. Interestingly, first indicators are that companies least prepared for digital transformation seem to show the highest interest in this most dramatic approach.
