On July 20, 2016, Sue Bethanis hosted David Rogers, professor at Columbia Business School and the author of the recent book The Digital Transformation Playbook. David is a globally-recognized leader on digital business strategy. David talked with Sue about why traditional businesses need to rethink, adapt, and learn from todays’ digital disruptors and innovators.
“The reason that digital technologies matter so much to businesses is because it matters to customers. Through technology, customers can discover, learn, interact, and influence each other. It’s changing the relationship businesses have with their customers.”
Digital transformation is a question — How does a business that was started before the digital era need to adapt in order to grow, thrive, and reach its next stage of profitable growth?
According to Rogers, digital transformation really isn’t about technology, it’s about changing strategic thinking and organizations’ need to upgrade their thinking across these five domains of strategy:
- Customers – Businesses need to shift from thinking about their customers as targets (who they market to) to thinking about them as networks. We need to look at customers as active and dynamic participants and partners. Technology is changing the customer relationship with businesses and with each other. There is now a much more reciprocal dynamic relationship with customers and it is important to understand the ways that they (customers) are interacting with each other and making decisions. Businesses now have better insight into the customer’s very rapidly changing path to purchase.
- Competition – We are shifting from a world where traditional competition was very much a zero-sum game. We are now not only dealing with rivals within our industry, but also with competitors from outside our industry (for example, Uber and the auto industry). We are now in an environment where companies are dealing with “co-opetition”. The same company may be your fiercest rival and a critical business partner.
- Data – Traditionally, data was expensive to obtain and was primarily used in an organizational silo fashion to manage processes and forecasting. Basically, businesses used data to operate more efficiently and effectively. Now, data is everywhere. There is an incredible sea change in unstructured data which is commonly called “Big Data”. We are now seeing businesses that can bring this data together in an integrated fashion. Instead of just improving operating efficiency data can be used to create new value and to innovate and drive the business forward.
- Innovation – There is a big shift from the traditional model of innovation that is based on senior organizational leaders making tough decision and placing big bets. We are shifting to a model that is based upon a process David Rogers calls “rapid experimentation.” The role of leadership is very different in this model. Instead of trying to figure out the answer, leaders set the goal and the question of innovation and enable their organization to figure out how they can effectively learn as quickly and rapidly as possible. Digital technologies now enable continuous testing and experimentation so that business leaders don’t sink everything into one big bet that may or may not work.
- Value – The last domain of digital transformation is the value a business delivers to its customers. Industry definitions and borders are becoming much more fluid and evolving. As the environment changes, businesses need to shift from taking a static view of who they are. Every business should look at every change and new technology and ask itself, “How can this create a new opportunity for me to deliver value to my customers that I wasn’t able to deliver yesterday?” It is important to be thinking about how to be as relevant to your customer today and going forward as you’ve been in the past.
On Data Sharing:
Certain industries are more comfortable with sharing data and there are certainly key differences among age groups.
- Brand Trust – Even when an individual is hesitant to share data, if there is a particular brand where they thought they had a trusted relationship with for more than six months they were more likely to share their data.
- Creating Value – People are really influenced by the perception that there is value being exchanged. When they feel that by giving the data to your company they can see that it allows you to serve them better, they are much more open to the idea of sharing data.
On Learning to Experiment:
Experimentation is really just an iterative process of what does and doesn’t work. Thinking about innovation as a series of experiments is about organizing your innovation process around learning.
There are a couple of different types of experiments and as a manager it is important to understand the distinctions.
- Convergent Experiments – You start with a specific question and you are converging on an answer (example: an A/B test). In the ideal situation, these experiments can actually be designed using a scientific method.
- Divergent Experiments – There is not a single specific question like an A/B test. You are posing an unknown set of questions that require a different process design. This is where you might be putting a prototype in the hands of customers or discovering through an iterative process what may be most meaningful for the business. The process may actually generate new questions for each stage. The ultimate goal is to test as many assumptions as possible behind a general idea of an innovation.
What We Found Most Interesting:
Businesses must understand the importance of strategies to build platforms, not just products. In the digital era, the competition shift is being driven by the growth of platform business models – a business that creates value by facilitating direct interactions between different types of customers. So, instead of the business creating the value – the business is creating value by bringing together different parties that are each contributing and exchanging different kinds of value themselves.
To learn more about David Rogers and his thoughts on digital disruption, listen to the WiseTalk recording.