Enter digital business building
At root, the challenge of digitization is not the adoption of any particular technology. Instead, it is the strategic coherence with which companies deploy that technology in support of a digital business model. Companies need to focus on building businesses that are fundamentally digital and that can continuously evolve, says Anand Ganapathy, who leads the EY-Parthenon Digital Business Building practice. “Digital transformation needs to happen broadly,” he says, “but the strategy on how to do it needs to be more thoughtful, faster, cheaper, and better.”
“To remain competitive, organizations must reimagine their business models to extract value from digital,” says Ganapathy. Re-envisioning a business around digital requires thinking strategically about “how they can operate like digital native companies, so they can be more agile and evolve faster and continuously to outpace peers and handle disruption from new entrants,” he says. “They must understand the anatomy of a digital business to turbocharge their core and build new businesses.”
In the traditional strategy playbook, Ganapathy explains, companies take a “waterfall” approach to change in which executive leadership designs a transformation plan and then hands it over to operational teams to implement over several years. This approach fails in today’s environment of constant flux. Firms must be continuously in motion to stay ahead of competitive threats and disruptions—and to profit from new opportunities. Agile work approaches, long used by technical teams, become useful tools for product development and project management, because they can deliver strategic change at the speed of digital business.
Digital business building, Ganapathy explains, is a “continuous, flexible process, leveraging agile experimentation in a rapidly changing business environment where players come and go, rules change, and endpoints are never singularly defined.” It is a crucial shift, he advises, because firms today cannot spend five years delivering on a change agenda.
While every business is different, Ganapathy emphasizes several core principles for digital business building. The first is to build conviction across the enterprise. While strategy leaders like to focus on big ideas, Ganapathy cautions that they must also spend time and effort building their stakeholders’ confidence to implement said ideas.
Startups and founders have experience with tough, lean operating environments in their early years. Conviction got them through, enabling them to overcome threats, fight fires, and lead teams through uncertain waters. That gives them a resilience that guides them through later challenges or reforms.
Business leaders in incumbent or well-established companies, by contrast, may lack that visceral experience. As a result, they may also lack the conviction to drive through a transformation agenda that brings risks, disruptions, and opposition, whether from shareholders, staff, or customers.
One way to build conviction in these types of businesses, Ganapathy says, is to focus on a company’s endowments. To be sure, traditional businesses have some disadvantages when compared to startups or digital natives: they may have to contend with legacy infrastructure, more defensive cultural mindsets, and a digital skills gap. But they also have assets of their own that they can take confidence from.