I was thinking back to dozens of recent conversations with customers, investors and advisors. Often the discussions turned to great digital leaders out there. Companies that seemed to "get" digital and build and expand their business with ease when others were struggling and falling behind.
They all have access to the same capital, talent and technology. Why is one company succeeding with digital when their peers are not? What is the difference that makes a difference? Winning companies have a digital-first mindset. Here is what I mean.
As I looked closer at the digital leaders and the laggards I noticed the many ways these companies think very differently. Not about technology but about themselves. Digital-first businesses talk about creating a digital business while laggards talk about deploying digital technology. The more I was digging into this I realized that being digital first is more about mindset than about tools or even capability.
Let me tell you a story to explain the difference.
I switched to a new investment account a year ago and it took my new broker days to get all the approvals for investing. The firm had a really nice webpage and a cool mobile app, but their processes were analog, outdated and slow. I could not place my first trade until a week after signing up. I had to talk to customer service reps twice and got 3 different sales calls from various client management teams.
In contrast, signing up to the digital-first investment platform called Robinhood happened in under 3 minutes. All from my phone. My first trade was 5 minutes after I signed up and they actually advanced the funds for it. I never had to talk to anyone from the company. I still don’t know how since I never needed to. Everything was digital. All their processes are build around me as the user, anticipating my needs.
For my old brokerage firm, digital was a feature for Robinhood it is their core business. My current provider has been at their digital transformation effort for almost a decade. They have dedicated teams, COEs and multiple digital transformation teams. Yet Robinhood ate their lunch within a year.
That is what digital-first companies look like.
What makes them different is their mindset about running the business as an end-to-end digital experience built around their customers. Digital is not something they do, it is something they are.
When talking to digital first companies I noticed 5 big differences in their way of thinking. We can call them the five pillars of the digital-first mindset. Here they are;
1) Digital is a business model
The most important difference I found was this. Digital laggards think of digital as a piece of technology that they need to add to their current processes to become “more digital”.
This is not how digital-first companies think. They don’t start with the technology. They ask how can they deliver their products and services to the customer the fastest with the least friction. How can they have the most effective interaction with them. What is the easiest way to place orders, submit questions and get support. The business model mandates the digital technology, because it is faster and has less friction. Digital-first businesses simply could not operate in an analog way. There is no Plan B. Digital is the business.
A telltale sign of a digital laggard business is that are struggling to find use cases for digital technology because they don’t want to change their business model for better experience and speed. Laggards want to automate or optimize the status quo.
Digital-first businesses are constructing the digital business model that is designed to disrupt the status quo. Digital laggards are piloting digital technology in a way that does not disrupt their status quo. Leaders and laggards have the opposite business model motivation.
2) Digitize the core functions
Leaders tend to digitize functions in their core processes. Customer facing functions, product development, service delivery and supplier collaboration. Their goal is to optimize core customer experience. Optimize for speed, efficiency and minimize friction. Digital leaders want their talent in customer facing functions or focused on product/service delivery.
Digital laggards tend to focus their digital transformation on non-core functions like finance, HR and back-office processes first. There is a disproportionate amount of staff in support functions, like finance, HR and operations.
The biggest telltale sign of a digital-first business is where you point your talent and technology in a digital program. Leaders in core operations, laggards in back-office.
3) Scale digital capability
For a digital-first company expanding digitally is a matter of growth and survival. They focus on how far they can expand to deliver faster and better customer experiences.
They are like a fish in the ocean, they don’t debate whether they should learn to swim, they are thinking about how to swim better and more efficiently. Laggards do the opposite. They ask why they should do digital transformation, they question the benefits. They are analog, They are landlocked.
To have a digital-first mindset means you decide that you will do everything digitally first and have to justify staying with the status quo.
4) Measure impact
Digital-first businesses have a great sense of the value they are getting from digital transformation. It is because the success metrics for digital are the same as the metrics for business. Revenue growth, reduction of customer churn, cost of service, cycle time and so on. Since they are a digital-first business, all business metrics measure their digital scale and agility. In Digital-first businesses the impact of digital transformation is material to the business. They are operating at a large scale with a high percentage of the business using automation, AI, analytics.
Analog-first businesses tie their business metrics to the old ways of doing things. Reducing customer churn likely involves throwing people at the problem. They use lot of non-digital steps, customer retention teams, customer services reps, salespeople. They have to justify why digital could augment the analog processes. Instead of making the same processes digital. They have a hard time measuring the impact of digital because they attribute most value to manual, analog way of doing things.
5) The C-Team owns digital
In a digital-first business - someone in the leadership team is measured on producing results from the digital business. These businesses are constantly innovating their core digital business model. This is an executive role, often at the board level. The success of the company depends on staying and scaling on this digital cutting edge.
At the laggards the projects are lower scale, non-core and often ignored by the exec team for those reasons. They do not move the needle. No top executive’s success is tied to the digital transformation because the focus is marginal to the business.
Conclusion
Winning in the digital race is about creating more effective business models and not simply deploying technology. To win, you need to adopt a digital-first mindset, making digital way of doing business the only way of doing business.
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