Strategic CIO // Digital Business
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4/3/2014
09:06 AM
Nigel Fenwick
Nigel Fenwick
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Digital Business: The Bolt-On Strategy Doesn't Work

Attaching new mobile apps or websites to a business does not make you digital. Immerse your products into the customer's ecosystem.

As a business leader, do you get the feeling you're no longer playing the same game you once played? It's not you; the world has changed. The things that used to set companies apart -- economies of scale, distribution strength, and brand -- are far less potent now. Why? Because digital technology has fundamentally changed two things: the dynamics of the markets in which you operate and the speed needed to stay competitive.

This shift has not gone unnoticed by business leaders. Seventy-four percent of executives in Forrester surveys report their company has a digital strategy. Typically, such strategies involve small departmental initiatives in marketing, e-business, or technology management, bolting digital apps, websites, or marketing on to the business.

[Is your company really a digital business, or does it just look like one? Here's how to tell the difference.]

However, in time, treating every new digital initiative as another bolt-on project creates organizational and technical chaos. This chaos intensifies the technology management challenge of having your organization's structures, technology, and metrics separated into functional building blocks, each fighting for scarce resources. As many companies eventually find out, a siloed approach to a digital strategy leaves your business vulnerable to nimble digital disruptors.

This is not IT's fault. The situation has evolved because we've built our businesses on a 100-year-old business model of supply chain efficiency. Indeed, IT has done a wonderful job helping businesses grow and automating business processes to deliver high-quality products and services. But our old models are being rewritten in the age of the customer. Instead of a supply-chain push from supplier to consumer, we now see consumers using products and services from a network of suppliers. Customers use digital technology to search rapidly for the services they need when they need them. If one supplier cannot meet their needs, another is just a tap or click away. Forrester calls this a "dynamic ecosystem of value."

To compete in the digital economy, your company must learn to create value inside each customer's unique ecosystem. For example, Walgreens opened up its photo printing capabilities via a digital interface, allowing developers of smartphone camera apps to let their users print directly at Walgreens. These photo apps were already a part of the consumer's ecosystem of value around photography; by opening its APIs to developers, Walgreens became a part of this ecosystem, opening the brand to a new set of customers. Walgreens now generates 15% of its photo-printing business from mobile devices.

Right now, your customers are looking for solutions to their problems using digital products and services from your suppliers, partners, digital disruptors, other customers, and competitors. They can do this because every company, every digital aggregator, every supplier, and every retailer is building apps and sites, making it effortless for customers to pick from a menu of everything they need, creating multiple "ecosystems of value."

The linear value chain has been replaced by dynamic ecosystems of value.(Source: Forrester)
The linear value chain has been replaced by dynamic ecosystems of value.
(Source: Forrester)

As such, businesses can no longer be standalone entities. They must be part of a complex network of suppliers that customers assemble according to their needs. In Germany, Commerz Finanz's APIs opened up its consumer credit agreement process, allowing electronics retailers like Media-Saturn Group to offer loans right at the point of sale.

It's important to note that digital isn't just about gathering new external connections; it's about having the operational agility to act on them. Once you're wired into ecosystems of value, you can quickly pivot to add new business capabilities. For example, the retailer Tesco has built a network of drop-shipping suppliers using the delivery management vendor MetaPack. As a result, Tesco added more than 50 new suppliers to its network and is shipping a quarter million new items directly to consumers under the Tesco brand -- without increasing costs significantly.

All of this demands a business reset. You need to look at digital holistically, from the outside in, and apply digital thinking across everything your company does. Tomorrow's winners will be those who control the ecosystem and can tap its power.

Too many companies treat digital and mobile strategies as pet projects. Here are four ideas to shake up your company. Also in the Digital Disruption issue of InformationWeek: Six enduring truths about selecting enterprise software (free registration required).

Nigel Fenwick, a former CIO himself, is vice president and principal analyst at Forrester Research, where he works with CIOs. View Full Bio

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Shane M. O'Neill
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Shane M. O'Neill,
User Rank: Author
4/3/2014 | 10:07:14 AM
Get in the customer's digital headspace
Great reminder here that companies in 2014 can't sell to the customer from the outside. They have to immerse themselves in the digital -- mostly mobile -- customer experience. The Walgreens camera phone printing example sums it up. Personally, I've experienced how CVS also does this with coupon and prescription alerts and activations from the company's mobile app. CVS became part of my digital ecosystem very effectively without me really noticing.
SusanO624
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SusanO624,
User Rank: Apprentice
4/4/2014 | 11:46:20 AM
Bringing it all together

One of the best ways to understand how apps and data sources fit into the enterprise is to look at the uses of data. There is a lot of information the average enterprise but not all of that information is accessible to users, managers or executives and that lack of access can mean that decisions are made using incomplete, out of date or inaccurate information. 

 

While the ideal enterprise might support seamless data collection and connections among all the old silo systems, applications, databases and data sources, it isn't practical to assume that an organization can successfully build and maintain such an environment without the old 'mine is the best' mentality eroding the homeostatic environs the company established. New executives, new team leaders, new IT management...all of these people can have an impact on the products and services that comprise the enterprise IT environment. 

 

At ElegantJ BI we find that it is simpler and more practical to offer clients business intelligence that lets them combine and analyze information, build reports and support disparate applications, add-ons, upgrades,  systems, migrations and changes with the kind of independence that frees the enterprise to manage its business and get the right information to the right people without having to mediate, negotiate or look for new products. 

 

<href="http://www.elegantjbi.com/why-business-intelligence-better/business-intelligence-architecture.htm" title=" Business Intelligence">Business Intelligence</a>
David F. Carr
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David F. Carr,
User Rank: Author
4/3/2014 | 11:00:37 AM
Digital Business vs. Social Business
Are the organizations that bought into the concepts of social business, as promoted by Salesforce.com, Jive, and E2.0 evangelists, any further along toward the digital business vision you describe? The point was supposed to be to make organizations more agile and more networked, but how much of that rhetoric is reality?
NFENWICK3025
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NFENWICK3025,
User Rank: Apprentice
4/11/2014 | 4:11:11 PM
Re: Digital Business vs. Social Business
Social Business initiatives tend to drive greater awareness of customer experience and greater engagement of employees, but these initiatives don't get at the heart of the transformation that needs to take place. Companies need to use digital to create new sources of value for customers. Social drives engagement but dies not transform the value creation within customer ecosystems of value.
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