Digital Transformation|Digital Disruption|Digital Drawnism

If only it were that simple.

Tom Goodwin, author of the book Digital Darwinism: Survival of the Fittest in the Age of Business Disruption, believes that most business leaders understand the importance of digital transformation. But he fears their strategies fall short – by bolting on piecemeal digital solutions to avoid a complete revision of their businesses and their technology infrastructures.

“I think every company needs to go into this with their eyes wide open,” Goodwin said. “More companies are in denial than are overly aware of the change that’s coming.” ( Also see research findings in Industries in the Cross Hairs of Disruption.)

A good start, Goodwin stresses, is to begin with the right questions. Tough questions.

“I think the most profound question you can ask yourself,” he said, “is what would your business look like if you set it up today?”

For many longtime incumbents, success was based on years of bold, creative decisions. But those strategies may no longer be relevant.

“If you were going to set up a banking network today,” he explained, “you wouldn’t think how can we own several hundred marble buildings around the U.S. If you were to create a car company, you probably wouldn’t be building huge combustion engine plants.”

Once looking at your business from that perspective, Goodwin added, a range of tactical questions arise.

“How do you undertake to become the thing you would have set up if you were to start today?” he asked. “And what does that mean for the culture? What does that mean for budget? More than anything else, how does technology play a role in that?”

Not to mention, how do you transform while still staying competitive?

“Do you metaphorically change the engines on the plane while it’s flying,” Goodwin continued, “or do you accept what actually may be the bravest decision of all as a CEO, to manage the decline of the incumbent business and also invest in the future of the business.”

Of course, incumbents shouldn’t abandon everything that made them successful. And there’s great value to be found in physical assets like stores and bank branches – if they are transformed in ways that optimize technology for an all-new customer experience.

“We need to completely rewire businesses,” he clarified, using retail as an example. “And they need to be based on what technology makes possible. But they also need to be based around consumer expectations. When you can find things quickly online, you expect to do the same in store. When you can get recommendations of products that go alongside each other, you then expect that in store.”

‘The Folly of Incremental Change’

One common mistake is attempting to transform without an upgraded technology foundation.

“Most legacy industries that have technology that underpins core aspects,” he said, “probably need to go through a fundamental rewiring of all of their systems, but it’s scary for them to contemplate.”

Instead, many add disparate digital solutions over outmoded network infrastructures, what Goodwin has called “the folly of incremental change.”

“You can make a customer-facing app that sits on top of this worrying foundation,” he said, “but the reality is changing your seat on a flight is impossible. And the banking infrastructure is very susceptible to security problems or just having systems that aren’t particularly robust and networks collapsing at key times.”

Rebuilding the foundation from the bottom up is never an easy prospect.

“These companies face very difficult decisions,” he said, “which is actually to completely rip out the guts of these systems, which quite often literally are server rooms with some machine running Windows ’95 in a corner and a floppy-disc drive.”

In the long run, Goodwin argues, investments in a modernized technology infrastructure will be cheaper than continuing to cobble together digital solutions over a slow, insecure network.

“You end up spending lots of money to maintain a system which isn’t what you should have,” he warned. “Effectively you’re polishing things, making small-scale changes, and putting a slightly glossier interface onto something which is fundamentally broken.”

Empathy for the End User

Once those foundational technology investments are in place, a world of digital possibilities opens. But no matter how dazzling the technology, humans must take center stage.

“The act of creating experiences which people clearly would love, that’s a much better application of technology,” Goodwin stressed. “They may be driven by 5G, or they may rely on blockchain, or they may have an underpinning of Internet of Things, but it’s not about that. It’s about making sure that people can get fresh groceries, or have apartments with lower energy bills, or get on earlier flights without thinking about it.”