“Simply taking an existing product line and putting it on an e-commerce site or digitising a customer experience is not a digital reinvention,” says Peter Dahlström, Liz Ericson, Somesh Khanna, and Jürgen Meffert at McKinsey.
They agree that reinvention requires re-thinking of the business itself. “Companies need to ask fundamental questions: ‘Are we a manufacturer, or are we a company that enables customers to perform tasks with our equipment wherever and whenever they need to?’ If it’s the latter, then logistics and service operations may suddenly become more important than the factory line,” they say.
Pop music songstress, Madonna, might be like an unlikely benchmark for modern business, but consider this: “Her ability to adapt to new trends and set some others offers a lesson for companies struggling with their own digital revolutions. That’s because the digital age rewards change and punishes stasis. Companies must be open to radical re-invention to find new, significant, and sustainable sources of revenue.” – McKinsey
When it comes to re-inventing your organisation for the digital world, business experts agree that smaller adjustments or creating new value streams outside of your core functions can provide consumers with real benefits (while you reap the revenues).
If you’ve been kept awake at night, wondering how to go digital in a manner that’s manageable for all stakeholders in your company, consider the following key points from McKinsey’s research into digital re-invention:
Your ‘core’ will need transformation
When it comes to keeping fit, Harvard Medical School says you should think of your body’s core muscles as the robust essential link in the chain that joins your upper and lower body. “[Your] core as the central set of muscles helps your body maintain its power, balance, and overall health,” the McKinsey authors add. “That’s the essence of what we mean when we talk about changing the core of the business – the set of capabilities that allows the entire business to run effectively.”
McKinsey’s representatives explain that your company’s ‘core’ is its value proposition based on your strategy, enabled by people, processes, and technology. “These elements are so intrinsic that any transformation that doesn’t address them will ultimately underwhelm and fizzle because the organisation will inevitably exert a gravitational pull back to established practices,” they add.
Determining your digital path
When it comes to digital re-invention in your company, McKinsey says that you must get a firm grip on the true value you add to consumers’ lives. “The value your company provides to customers (whether existing or new) through its products or services must be based on a clear strategy that articulates where value is being created, shifted, or destroyed,” McKinsey’s representatives add.
Critical to getting digital re-invention right lies in identifying and evaluating your existing assets, systems and processes that are most important today. Only then can you implement digital solutions to deliver on what customers actually want or need. “This can be surprisingly difficult to do in practice,” McKinsey’s researchers add. This is why digital transformation requires buy-in and input across your management suite and at ground level where employees are concerned.
Parting shot on demystifying your value creation engine: “The value that Amazon originally provided, for example, wasn’t selling books online but rather providing convenience and unheard-of selection. Understanding the real source of its value allowed Amazon to expand exponentially beyond books,” McKinsey says. You can do the same, if you understand how your core function delivers value. If you do, digital re-invention won’t induce insomnia in your life any longer.
Incumbent businesses stand to lose ground to start-ups in the digital realm. Because start-ups are more open to trying new ways of capturing market share, they are leaving many established company’s in their digital dust. BCX can assist your business in determining the digital systems that can enable your business to thrive in the digital age, but you need to know how you create value for customers as a matter of priority. Otherwise, you might be taking digital leaps that don’t align with your core offering.