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How To Make Your Digital Business Succeed

2014 April 16
Digital business

Peter Drucker once famously said that a business has only two functions: marketing and innovation.  What he meant was that successful businesses create great products and sell them effectively.  Everything else is secondary.

Yet today, both marketing and innovation are driven by digital technology.  It’s tough to think of a product without a digital component and marketing has become so digitally focused that CMO’s will soon be spending more on technology than CTO’s.

In effect, every business today is a digital business and technology, no longer confined to the IT department, is everybody’s job.  Sadly, few enterprises have adapted effectively and most corporate digital initiatives fail.  The problem isn’t a lack of investment or even a lack of commitment, but an unwillingness to adapt core business practices to the digital world.

Beware Of The 5 Year Death March

Some time ago I had the chance to chat with James Manyika, a Director of the Mckinsey Global Institute and a leader in the firm’s tech practice.  He told me that an alarming number of the companies he saw tried to muscle through technology transformation by embarking on a “five year death march.”

In order to signal their commitment, management teams often launch all encompassing digital initiatives.  Invariably they in put an enormous amount of stress on the organization and the people in it, but usually failed to attain its objectives.  Worse, by the time the project is complete, it’s usually out of date.

Digital business is about preparing, not planning, realities not roadmaps.  While creating a major initiative to transform your business may feel like the right thing to do, in the digital world it is more likely to rob you of the flexibility you need than get you the results that you want.

Start Small And Iterate

I used to run a leading digital business which commanded a 40%-50% share of its market.  That allowed us to build up considerably greater engineering resources than our competitors, which we saw as a crucial competitive advantage.  In order to capitalize on that advantage, we planned major projects that none of our rivals could match.

Unfortunately, what we found was that during the 6-12 month development process, needs in the marketplace would change and we would have to continually alter project specifications.  The result was that our massive projects were full of bugs and came in late. Then we had to spend even more time fixing them.

Finally, we got smart and started developing minimally viable products, which were usually completed in six weeks.  They didn’t set the world on fire, but they launched on time and we could gauge consumer reaction in the real world.  We would then use that knowledge to improve the next phase.

What we found was that instead of planning big projects, we could get a lot more done and improve quality by starting small and iterating.  Ironically, we actually got more big things accomplished this way.

Forget Features, Focus On Experience

Everybody wants to beat the competition.  So product development is often a race to give customers more.  You think up something you can add to your product and then see that your rivals have included something you didn’t consider.  Then you race to add that too. One-upmanship is the bread and butter of the corporate world.

In the digital world we don’t have any pesky laws of physics to constrain us.  So adding a new feature can be as easy as copying and pasting a few lines of code.  Once written, code is essentially free so there never seems to be any good reason to take it out.  In 1993, Microsoft Windows had 4.5 million lines of code.  Ten years later, it had 50 million.

Anyone who’s ever used a TV remote control knows that complexity has a real cost.  Extra features can be confusing and result in more glitches and bugs.  Giving the consumer more isn’t always the answer.  In fact, it’s often just a sign that you haven’t really thought about what people want or need.

In Rework, the founders of Basecamp attribute much of their fabulous success to crafting an experience by stripping down their products to the bare essentials.  Anybody can add features, it takes work to determine what’s really important.  But if you’re going to be successful in digital business, that’s what you have to do.

Changing The Software Of the Organization

In the last decade, we’ve seen a revolution in digital technology.  Computers used to be designed for efficiency.  They could do a massive amount of rote operations, extremely quickly with few errors.  Yet now our machines can recognize patterns and learn from them. They’ve become intelligent, adaptive and scalable.

Unfortunately, our organizations haven’t kept pace.  They are still organized into discrete, functional units, with strict technical specifications that determine the ability to perform specific operations.  The individual elements of these functional units—sometimes called people—are expected to be uniform and replaceable.

So to truly compete in the digital age we need to rewire the software in our organizations.  We can no longer think just in terms of efficiency, but how we can collaborate with machines to become more agile and ensure that our organizations can adapt and learn.

And that’s the irony of digital business.  In order for it to succeed, organizations need to become not just more technological, but more human.  You can’t plan for that, you can only prepare.

- Greg

4 Responses leave one →
  1. April 18, 2014

    A very timely post, Greg. Anecdotally, I am seeing and hearing a lot about organizations that were traditionally conservative and slow to change now embarking on major restructuring projects in an effort to be agile, lean and entrepreneurial – whatever those terms mean to them! These are organizations like financial institutes and government initiatives. More often than not I wonder how effective the restructuring will be without the necessary cultural mindsets.

    Thanks for the cautionary tale! I’d love to hear more about these challenges and experiences from you in future posts.

    [Reply]

    Greg Reply:

    Thanks Ali. I’ve seen the same. It’s easy to confuse activity with action. Managers want to be seen to be doing something and a “major initiative” has a nice ring to it, even if it does more harm than good.

    - Greg

    [Reply]

  2. April 29, 2014

    Greg,

    What a great article, thanks. You state in just a few paragraphs, succinctly, the challenges of the digital technology age. It is interesting what you say about new products and how small iterations are appropriate for digital products as the development of innovative products takes so long. I think this is right and is just what growth hackers do now isn’t it? At incredibly low cost relatively to organisations. But I think for non-digital products, incremental innovation is not the way and radical innovation is e.g. iPad, iPod, iPhone.

    Either way – digital or non-digital – what orgs must continue to seek is a competitive advantage by creating that leap in value that leaves competitors behind. And you touch on organisational strategy and how important it is for people to understand it and carry out their roles with it foremost in their mind. My studies of other people’s studies reveal that the biggest cause of an organisation’s strategy failure is when individuals in the organisation do not understand or believe in the strategy.

    And I love your comment on ‘features vs. experience’. Again my studies reveal that we’re moving toward a new paradigm for marketing (relationship marketing being the ‘old’ one). Quite that is has yet to be agreed by academics but experience marketing is a prime candidate (value marketing is another but of course they are linked). Your criticism of the unnecessarily complicated products of today is again a feature in my studies but you word it so well and creditably. This article has got to be shared with marketers and managers in organisations. Well done.

    [Reply]

    Greg Reply:

    Thanks Richard and very goo d points!

    Just one clarification: Minimally viable products and iteration works for non-digital products as well. Steve Blank has some great examples.

    - Greg

    [Reply]

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