What it takes to turn a traditional company into a Digital Age company
In a very dense and insightful article, Nicolas Colin (Partner at TheFamily accelerator and well known lobbyist) elaborates on how Goldman Sachs has been transitioning to catch up with the Digital Age and its benefits in order to continue thriving in its banking industry. The content focuses on how this key company has been updating its core structure to move from traditional banking to a technology company that is able to outcompete the market. Building on it, we can identify lessons and principles to turn a traditional company into a Digital Age one that leverages both technologies and innovation to build and consolidate its performance.
The key dimensions of a digital age company
As stated in Nicolas Colin’s piece, there are 3 key dimensions that define a digital age company: (1) ability to increase return at scale, (2) proficiency in leveraging user-generated data, and (3) capabilities to provide an exceptional experience for all stakeholders (employees, business partners, customers). Those 3 dimensions are shared by all of the technology companies that are, for the last 10 years, reshaping the world: the GAFA (Google, Apple, Facebook, Amazon) and the BAT (Baidu, Alibaba, Tencent).
Yet, reshaping would be a very strong term as they are adapting the usual business models to a world that is experiencing the emergence of new markets due to new technologies enabling a faster inventory management, faster communications, and faster computation. While all the technologies are available for any and every companies, what makes a clear difference is how to operate them at the relevant level of performance to have them benefit the company. And this is this ability to generate a framework or a “platform” that would provide the agility to move from one stage to the following without critical hiccups and change management challenges that would turn your company into a loser or a winner.
Building the platform for agility at scale
The main objective is to create the conditions of success for the company to transition from a standard business process into a digitally modified business process. The target is then to develop and deploy a strategy to gradually increase the agility of the company. At this stage, it is necessary to clarify what agility would mean for a company:
- It is not to be able to run the business with a “test & learn” process: do so and your business would quickly become a boat without a captain because your current employees are not used to this model (nor is their management team, nor your customers and partners), which would lead to the failure of your process and operation management and the rest would be history
- It is to be able to use tools and methods to diversify and derisk your initiatives: you need to identify how you can, at the same time, use your capabilities to operate the current revenue streams and invest in the emerging markets to stay on top of your competition on the mid/ long term
In order to provide this level of agility, at the company level and not at the operations level, it is critical to use tools and methods that provides (1) the lowest commitment possible and (2) the ability to cut your losses rapidly in order to reallocate the rest of the budget to a more successful investment. This also means that the company mindset, in priority at the board and C-suite level, needs to evolve in order to adjust for a world that is restructuring:
- The business model is moving from an product-centric approach to an experience-centric approach, meaning your company needs to be able to sustain exceptional company-customer relationships that is cash intensive by leveraging automated transactional interactions and moving your resources to the 2% to 8% of emotional interactions
- The user-generated data needs to be handled with care because of the emergence of new usages and the legal uncertainty, meaning you need to create a technology platform that can be versatile so that you can plug/ unplug your initiatives whenever needed without reshaping the core of your business, which would in fact mean a full turnaround of your business
- End the long term/ short term vision and supersede it with a fast growth/ slow growth vision in order to update the company corporate politics and increase the willingness of the top management and operations to work on innovation projects instead that are key for your long term success that would include the current emerging lines of business
Simple structure to enable agility
We can spend a month discussing the number of stages that are necessary in order to move from a traditional company to a digital age company, as they would be unique for each companies depending of the amount of technologies available, the level of expertise of the customer, and the currently available capabilities. Still, the topics you would need to focus on are the same: the technology platform, the business platform, and the corporate culture:
- The technology platform: it needs to facilitate the adaptation and deployment of both your KPIs/ Management dashboards and your new business initiatives through a simple but scalable data management platform (doesn’t need to cost millions, if so it means you are either a data broker or an adtech platform, otherwise someone is trying to bluff you)
- The business platform: it needs to enable flexibility to collaborate with business partners that have lighter foundations (i.e. startups that are more cost effective) and to quickly reallocate budgets, meaning your contracts and your investment structure have to be aligned with this
- The corporate culture: it has to evolve to actually reward the mid and long term to encourage innovation instead of short term performance that destroy the value you are willing to create or you would be taken short when the market turns and you didn’t invest enough on the emerging market that would have become the core business of your industry