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CEOs – Use Three Questions To Find Your Leapfrog Digital Business Strategy

by Mark Raskino  |  April 26, 2017  |  Comments Off on CEOs – Use Three Questions To Find Your Leapfrog Digital Business Strategy

Recently I read a business news article about a techquisition. A large traditional model company bought a smaller online-only company that had invaded its sector. They paid a high price. The writer suggested this could represent a ‘leapfrog’ digital strategy for the acquiring company. To my eye it was not that – not at all. It was a late catch-up move by a management team that had allowed a web based e-commerce company to grow fast, under its feet, for several years, gradually stealing its lunch. The acquired startup was founded more than a decade after web based e-commerce became a big thing in business and had grown in plain sight of its eventual acquirer.

[ Listen above or continue reading below – the same post ]

It’s 2017, not 2007. You can’t win the future of your industry by playing late catch-up e-business. Re-badging that strategy with a D, doesn’t change what it is, or fool anyone. Digital business is a different evolutionary stage beyond e-business. As I explained in a recent post – it should offer your company the opportunity to take control of the game and truly leapfrog to the next big industry disrupting idea. But what would that idea be?

Finding it is often highly creative and non-trivial work but there are questions that CEOs and Boards can ask themselves and others to help uncover the big new opportunity spaces.

  1. How could digital technologies be used to reinvent the products and services of  “our” industry?
  2. Who will win the biggest share of platform control over those digital, connected products and services?
  3. What value can be generated from the data created and captured in all that activity?

First – as we have said – every industry will be digitally remastered.  Entrepreneurs will re-examine fundamental customer needs, finding gaps and weaknesses in all of today’s offerings. They will then use the creative, functional power of digital technologies to invent far superior products. It has happened to media, music and books. Now it is happening to payment, cigarettes and cars. In the end there will be no exceptions. All products and services can be transformed – sometimes with previously unimaginable new value features and customer utility.  I recently posted some example thought provoking videos. If your company and your existing industry does not take up the opportunity to radically reinvent products by applying digital capabilities to them – someone else will. Digital creates what we call “boundary blurring” effects. It melts away previous barriers to entry and allows invaders to easily slide into adjacency opportunities that were previously impregnable.

Second – as products become digitally re-imagined and redesigned, they inevitably become connected. They rely on access to cloud based services. Your new Nespresso coffee maker connects to your smartphone app and that phone app connects to the cloud to access services such as capsule reordering. Your car gets over-the-air self-driving software updates. Your travel luggage is wirelessly tracked. As this happens customers are expected to register and sign-up. But as we all know, people don’t want hundreds of individual system sign-ons and relationships for little points of daily utility. They want one place where their stuff happens – at least around big themes like money, health or construction. So after a while, we prefer to move to aggregators who bring together lots of digital services in one place. Big, integrating platforms emerge and it’s clear by looking at early examples such as ride hailing, professional networking and photo sharing – that in many domains we end up with one, two or three big platforms controlling most of the activity in an industry. Often these controlling platforms win by working directly for end users – who are not only consumers but also workers – such as accountants or tractor drivers. In this way the big controlling digital platform phenomenon applies equally in B2B. Intermediaries are squeezed and dis-empowered by this. They have to work harder to justify their existence in a value chain, or take a smaller payment as their part of the total service offer is eroded.

Third, connected products and services operating on a moment by moment basis can digitally record activities in immense detail, in the cloud, in perpetuity. Over time we create a vast resource pool of activity data. Not just commercial data about how and when a product was created and sold – but usage activity throughout its life-cycle in the hands of its customer or user. All of the activity of all of the products gives us statistically meaningful analysis possibilities that could not have been dreamed of before. By analyzing the data we can discover – and play back to customers, valuable insights into how they can improve their work and their lives. Increasingly, learning algorithms can help to do this more effectively than an army of humans alone ever could.

The only limitations to finding your own high-value creative answers to the three questions are the limits of your imaginations.  A leadership team doesn’t just have to think outside the box, it sometimes has to dare to wander off-planet. The data from the digital services additions to the reinvented products you make, might be valuable to others way outside your industry. Your business model might even give up selling products directly, instead giving them away “free” – in order to monetize the insights they can help you create from the data that they generate.

All of this creates opportunity for you to seize the future and set the next new rules of competition in your industry before someone else does. Yes, it is challenging, argumentative and disconcerting original entrepreneurial work. The alternative is to toil harder and harder to maintain position with the existing product offer, while watching customers start to ebb and then flood away. Then in a few years find yourself emptying the corporate coffers or borrowing beyond your means to grit your teeth and buy a capricious upstart business, for an eye watering market premium, as the last roll of the dice.

Much of this analysis is based on our book Digital to the CoreIt is available in all the formats, from all the usual outlets.

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Mark Raskino
VP & Gartner Fellow
15 years at Gartner
30 years IT industry

Mark Raskino is a vice president and Gartner Fellow in the CEO Research group. Mark creates advice and analysis for CEOs on technology related and digital business strategy and change Read Full Bio




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