Can you be a digital follower?

business people racing in countrysideDigital is inevitable. Regardless of where you are in the world, what industry you are in and what type business you are, you will be impacted by digital at some point in the future. And it would seem that the majority of business executives are aware of this fact. Take for example the following findings from large global surveys of business executives:

  • 93% of executives believe that their industry will be disrupted by digital within 12 months (Forrester);
  • 90% of IT leaders think their business will be affected by digital disruption in the next few years (Harvey Nash)
  • 73% of executives believe that digital will directly impact the way they do business at some point over the next five years (Vanson Bourne).

Whilst the exact figures and timescales vary the message seems clear: digital is coming to your business. It is a question of when, not if. It is not surprising, therefore, that a recent study by Accenture has found that 77% of organisations in the European Union expect to be a digital business within the next three years. However, the research also found that just over half (55%) of the businesses covered by the survey did not have a strategy in place for realising this goal. So whilst these organisations envision being a digital business in the near future, they have no plan in place to ensure it actually happens.

This apparent disconnect between vision and strategy could possibly be explained by another of the survey’s key findings that 61% do not want to be a digital leader in their industry preferring instead to wait for digital concepts to develop further or adopt a ‘fast follower’ strategy. So whilst these organisations fully expect to become a digital business in the next few years it appears that they are going to observe how others approach the issue before deciding how they will achieve their own digital transformation.

At first sight this seems like a sensible approach: let other organisations take the risks associated with being a first mover, learn from their mistakes and successes, and then apply these lessons to your own business. Certainly this is a method that has worked well in the past where being the first into a new market has not always been a guarantee of success. Often when a new market is created by a small, innovative business it is only a matter of time before established and larger companies move into that market and use their brand, scale and resources to force the smaller players out of business or into a niche position. And failing that they could just acquire them.

The wait-and-see or fast follower strategy is based on a major assumption: that the business has the time and resources it needs to respond to a change in its markets before that change becomes a significant threat. Historically this has usually been a reasonable assumption. But digital markets move quickly, they are more dynamic than traditional markets and they can be disrupted more easily. Brand, scale and resources do not necessarily provide the protection they once used to if an organisation cannot respond quickly enough to a potential threat.

This strategy also assumes that the organisation can correctly distinguish between those developments that have the potential to disrupt its markets and those that will have little impact. And, to give itself the time it needs to react to the real threats, the business needs to be able to do this much earlier in the lifecycle than it has had to do previously. But how do you spot a potential disruption? By definition, a new product or service can only be considered disruptive after the event. In other words after it has disrupted the market and it is too late to respond.

In my view, taking the wait-and-see or fast follower approach to digital is a flawed strategy and one that is likely to increase an organisation’s chances of being disrupted. It is a strategy from the past and perhaps demonstrates that whilst many executives know that digital is coming, they do not truly understand what being a digital business actually means. It is also typical of the risk-adverse mentality of large corporates, which often sees them investing only in certainties and avoiding failures at all costs.

Being a digital business means moving quickly, taking risks and being prepared to fail along the way. That is not to say there is no role for governance in a digital business but that governance has to allow a company to take calculated risks, try new things, test ideas and learn quickly from the results. Most large organisations just do not have the culture, policies, processes or systems in place to operate in this way. As a result, when faced with a potentially disruptive change in their markets most of the existing players will struggle to respond in time, while some may not be able to respond at all.

Organisations that have already successfully transformed into digital businesses have not done so by waiting to see what others in their industries are doing or by waiting for a new player to enter their markets with a digital offering. Instead, they have led the way in terms of defining new technology-enabled business models, products and services that meet their customer’s needs. And they have proactively transformed their organisations to operate at the speed required for digital.

To be a fast follower, an organisation needs the leadership, culture, governance, skills, ways of working, etc, that will enable it to both identify and respond quickly to potential disruptions in its markets. But most organisations do not currently have such capabilities in place. Adopting a fast follower strategy cannot therefore be used an excuse to do nothing about digital, as not being able to react quickly enough to a new threat will leave the business struggling to catch-up.

In other words, regardless of whether you adopt a wait-and-see strategy or whether you decide to lead the market you still have to prepare your organisation for operating in the digital world. However, it is likely that many of the wait-and-see organisations will also delay their internal changes until they have a clear picture of what others are doing in terms of digital.

In general it is better to be leading a market than it is to be playing catch-up. This is especially true for digital. Given the speed at which digital can disrupt markets and revenue streams, taking a wait-and-see approach is a high risk strategy and one that could lead to the business being left behind.

If your organisation wants to develop a vision and strategy for its digital transformation, or reinvent its business model for digital then please contact me or visit my website, axin.co.uk.

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  1. […] taking a Can you be a digital follower?. It assumes that the business has the time and resources it needs to respond to a change in its […]

  2. […] is not a viable option for any business that wants to survive in the long-term. And taking a follower approach is risky, as it assumes the organisation has the capability to respond to disruption before it is […]

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