Let’s Get Digital! Digital!

Okay, this theme song has gone so viral they are playing it on elevators now. But that doesn’t mean the average established enterprise’s efforts have Nailed it! This walk the walk stuff is so much harder than the talk the talk part.

But our friends at McKinsey have shared some interesting data that can give a leg up on efforts that may be stuck in neutral or going sideways. Here’s the data:

The survey listed four strategic objectives, but in my view this is a trick question, because two of the four are good ideas that promise high returns, and the other two are bad ideas that are doomed to failure. So, before going any further, can you pick out the two pairs?

One good idea is to use digital disruptions to create new business or tap into new profit pools. The latter idea is particularly good because established enterprises typically already have access to these profit pools, they are just not taking proper advantage of it. When they do, their customers give them a high five, the revenues pick up, margins get even better, and there are smiles all around.

Getting into new businesses with a new technology that is unfamiliar to you is a so-so idea. It is possible, and it may be the right thing, but this is not your organization’s sweet spot, so unless you have some adjacent competitive advantage to leverage, this is one of those “leave it to the consultants” propositions. Still, it is not crazy.

The next idea—build competitive advantage in an existing business—is crazy. Or rather, it is crazy to think it will actually work. Pundits love to talk about how businesses have to learn to disrupt themselves. This is a bit like advocating self-surgery as the key to lower health care costs. It is not only an unnatural act, it is unhealthy. Established enterprises have a store of competitive advantages. Digital disruption is indeed eroding them, but bringing it in house doesn’t slow the erosion—it capitulates to it. Worse, you aren’t any good at it, so in addition to tearing good stuff down, you end up building bad stuff up.

So what can you do? Embrace the third idea in the list: Shore up your existing business and keep pace with your competitors. This may look similar to the prior notion, but it is actually worlds apart. Your goal here is not to differentiate but to neutralize. You do not want to be beyond compare, you want to be good enough. You are not playing to stand out, you are playing to get back in. It is not about separation, it is all about speed. This you can do, even if you have to reach out to third parties to actually implement the digital reforms. What you cannot do is sit digital out.

And that leaves one last idea—another non-starter from birth: Use digital disruption to cut costs and improve operating margins. It is great to see that not many people are doing this because the chances of it being successful are two—slim and none. The last thing that organizations looking to optimize are likely to embrace is any form of disruption. There is just too much lost to the disturbance that you have to recover before you can bank any of the gains. Visionaries can see past this investment—conservatives cannot. Or rather, they refuse to, because they are deeply familiar with the law of unintended consequences and can cite a litany of failed initiatives to make their case.

So, the leg up is simple: Fund ideas #1 and #3 and shut down anything approaching ideas #2 and #4. But do get digital.

That’s what I think. What do you think?

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Geoffrey Moore | Zone to Win Book | Geoffrey Moore Twitter | Geoffrey Moore YouTube