Digitalisation has contributed to significant changes in the way companies implement their strategies. In spite of of the extreme pace of change, most companies still measure their success using the same KPIs as previously. In January 2019, consultancy firm McKinsey highlighted four elements that characterise the best companies. McKinsey also concluded that most businesses had not advanced much beyond where they were at the same time last year. In order to ensure progress and results, the key words are “agile” or “flexible”.
Knowit recently organised a management seminar at which it highlighted two of its innovative customers: power and mobile company Fjordkraft and housing cooperative BOB. Both companies have largely adopted the success factors we discuss here.
- Flexible approach to strategy
The first thing that distinguishes the best from the rest is an agile approach, i.e. quickly and flexibly making decisions about and implementing and adjusting their strategies. We can call this adaptive operating models in a digital world. Such models are crucial for companies who want to be “first movers” or “fast followers”.
Flexible methods reduce actual risk and increase quality through ongoing learning and change. Priorities can change and new information can be taken into account in the calculations. Reciprocal trust also generally improves in this process. New functions and continually improved functionality are launched at an early stage and quickly generate value for users.
In order to succeed it is important to set aside internal resources for involvement in collaboration projects, so that you can adjust the scope of the project along the way when the goal is movable. This also means that the supplier will not be able to undertake to deliver in accordance with the original specification in the conventional manner. However, the supplier will be able to commit to a defined level of quality and to deliver a certain number of effective working hours at a certain pace.
- Digital platforms and ecosystems
Another factor that characterises the best is that they invest more in ecosystems, digital products and operating models. They utilise the new digital ecosystems, focus all product development on new digital services and constantly think innovatively with regard to the way they work and formulate their value chains. We know that digital platforms have made it possible to create new marketplaces through data sharing and utilisation of network effects on a scale that a few years ago was unthinkable. These platforms blur the distinction between traditional sectors and change the way in which businesses assess their business models, customer needs and who is currently their competitors and partners.
- Investment strategy
Given the speed at which digital changes are occurring and the challenges businesses encounter in order to keep pace with organic growth alone, it is not surprising that the acquisition of relevant businesses is vital. Nevertheless, it is surprising that the best have a different investment strategy than the rest. They invest in mature companies, new digital start-ups and digital skills. And they invest relatively more than businesses that don’t succeed.
- Recruitment and cultivation of digital talent
Qualified digital talent is in great demand, not least because digital development has overtaken the availability of resources that can actually deliver on this. The best companies in the class stretch themselves the furthest in order to succeed in recruitment, for example, by dedicating a larger part of the workforce to digital initiatives. It has also been demonstrated that more frequent redistribution of digital talent internally characterises success in digital development. This kind of flexibility makes a positive contribution to both the most profitable digital initiatives and managing the company’s backlog. This is how they achieve a better balance between resources and strategies.
Success measurement redefined
A digital strategy must be tailored to both the digitally driven changes that take place outside the company and those that take place within the company. McKinsey recommends that companies look at their strategy as a roadmap for continuous change; a living organism that develops together with the commercial climate. Nevertheless, in spite of the huge pace of change, many companies still measure their success using the same KPIs as previously. We note that the best companies, however, are moving away from using, for example, market share as a yardstick. These days, companies can set new standards that indicate whether they are at the forefront of innovation, productivity and adopting digital technologies.
At Knowit, we are now noting that several of our customers are using “first on the market”, “most effective factory” and “level of collaboration with other businesses in an ecosystem” as indicators of their future digital success.