« Digitizing » the business: what works? Part 1: Lessons from common experiences

Summary: The strategic integration of the internet into a business inevitably involves—sooner or later—its « digitization. » The various approaches to this have included learning through experience, the creation of a digital directorate, setting up or buying out expertise, and establishing training programmes. These are neither intrinsically good nor bad in themselves, but are often insufficient, due to a partial take on the subject and an absence of digital strategy, which derives from a lack of engagement by senior management. This involvement of senior management is the keystone of the digitization of the entire business. Overall understanding begins with an analysis of each element in the value chain, and its value to the organisation, passing by way of its culture and management.

 

Any integration of the Internet and digital media into the strategy of a business that does not also incorporate the required practical knowhow is an option that is likely to fail—as many a business has come to understand, as it begins to tackle the huge programme of work that is « digitization. » To get beyond the first stage, should the work be tackled informally through inspiration and experimentation by assorted individuals, or should a programmatic approach be adopted? Is there a valid approach for every kind of business, or should the approach be tailored in each case?  In the light of the financial and competitive issues within globalized markets, the businesses that do it better and quicker will inevitably find themselves ahead of their competitors. This invisible but strategic battle must be commenced.

 

How can we tackle this vast question?

We will do so in two parts: firstly, by drawing lessons from the most commonly applied approaches to illustrate the most important factors in success or failure, which will be the purpose of this article. This will allow us to conceive a global approach that is generalizable to any kind of business. The second article will then provide a concrete example, illustrating its application to a particular business.

What approaches to « digitization » are commonest in business?

In the 20 years that the internet has existed, a sometimes considerable gap has opened between the most innovative businesses who have embraced the digital media with open arms, and those who are still pondering their approach to the question. Most of the French market seems to be situated between these two extremes. For big businesses—and dynamic smaller ones—there are still important internal issues to be addressed, following on from an approach to management that generally outsourced the digital channel in the early years of the web by using agencies, IT companies, specialised consultancies and so on.

What are the approaches that have been or are still often currently used to « digitize » the enterprise? Without claiming to be exhaustive, the following measures—which are not mutually exclusive—can be listed:

– Learning from experience—getting your hands dirty

By default, this is the initial approach in real world terms, and is the best way to learn. Expertise is acquired through practice, and this is especially true of skill with new technologies. This is the approach chosen by businesses which are, by definition, pioneers. To take only one example, thousands of IBM employees are active in the blogosphere and social media. The scale of the practice varies by business sector, and the number of employees who are free to experiment with new approaches (in communication, marketing, sales, and after-sales service). The success of these types of approach is closely linked to the internal culture of the business. Just opening the floodgates to « digitization » is not enough for it to happen, and happen effectively. A wise balance must be found between the motivation of employees, and evaluation of their participation. The rules must be assimiliated rather than imposed for overall success.

– The top-down approach: evangelists and digital directors

Making a clear commitment to « digitization » often comes about through the nomination of a « digital director »(or similar title), whose responsibilities are nevertheless extremely variable according to the size and sector of the business, and their closeness to senior management. It can range from a « simple » transverse internal evangelisation to the creation of a specific profit centre for purely « digital » business, by way of missions that integrate digital channels into existing businesses within the enterprise (for example, the development of e-commerce, or of a digital communication strategy). Such heterogeneity of practice—and title (Digital director, VP Internet, Digital lead, Chief digital officer)—is evidence that the role of the internet and the most senior business functions linked to it are not yet « fixed », because their mission has not been fully clarified by the business.

– Implanting or grafting: the creation or buyout of a specialized team

Here the idea is to create teams or expert departments of specialists dedicated to the internet and to unify the digital skillsets existing within the business. The initial goal is the same: the rapid acquistion of digital competencies which are distinct from those of the « traditional » competencies within the business. This may be acheived through functional reorganisation of a communications, IT, or commercial directorate, or the acquisition of a « pure player, » for example, an agency whose teams are then integrated into the purchasing business, or the creation from scratch of a new department, for example to handle e-commerce, by recruiting experts, most often external to the business. Once the first step has been taken, subsequent operations become more complex, depending on the level of integration that is desired by the business. The dissemination of these new competencies to the existing employees of the business is not necessarily something that will happen naturally. It is wishful thinking to imagine that merely placing these employees side by side is sufficient. The reality is that most often such digitization is a painful process, in which brutal management is associated with heavy staff turnover and « culture shocks » untempered by mentoring. At group level, the acquisition of external companies can be placed in this category. The subsequent degree of integration varies according to the degree to which the original brand of the bought-out company is to be perpetuated or dissolved. Maintaining the brand does not necessarily presage that the autonomy of the team will also be preserved, which can find itself merged or dissolved within the teams of the purchasing company (see Publicis Modem and Publicis Dialog, for example).

– A process of evolution: staff training and development

This is often the « softest » approach from a management perspective, but it necessarily raises questions about the short term effectiveness of the approach. If staff development is not closely supervised in order to assure that the newly acquired competencies are applied to the needs of the business, they will have little value for the organisation, even if they are valuable in maintaining the motivation of employees and refreshing their skillsets. Staff development organised centrally within the business is nevertheless important in creating a common reference point for the employees, and can « smooth over » the sometimes enormous disparities of knowledge and practice between different individuals. The use of external training to acquire baseline competencies is inevitably « normative. » The establishment of internal development will prove a longer term proposition, though with inevitable failures along the way. This approach will better tailor practice to the needs of the business, and thus contribute much more to the genesis of original knowhow. The involvement of senior management in such training is indispensible: they personify the business, so their committed involvement is a top priority, leading by example in the process of digitization in order to achieve the same (if not higher) standard than the rest of the employees.

 

What lessons can be drawn from these different approaches—what are the advantages and disadvantages?

None of these approaches are good or bad in themselves; nor are they mutually exclusive. It is the way in which they are applied and combined that will determine their effectiveness. In practice, the principal factors that determine success or failure are usually cultural and managerial. There is no mystery—the human factor is at the heart of real success, beyond the effects of the excitement of a new initiative and improved communication.

The most frequent pitfalls are often:

– Choosing a single approach:

The hasty nomination of a digital director whose arrival is anticipated like a messiah, who is then soon fallen when miracles fail to materialize; the acquisition of a pure player which is then brutally integrated into existing teams provoking haemorrhages from both camps; or a costly training programme which assuages the consciences of senior management but has no effect on the daily functioning of the business; are but three commonly observed patterns.

– Absent or limited vision of digital strategy:

These are 2 sides of the same coin. While this pitfall is perhaps inevitable for pioneers in the sector, it does not have to be so for businesses now engaging in the digital world. Even though digital technologies continue to evolve, the fundamentals of a digital strategy can now be perfectly well determined for any kind of business.

– « Shoehorn » integration:

The working methods in the digital professions are perceptibly different from those of the traditional media, and must therefore be organised and managed differently. Failing to anticipate these differences beforehand is a common cause of failure, which must often then be painfully corrected by repeated trial and error, or in isolated silos by teams with different skillsets.

– Lack of engagement by senior management:

Digitization poses a real problem for business, because, frankly, a good number of directors are not really interested in the internet and new media. This subject is taboo—very few directors will dare admit it, but their actions speak louder than their words. Associated with a fear of loss of power, this taboo provokes significant waste because « official » pronouncements are contradicted by the daily behaviour and decisions which are the true indicators of the workings and direction of a business. A pattern of insidious « delays, » ill-directed efforts and aborted initiatives above all reflects the directors’ fears of engaging the business on an effective and secure path to digitization—which they fear they will no longer be able to control.

 

To conclude, the obstacles of each approach are not problematic as long as progress in the right direction can occur—digitization has to start somewhere. The biggest avoidable risk is a fixation on one approach or another without continuity and without an overall plan—which brings us back to the undeniable need for the involvement of senior management and a clear digital strategy. Digital « shoots » can sprout anywhere among motivated employees and committed teams, but the digitization of the whole business cannot be achieved without real engagement by senior management. In other words, a shared strategy must be embodied into the everyday transactions that the activity requires.

If this is the case, a combination of different approaches must be orchestrated for maximum effectiveness, because they are effective at different levels. How should these different approaches be coordinated, and according to what criteria? One solution is to start with the broadest possible approach: by analysis of the value chain of the business, and the impact of the internet on the activity of its customers, which will determine the « degree of digitization » that is needed for the various profiles and professions of the business. This approach will be further developed in the next article, using the example of an application in a consulting business as a concrete example.

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