THE NEW LEADERSHIP IMPERATIVE: Embracing Digital Transformation
DIGITAL TRANSFORMATION IS A HUGE BUZZWORD these days — but the fact is, it’s not a new topic. More than 30 years ago, Harvard Business School Professor Michael Porter wrote about how information technology (IT) would transform competitive advantage. Professor Porter saw what was happening with the democratization of IT, and predicted that this new ‘IT layer’ of every organization would transform business, enabling information flow to scale in ways that were not possible before.
Professor Porter was right: Thanks to technology, today’s companies can reach around the globe to find customers in new markets, and IT has become the ‘binding glue’ underpinning all sorts of traditional-style industrial growth.
However, when we talk about digital transformation today, there is much more to the story. Today, we have Amazon, the biggest retailer by market capitalization, with only a handful of experimental stores; Uber, the biggest livery service in the world by fleet and by countries reached, with no vehicle ownership; and Airbnb, the biggest hospitality service by number of locations, with no owned properties. Clearly, the way companies are embracing digital to create business models and attack the market place is very different from the way we talked about digital transformation over the last 30 years.
In this article I will discuss three key aspects of digital transformation: What used to matter; what matters today; and the key challenges organizations face.
What Used to Matter?
To describe what used to matter, I will use a simple example: Soap — the prototypical product of the industrial process. At the turn of the 20th century, was building a massive business — and it was not based on technological innovation. Sure, Ivory was ‘the soap that floats’; but the most interesting thing P&G did was to master a set of functions that were largely unavailable to the average company at the time: It mastered the sourcing of supply to scale; distribution across the nation and ultimately the globe;
