OK Google, What’s My Digital Strategy?
Clients that work with digital consultants are, by now, accustomed
to hearing the constant refrain that,
in order to survive and thrive in
the digital age, they must become
agile, innovative, and collaborative organizations that inspire passion in customers and
employees alike by fostering a fun-loving but hard-working culture and by using digital technology and design
thinking to create uniquely compelling customer experiences. And if you can look past the jargon and hyperbole,
there is a lot to be said for each of these recommendations.
You’d be hard pressed to find a consultant who would seriously advocate that any corporate leader should pursue
the opposite approach (after all, given a choice in the matter, few people would want to work with or for a torpid,
unoriginal, unilateral organization that inspires loathing or
indifference in customers and employees).
The issue isn’t so much the advice itself, or the “
strategic vision” this overwrought language is meant to
conjure up (although it does all fall squarely into the
“easier said than done” bucket). Rather, the issue is that
digital consultants so often hold up the wrong examples
for clients to emulate. Established companies in mature
sectors from manufacturing to mining to banking are
exhorted to turn to Silicon Valley technology startups,
not just for general inspiration, but as a source of specific strategies and tactics that clients across a wide range
of industries can apply to their benefit. And at a superficial level, this idea seems to make some sort of intuitive sense. Certainly there is much to admire from the
extraordinary success enjoyed by digital leaders such as
Amazon, Google, Facebook, Uber, etc., and who better to look to as a model to follow when navigating the
stormy seas of digital disruption than the world’s leading digital technology companies themselves?
But as alluring as this idea may be, the truth is that the
value that these Silicon Valley giants hold as a source of
practical or strategic advice for established companies
grappling with the digital revolution is decidedly limited.
This is not because there isn’t important knowledge to be
gained from studying these successful companies. Rather,
it is turning that knowledge into practical advice that is rel-
evant outside of the unique context of internet technology
companies that is the challenge. Unfortunately for execu-
tives looking for easy answers, the inconvenient fact is that
much less than is generally assumed of the “secret sauce”
behind the success of these companies is actually transfer-
rable across industries in any meaningful way.
The extraordinary success enjoyed by the leading in-
ternet firms has less to do with their strategic vision and
operational prowess, impressive though they may be,
and much more to do with the fact that they are “plat-
form” players that can take advantage of the power of
network effects (the more users Facebook has, the more
users and advertisers Facebook will attract), winner-
takes-all markets, and natural monopolies (how many
ride-sharing apps or apartment-letting apps does the
world need? The answer may well be greater than one,
but it’s almost certainly less than five). Network effects,
or the lack thereof, are a question of inherent industry
structure, and altering industry structure is beyond the
capacity of the vast majority of companies (though it is
within the power of regulators).
What is often not fully appreciated is the extent to
which the exceptional performance of the digital technol-
ogy leaders comes down to the nature of digital products
or services themselves, which are infinitely replicable with
perfect fidelity at zero marginal cost, and can be effort-
lessly and instantaneously distributed across the globe.
This is what makes digital technology truly revolutionary,
and it’s what’s behind much of what makes the Silicon
Valley model unique (and therefore hard to transfer). For
example, much has been made of the “asset light” busi-
ness models of companies like Uber (which facilitates
transportation, but doesn’t own vehicles) or Airbnb (which
facilitates hospitality, but doesn’t own any hotels), in com-
parison to their traditional asset-intensive counterparts.
Ultimately, when it comes to grappling with the
challenges of digital disruption, there are no shortcuts,
and each client will have to forge their own path. In the
end, there are still some questions that Google can’t
help you answer.
Brendan Williams is Associate Director, Lead for Digital
Consulting Research for ALM Consulting Intelligence.