In 2011, Marc Andreesen attracted a lot of attention with an op-ed piece in The Wall Street Journal in which he wrote, “Software is eating the world.” That column brought into focus the enormous opportunities being seized by software-driven upstarts who were upending incumbent market leaders — from traditional entertainment providers and booksellers to manufacturers of mobile phones.
At EMC, we talk quite a bit about what we call “software-defined enterprises” — companies that are using some combination of cloud, mobile, social and big data to rewrite the rules for their industries, from the likes of Tesla in automobiles to Uber for cars for hire. These born-in-the-digital era companies get lots of attention for their novel approaches and rethinking of existing business models. But what about established businesses that are learning to adapt their models for a cloud/mobile world?
There are plenty of success stories here as well, and they are the focus of a new book released today: Leading Digital: Turning Technology Into Business Transformation, co-authored by Andrew McAfee and George Westerman, both of MIT’s Center for Digital Business, along with Didier Bonnet, who leads Digital Transformation at Capgemini Consulting. [Disclosure: We know Andy’s work well. EMC Chairman and CEO Joe Tucci hosted a breakfast session at the 2014 World Economic Forum in Davos on Andy’s previous book, The Second Machine Age. And Bonnet’s firm is a good business partner of EMC.]
Leading Digital is worth a read by anyone who wants to understand how technology leadership is redefining business. “Technology is reaching into every corner of the business world,” the book notes—“every industry, company, process, decision, and job—bringing deep changes in how companies are structured and led, and how they perform and compete. Over time, it will create a new playing field with new rules—and new winners and losers.”
The authors tell how Burberry, the upscale clothier for aging baby boomers, has used technology to refashion its brand for the Millennial generation of consumers. How Ceasars Entertainment grew its business through a personalized loyalty program that capitalizes on customer data and predictive analytics. How the Cleveland Museum of Art expanded access to its collection through an innovative digital catalogue. How Codelco, the world’s largest copper producer, in Chile, uses technology to automate operational processes.
What distinguishes digital leaders (this books labels them “Digital Masters”) from the rest of the pack? According to Westerman, Bonnet and McAfee, they possess strong overarching digital visions, strong governance across business unit silos, strong digital cultures throughout their companies, and they have “many digital initiatives generating business value in measurable ways.” They invest in digital capabilities, but more importantly, they pursue digital agendas that are driven by executive leaders at the top. Amazingly, after studying more than 400 global firms, the authors observe, “we saw no examples of successful transformation happening bottom-up.”
By contrast, firms beginning their journey down the path of digital transformation may carry out innovative experiments here and there, but they are limited by executive management teams that are skeptical of the business value of advanced digital technologies and, consequently, by immature digital cultures across their firms.
“The best way to get ready for these changes,” argue Westerman, Bonnet and McAfee, “is to start the work of becoming a Digital Master now. Companies that are indifferent to technology (to say nothing of hostile to it), or that haven’t figured out how to make it part of the lifeblood of the enterprise, are going to have an increasingly hard time as the innovations keep mounting and the management breakthroughs keep coming.”
Perhaps the most memorable data point in the book is the authors’ finding that Digital Masters are 26 percent more profitable and generate nine percent more revenue from physical assets than other firms. To the authors, it’s not yet clear how much of this is cause-and-effect — whether the best use of technology leads to outsized profits — or how much of this is merely correlation (the more profitable companies just happen to be a step ahead of competitors), but one thing’s for certain: as this new book makes clear, “the best managed companies manage digital activity well.”
Is your business a Digital Master?