An Exploration of Digital’s Place at the Boardroom Table in 2023
‘Creative things need to sell in order to be acknowledged as such.’ – Steve Wozniak
Digital innovation has become an integral part of corporate strategy, permeating various aspects of business. While it initially focused on social, mobile, analytics, and cloud technologies in 2012, digital innovation has now expanded to encompass disruptive technologies that have a significant impact on large enterprises across the majority of business functions.
Over the past decade, the evolution of digital innovation has not only witnessed the proliferation of transformative technologies but has also driven fundamental changes in business operations and models. Today, enterprises prioritize digital innovation as a key initiative, as executives recognize its importance not only for gaining a competitive edge but also for survival in the marketplace.
When strategically implemented, digital innovation delivers sustained benefits such as revenue growth and cost reduction. It goes beyond technological advancements, enabling the creation of improved or entirely new business models, enhanced customer engagement, innovative commercial approaches, and increased operational efficiency.
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The Success of Strategic Digital Business Strategies
From 2015 to 2022, companies that successfully developed and executed digital business strategies experienced significant margin growth compared to the median. These companies deliberately identified opportunities and executed initiatives that contributed to both top-line growth and operational improvements.
While digital innovation plays a crucial role in generating a competitive advantage, many companies struggle to embrace it, putting them at a disadvantage. Digitally enabled companies, born digital or quick to adopt digital practices, have disproportionately benefited from digital innovation, leaving others behind.
For example, In 2012, credit card giant, Capital One, embarked upon a transformative journey with the objective of establishing itself as a technology-focused organization engaging in banking activities, rather than merely a bank utilizing technology, as stated by CEO Richard Fairbank. The primary aim of this initiative was to provide personalized banking services in real-time to its clientele.
By leveraging a contemporary technology stack, the company harnessed the power of big data and machine learning to gain deeper insights into customer behavior and preferences. It attracted bold, talented architects capable of developing customized applications, adopted cloud computing solutions, and implemented agile software development methodologies and DevOps practices, including the integration of open source software.
A significant milestone was achieved in November 2020 when Capital One became the first financial institution in the United States to announce the closure of all its eight on-premises data centers, transitioning all applications and systems to the robust infrastructure of Amazon Web Services. This strategic cloud-first approach enabled Capital One and its digital transformation team to relinquish the burdens of infrastructure management and concentrate on accelerating customer-centric innovation. The utilization of machine learning algorithms to transform vast amounts of data into actionable insights has been instrumental in this pursuit.
Edward, a reputable industry expert, acknowledges the remarkable strides made by Capital One in their digital transformation journey, emphasizing their commitment to becoming a fully-fledged digital entity. While lagging behind Wells Fargo and Bank of America in the past, Capital One's comprehensive digital transformation efforts have positioned them favorably to attract a new wave of young subscribers to their banking services. The organization has even recruited new executives specifically dedicated to spearheading this digital transformation.
Moving Beyond Potential: The Disparity of Performance
Despite the potential and promises of digital innovation, it has often fallen short of expectations. The primary reason for this disparity lies in the inability of enterprises to look beyond digital technologies and consider their business applications.
Most digital initiatives focus on modernizing legacy technologies rather than developing new business capabilities that leverage the potential of emerging technologies. As a result, the majority of digital innovation efforts yield limited business impact, resulting in abandoned projects, failures, and costly investment cycles reminiscent of previous technology generations.
The Influence of Speculative Opinions
Blaming corporate leadership alone for this disconnect is tempting, but it overlooks the challenges presented by emerging technologies and the disconnect between thought leaders' ideas and tangible business imperatives. While discussions on emerging technologies may be academically stimulating, they often offer limited practical value to enterprises.
Furthermore, experts in the field tend to focus exclusively on the technological aspects of digital innovation, disregarding its strategic business value.
Navigating the State of Confusion
Even when companies strive to focus on business impact, they face overwhelming possibilities and dependencies arising from the ever-expanding range of technologies and complex business value chains. This confluence of confusion, hype, and simplistic responses to complex business needs is particularly evident in the fervor surrounding blockchain and other Web3 phenomena.
Self-proclaimed experts offer opinions on blockchain without a comprehensive understanding rooted in outdated mindsets. Software offerings, from profound to trivial, are marketed as blockchain solutions based on crowdsourced public opinion, while technology salespeople eagerly label blockchain as a revolutionary solution for every industry.
However, the reality is that while blockchain may play a crucial role in business transactions requiring distributed trust, it does not disrupt the vast majority of business value chains. Moreover, existing, cheaper solutions already meet businesses' needs more effectively than blockchain claims to achieve.
Even the venerable McKinsey has clarified the perspectives of blockchain enthusiasts shared three years ago, grounding blockchain in a more realistic and business-aligned framework - a sentiment echoed by the Great and Powerful Woz himself.
Shifting the Conversation: Understanding Business Needs
It seems that these so-called "experts" desire digital innovation to remain enigmatic, compelling business leaders to rely on technologists to define enterprise needs and priorities. To better serve enterprises, the conversation must shift toward understanding what the business requires rather than blindly pursuing technology for the sake of technology.
An article published by Harvard Business Review in 2022 outlines the four key pillars of digital transformation: IT uplift, digitizing operations, digital marketing, and digital businesses - all essential elements of a transformative roadmap - and each of which ultimately impacts every area of business.
In Conclusion
Digital innovation has become an indispensable aspect of corporate strategy, with its potential to deliver sustained competitive advantage. However, many companies struggle to fully embrace digital innovation and leverage its benefits. By looking beyond digital technologies and considering their business applications, enterprises can bridge the gap between potential and performance, unlocking the true value of digital innovation.
By focusing on understanding business needs and priorities, enterprises can navigate the state of confusion and make informed decisions about adopting emerging technologies. Ultimately, it is the strategic alignment of digital innovation with business imperatives that will lead to its successful implementation and deliver tangible benefits for enterprises in the digital age.
As a digital transformation expert, our team has helped organizations of all sizes navigate their digital transformation journeys. More recently we’ve partnered with McCain Foods on a large-scale digital transformation project to modernize their manufacturing operations, with the goal of maintaining both their competitiveness in the market and commitment to sustainability. You can read more about the project here.
