Digital to the Core

Remastering Leadership for Your Industry, Your Enterprise, and Yourself

Mark Raskino, Graham Waller

• Publisher: Routledge
• Year: 2016
• ISBN:
  9781351861984
• Edition: 1
• Topic: Betriebswirtschaft
• Subtopic: Business allgemein

There is no simple strategic method for dealing with the multidimensional nature of digital change. Even the sharpest leaders can become disoriented as change builds on change, leaving almost nothing certain. Yet to stand still is to fail. Enterprises and leaders must re-master themselves to succeed. Leaders must identify the key macro forces, then lead their organizations at three distinct levels: industry, enterprise, and self. By doing this they cannot only survive but clean up. Digital to the Core makes the case that all business leaders must understand the impact the digital revolution will continue to play in their industries, companies, and leadership style and practices. Drawing on interviews with over 30 top C-level executives in some of the world's most powerful companies and government organizations, including GE, Ford, Tory Burch, Babolat, McDonalds, Publicis and UK Government Digital Service, this book delivers practical insights from those on the front lines of major digital upheaval. The authors incorporate Gartner's annual CIO and CEO global survey research and also apply the deep knowledge and qualitative insights they have acquired as practitioners, management researchers, and advisors over decades in the business. Above all else, Raskino and Waller want companies and their top leaders to understand the full impact of digital change and integrate it at the core of their businesses.

1
Go Digital or Go Home

Rafael Nadal, looking relaxed in sweatpants and a baseball cap, strode up to the net on a tennis court at the Babolat headquarters in Lyon, France. As Nadal played the first few strokes, Eric Babolat, CEO of the French tennis equipment company, watched with nervous anticipation. In April 2012, Babolat had invited Nadal to test the revolutionary new “Connect” racquet, which digitally captures a player’s forehands, backhands, smashes, and serves— and sends that data directly to a smartphone or tablet. Richly colored charts told Nadal how much top-spin he put on each stroke and whether he hit the ball with the racquet’s sweet spot.

“It was like a kid seeing a toy for the first time,” Eric Babolat recounted. “You could see it in his eyes,” Babolat said of Nadal. “He’s a professional player, he has played every day of his life. For the first time he was seeing new images— the data of his game. Before there was tennis without data, now there is tennis with data. It’s not a new page in the book. It’s a new book.”¹

Babolat’s Play racquet contains accelerometer and gyroscope sensors, a digital microprocessor, Bluetooth wireless communications, and a battery. All of these components weigh just fifteen grams and fit inside the handle. A player picking up the conventional version of the same racquet cannot tell the difference; they feel exactly the same. What’s more, the technology isn’t available only to Grand Slam professional players. Anyone can buy the racquet for $300 to $400.

This is digital to the core— radical new technology flowing into a company and penetrating right to the core of its product— the racquet— and to the player and the game. The game of tennis can trace its roots back to twelfth-century France. So perhaps it will surprise you to know that until 2013, this revered sport— played, loved, and watched by many millions of people the world over— was defined with only thirty rules. One year after Nadal picked up the Play racquet, in July 2013, Eric Babolat sat in a hotel near the Arc de Triomphe in Paris waiting for a crucial decision from the International Tennis Federation (ITF) Annual General Meeting. “It’s like the United Nations,” he recalled. “You have people from everywhere, with all languages. They vote for a lot of resolutions.”² Would they vote for the one he proposed? In a unanimous decision, the ITF approved the thirty-first rule of tennis, which allows the use of Babolat’s new racquet during match play. Here is the crucial phrase in the new rule: “Player analysis technology may record and/or store information during a match. Such information may only be accessed by a player in accordance with Rule 30.”³

Babolat’s digital innovation helped to literally change the rules of the game. The rule change was crucial to the company’s future, because tennis is big business. The size of the tennis industry is $5.55 billion a year in the United States alone,⁴ and it is part of a wider global sporting goods industry estimated by some analysts to be over $300 billion.⁵

Taking Digital to the Core for Every Business

A quick sketch of Babolat’s history will help you see why this type of digital disruption isn’t reserved for greenfield start-ups alone. Every business, no matter how old, has the opportunity and the ability to digitally remaster its products and services. Babolat’s story showcases a long history of innovation.

In 1998, Eric Babolat became the fifth-generation leader to run the family-owned company, and he was determined to build on its historic foundation. Today, the company provides both racquets and strings to millions of players all over the world, including top professionals. It was Babolat’s great-grandfather, Pierre, who first invented some of the strings the company continues to make. In 1875, a racquet maker asked Pierre to try to make strings from animal gut, using the same process he had already mastered for violin strings. The results were revolutionary. Even today, natural gut strings compare favorably to nylon, polyester, Kevlar, and other modern materials.⁶ That invention led the Babolat company eventually to focus wholly on sports racquets. More than a century later, building on that legacy of technological innovation, Eric Babolat is full of passion and pride when he speaks about the world’s first and most advanced digital tennis racquet.

He sits in the same 1870s buildings that his great-grandfather used, nondescript and easily missed on the quiet Lyon side street, marked only by a small plaque that guides you to the right doorway. Once you’re inside, however, the lobby tells you about the revolution going on— video screens show the connected racquet in action and data projectors paint slogans with light onto the tables: “Innovation,” “No Guts, No Glory,” “No Limits.” It’s all about a piece of sports equipment that senses every strike of the ball, calculates and interprets what’s happening, and wirelessly sends that information to the player’s smart-phone or tablet for later analysis.

This individual product revolution is both fascinating and impressive, and we will return to it throughout this book. But it’s just one story of how products and services— including yours— will be digitally remastered over the next few years. We wrote this book for CEOs, CIOs, CDOs, strategy officers, and other executives— as we will see in chapter 5, the entire C-level leadership team must be involved. Over the past several years, we have surveyed thousands of CIOs and CEOs to understand their priorities and concerns, and we’ve worked with CIOs in companies and governments around the globe in their pursuit of digital business. We realized that executives from businesses outside the tech industry need to better comprehend the profound digital disruption now taking place— with more changes on the horizon— and understand how to take action. Often, they are unsure of where to start or how to stay oriented as change builds upon change.

To delve into the secrets of today’s successful digital leaders, we supplemented Gartner’s vast research base and annual executive survey data with more than thirty interviews of CIOs, CEOs, chief digital and data officers, and other C-level executives from a range of global organizations including Babolat, GE, Ford, Quicken Loans, Publicis, the U.K. government, Tory Burch, BBVA, India’s Bharatiya Janata Party, Tokio Marine Insurance, Seoul National University Bundang Hospital, and more. Digital to the Core is the result of this research and our many conversations with CIOs in the Gartner community, and it explores how three disruptive digital forces will require you to remaster leadership of your industry, your enterprise, and yourself.

Before we describe these three forces, let’s set some context by describing the power and potential of digital business.

What’s Different About Digital Business?

Do you assume that everyone is already “doing digital”? If so, then consider that many businesspeople today have a fuzzy view of what digital business is, what the progress stages look like, and how big the gap between companies is. In fact, it’s quite alarming how far behind some companies really are. In the 2014 Gartner CEO and Senior Executive Survey, we asked CEOs to answer the following question in their own words: “What does digital business mean in the context of your company and industry?” The responses varied widely, and we found that some companies are far ahead of others.

Industry differences did not explain the wide range of responses. Some responses toward the bottom left of Figure 1.1 were both general and vague. These represent the business leaders whose thinking reflected the attitudes of the 1990s. Those around the center of the chart raised thoughts that were really about the e-business of the early 2000s. Only a small proportion— perhaps 10 percent to 15 percent— expressed specifically directed, newer ideas, such as mobile commerce, the Internet of Things, virtual business, and digital products. Why does it matter if CEOs are a bit vague and fuzzy about digital? The simple answer is that they will rely on digital business to make their numbers. Gartner’s 2015 survey found that CEOs expect that revenues attributable to digital products, marketing, and sales will double from an average of 21 percent in 2014 to 42 percent in 2017.⁸ It will be hard for CEOs to lead such growth if they don’t understand digital clearly.

Figure 1.1 CEO Responses: “What Does Digital Business Mean for Your Company and industry?”⁷

As a leader today, you face the difficulty of making the critical decisions that will determine whether the enterprise you lead wins big or ultimately fails. The purpose of this book is to clarify the existing digital business race and orient you to the journey ahead. We also provide a leadership framework to help you continue to lead with clarity, even as a whole new set of deeply disruptive technologies and business model changes pile up on the ones already in play.

Let’s deal first with the definition problem. What is digital? The simplest technical definition is: Signal transmission that conveys information through a series of coded pulses representing 1s and 0s (binary code).⁹

But that’s not what most businesspeople mean when they use the term. Gartner has a broader definition that better suits the needs of the business community: All electronically tractable forms and uses of information and technology.¹⁰ This broader definition contrasts with the typical corporate use of the term “IT” because it includes technology outside a company’s control, such as smart mobile devices in the hands of customers, citizens, and employees; social media; and technology embedded in products such as cars, consumer goods, or industrial machinery.

This book is concerned with how enterprises will apply that understanding of digital for advancement and advantage in an endeavor we call digital business: digital business is the creation of new business designs by blurring the digital and physical worlds.¹¹

You are probably already familiar with digital marketing because you experience it every day. Digital business goes much deeper. It goes to the heart of what you make and serve to your customers. It redefines some of your core competencies and what you are in business to do. It could even end up placing you in a new industry— possibly one that never existed before.

When we say “new business designs,” we are referring to new kinds of products and services, business models, and industry models, as well as new ways of creating value for customers. “Blurring the digital and physical” means ending the traditionally clear boundary between the tangible world we live in and the virtual informational world, or “cyberspace,” typically thought of as existing inside computers. Perhaps we shouldn’t use “digital” in the definition because it’s a bit circular, but the word feels comfortable to people in a way that cyber and virtual don’t. Perhaps examples explain digital business best.

Babolat blurs the real-world game of tennis— where yellow felt-covered balls hit racquet strings— with the digital world by measuring millions of tiny movements and vibrations in the racquet head. This data moves though algorithms that analyze and compute the physical movements of the player as they happen. The amount of topspin a player puts on the ball is felt by his arm and measured by the racquet at the same time.

In this book you will find many other examples of organizations and their achievements at the forefront of digital business, including:

• Bharatiya Janata Party (BJP), India’s largest political party, which used holograms to project a virtual version of its leader at real-world election rallies and crowdsourced its manifesto
• Ford, which is betting big on connected cars, new forms of mobility innovation, and, one day, autonomous vehicles
• Zappos, a retailer that believes that someday soon your phone might be able to create a 3D scan of your foot, for a better-fitting shoe
• Seoul National University Bundang Hospital that has managed better outcomes for diabetes patients by remote monitoring of glucometers that the patients use in their own homes
• BBVA (Banco Bilbao Vizcaya Argentaria), which is analyzing location data and historical payment transactions to create a better credit score for specific retail sectors, such as pizza restaurants.
• Tory Burch, a company that has created a successful wearable product by enveloping Fitbit activity sensors in its distinctive fashion accessory designs

In each of these cases, the organization has taken digital to the core of its products and services to deliver a new type of customer value. Whether the advances are derived from exquisitely detailed data analyzed to discover patterns, new sensor enablement, or precision control, the core competencies of the digital era may end up being more important than the competencies of each organization’s past.

Let’s gain some persp...