On the face of it, the alarmist exhortation to “go digital or die” seems to fall into the category of hyperbolic scare-mongering lines desperate salespeople peddle a week before their targets are due. One might feel justified in scoffing at its fear-based pretentions to import and carry on about one’s business.
Then again, did somebody say “die”?
A popularly referred-to study that speaks to the notion of company mortality rates was led by Professor Robert Foster of Yale University. Its conclusion gives pause for thought: the average lifespan of a company in the S&P 500 index has decreased from 61 years in 1958 to just 18 years up to 2015. And the downward mortality spiral is continuing unabated.
While part explanation for this grim portent can be accounted for by events like mergers and acquisitions, the primary cause is generally accepted as being something else: ‘creative destruction’. The term was originally popularised by Austrian-American economist Joseph Schumpeter who characterised it as “[the] process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one”. Today the term is frequently co-opted to refer to the disruption that occurs when a challenger utilises digital technology to create value in markets that incumbents cannot imitate and so become obsolete.
Which brings us back to the notion of “digital”. There are as many definitions of ‘digital’ as people with opinions so for the sake of economy lets agree on this one: digital refers to the technology that makes people, places and things more connected. These connections result in the generation of data that can be harnessed and potentially transformed into business value. A deeper reflection on this modern alchemy would concern itself with the entire organisation as a system, but that would require a substantially longer missive.
So, digital helps organisations become more connected to the ecosystems in which they operate and results in a ‘data exhaust’ that can be mined for value. Sounds harmless enough. Now let’s consider the demand side of the value equation, where the elusive consumer lurks.
Back when mobile phones were for the exclusive use of the crew of the Starship Enterprise and a web still meant accommodation for spiders, ‘legacy organisations’ reigned supreme. These organisations were deliberately structured around their products; to produce and deliver them to market as efficiently as possible. Companies thrived on this ‘product-centric’ approach because, well, they could. Customers had less information, less choice and nothing particularly different to compare their shopping experiences to. To prevent customers from switching to other equally product-centric companies, loyalty schemes were deployed. By “loyalty” scheme I of course refer to the systematised programs of paying customers to not defect to a competitor.
Today, through the adoption of consumerised forms of digital technologies, customers enjoy real-time access to vast information resources, have seemingly unending choice and how, where and why they shop where they do has changed dramatically. Much to the consternation of legacy organisations everywhere, it is becoming increasingly apparent that the only thing customers are loyal to is a great experience – irrespective of which brand provides it. Ouch. For this reason “customer-centricity” has become the go-to buzzword in boardrooms everywhere, with the attending imperative to deliver a superior customer experience.
By now, most customers have relationships with “born digital” businesses such as Google or Amazon and others, and have developed the expectation that a seamless, personalised experience is what dealing with a business should be like. Thus, the primary risk for product-centric organisations is the experience gap that is created when customer expectations escalate at a rate faster than organisations can meet them.
When the rate at which this gap grows exceeds the organisations ability to close it, the slide into obsolescence is all but assured.
In conclusion, the exhortation to ‘go digital or die’ is useful in that it brings attention to the immense value digital technology can unlock for business. But it confuses the means with the end. In the competition for customers, technology is a critical player, to be sure, but relevance is the whole game.