Business transformation: disrupt, differentiate or defend?

Nigel Vaz, chief exec­u­tive, Publicis.Sapient Inter­na­tion­al

Soft­ware is eat­ing the world,” wrote Marc Andreessen in The Wall Street Jour­nal. The entre­pre­neur and soft­ware engi­neer made his obser­va­tion in 2011; today almost every aspect of com­mer­cial organ­i­sa­tions – what they are and what they will become – is dri­ven by tech­nol­o­gy.

“Busi­ness­es have been trans­form­ing for­ev­er, but there are two new fac­tors influ­enc­ing the speed of change,” says Nigel Vaz, chief exec­u­tive of Publicis.Sapient Inter­na­tion­al. “The first is the accel­er­at­ed rate of change of con­sumer behav­iours and expec­ta­tions. The sec­ond is the rate of change of tech­nol­o­gy or the dig­i­tal ele­ment of busi­ness trans­for­ma­tion.

“Where­as tech­nol­o­gy was once the pre­serve of the IT depart­ment, and cost and risk were the pri­or­i­ty, now tech­nol­o­gy is inte­gral to and pow­ers every part of the organ­i­sa­tion. As a result, it is on the agen­da of the CEO and C‑suite instead of iso­lat­ed to IT.”

Trans­for­ma­tion and the capa­bil­i­ty to deliv­er it require busi­ness­es and lead­ers to regard change as much more than a project with a start­ing point and a com­ple­tion.

“Ama­zon is con­stant­ly evolv­ing – is it a book­seller, a retail­er, a media com­pa­ny, a logis­tics dis­rup­tor or the largest provider of cloud ser­vices?” says Mr Vaz. “Ama­zon is defined not only by what it does, but also how it does it. It has built capa­bil­i­ties to pow­er its own busi­ness, for instance AWS to pow­er its com­merce plat­form, and has turned that into a busi­ness itself. How it quick­ly stands up and then mon­e­tis­es these capa­bil­i­ties is a core skill, one which more tra­di­tion­al organ­i­sa­tions need to under­stand and to adopt.”

Tra­di­tion­al com­pa­nies and indus­tries are increas­ing­ly being dis­rupt­ed by nim­ble and dig­i­tal-first entrants. While this is true across all sec­tors, the dis­rup­tion can come in dif­fer­ent forms from process­es such as man­u­fac­tur­ing, to prod­ucts and ser­vices. If com­pa­nies do not evolve their busi­ness­es and put dig­i­tal at the core, they could see them­selves sur­passed by dig­i­tal lead­ers.

If com­pa­nies do not evolve their busi­ness­es and put dig­i­tal at the core, they could see them­selves sur­passed by dig­i­tal lead­ers

Many of the top com­pa­nies of yes­ter­day have been over­tak­en by those that put dig­i­tal at the core. Look at a com­par­i­son of the top five US com­pa­nies by mar­ket cap­i­tal­i­sa­tion in 2001 and today.

Publicis.Sapient has been help­ing to build dig­i­tal busi­ness­es for almost 30 years, and has fun­da­men­tal­ly changed many indus­tries through the launch of some of the first inter­net banks, stock trad­ing plat­forms and the largest retail com­merce plat­forms. It helped to cre­ate online seat selec­tion tools for air­lines, which became one of the biggest dri­vers of cost reduc­tion at the time and now rep­re­sent the air­line industry’s sec­ond biggest rev­enue gen­er­a­tor after air fares.

Publicis.Sapient part­ners with clients on their dig­i­tal busi­ness trans­for­ma­tion (DBT), an approach that begins with iden­ti­fy­ing how to cre­ate val­ue for con­sumers and the busi­ness, and pri­ori­tis­es what will most mate­ri­al­ly impact a busi­ness. The sec­ond stage of the DBT approach focus­es on how to unlock that val­ue using dig­i­tal capa­bil­i­ties.

In the instance of air­line seat selec­tion, the clear val­ue iden­ti­fied both to cus­tomers and to the enter­prise required adjust­ments to many sys­tems and process­es. DBT requires the trans­for­ma­tion of both the front stage, which is exposed to cus­tomers, and the back stage, under­pin­ning busi­ness infra­struc­ture and oper­a­tions.

“Some com­pa­nies iden­ti­fy oppor­tu­ni­ties for dis­rup­tion, but then fail to realise how they’ll go about deliv­er­ing it,” says Mr Vaz.  “Oth­ers are so mired in the how of a change that they are unable to evolve the busi­ness to ask the big­ger ques­tion of the what.”

He con­trasts two of Apple’s boss­es.  “Steve Jobs was a trans­for­ma­tion­al CEO where­as Tim Cook is a more tra­di­tion­al CEO.  Cook is the kind of boss that most com­pa­nies have – some­one who is great at run­ning the organ­i­sa­tion. But the more trans­for­ma­tion­al CEO is focused on how the com­pa­ny will cre­ate val­ue for con­sumers and push­es it to achieve that.  The organ­i­sa­tion needs both skillsets – the vision and the roadmap to get there.”

There are com­pa­nies that “dis­rupt” in con­trast to those that “dif­fer­en­ti­ate” and “defend”, explains Mr Vaz. “If we look at the Ger­man auto­mo­tive indus­try, it is dif­fer­en­ti­at­ing on the tra­di­tion­al com­bus­tion engine alone. These car­mak­ers pio­neered it and it is their focus; they’re using it to defend them­selves against the dis­rup­tors.

“Tes­la, on the oth­er hand, might not yet have the pro­duc­tion capa­bil­i­ties and the scale, but it has put a mark­er in the sand to say, ‘This is how we think that the auto­mo­tive sec­tor will evolve’. It is a future that is less about the hard­ware of the car and more about the car becom­ing a plat­form through which com­pa­nies can dif­fer­en­ti­ate them­selves.”

In research con­duct­ed by Publicis.Sapient in part­ner­ship with the For­tune Knowl­edge Group, near­ly three quar­ters of dig­i­tal­ly mature organ­i­sa­tions say it is like­ly or very like­ly that the leader in their indus­try will be a dig­i­tal dis­rup­tor with­in the next five years.

Many com­pa­nies look to exter­nal part­ners to help with their busi­ness trans­for­ma­tion, some­times due to lack of inter­nal capa­bil­i­ty, but more often because, while they are high­ly effec­tive at their core busi­ness, it is a sig­nif­i­cant chal­lenge for them to reimag­ine the future of their busi­ness and indus­try.

An approach that puts the cus­tomer at the heart of every­thing that a com­pa­ny is and does, start­ing with cus­tomer needs, will enact change that has the great­est impact on val­ue to the cus­tomer and for the busi­ness.

Dig­i­tal­ly mature organ­i­sa­tions are twice as like­ly as their imma­ture coun­ter­parts to point to deep cus­tomer insight as the most impor­tant fac­tor dri­ving suc­cess of their organisation’s dig­i­tal trans­for­ma­tion strat­e­gy, accord­ing to the Publicis.Sapient and For­tune Knowl­edge Group research.

The “how” should become the “what” of dig­i­tal trans­for­ma­tion, Mr Vaz argues. “You need to think about how you view organ­i­sa­tion­al mod­els, cul­ture, process­es and poli­cies, and how you mea­sure results. It’s impor­tant to cre­ate a cul­ture of con­tin­u­al­ly unlock­ing val­ue by con­sis­tent­ly evolv­ing. Even if you make the wrong choic­es about where you’re going, you need to be able to move beyond those mis­takes as part of your evo­lu­tion.”

He believes that the lead­ers of com­pa­nies need to adopt a cul­ture of con­stant dig­i­tal trans­for­ma­tion. “They need to think about it as a jour­ney rather than a des­ti­na­tion,” he says. “That’s what’s so excit­ing about it.”

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