Transformation with intermediate steps
The importance of the digital revolution has been recognised on the top floors in Germany. Large companies are acting defensively while startups and growth companies are becoming more agile and fast-paced.
There is no doubt: The importance of the digital change has meanwhile been recognised in German top level management. This is good news, as the significance of this topic has been underestimated up to now. However, the progress in implementing the digital transformation has still been slow. While German companies focus on defending their existing structures, startups that offer fast and agile solutions are shooting up like mushrooms and attracting public attention. The capital available in the market flows into these new channels undermining the business model of the established companies. Large companies are at their wits’ end, calling for pro-active help: “Action required — but what exactly?” Executives are unwilling to make the necessary radical decisions. Digital transformation processes are often not controlled by the board or the management. The root of the problem lies in the corporate structures. Today’s managers are conditioned to make optimal use of the existing structures and to continually optimise and increase margins and profits. The decision to invest in a business model which may cannibalise the existing model is not an easy one, especially if you want to make your shareholders happy. The question is rarely asked: What will happen if we don’t do it? Managers have traditionally shied away from making the radical decisions necessary for digitalisation. Furthermore, from our experience, in more than half the companies surveyed, digital transformation processes are not directly controlled by either the board or management.
Remove the fear. Create trust by testing a scenario. Foster smooth transformation.
One solution for taking the fear of risk and change could be to think through a new business model as a prototype. “Enterprise Prototyping” works by the use of real corporate data. We evaluate the data to identify opportunities, risks, and difficulties. The prototyping process takes place as close to reality as possible supported by role playing, prototyping, and co-creative collaboration.
Sustainability & commitment within the team and with the customer.
The new business model becomes comprehensible and emotionally accessible. “Enterprise Prototyping” allows us to create a vision which achieves a high degree of confidence in a future model. Since this model is not only based on mere data, but on scientifically substantiated forecasts and 20 years of experiences, it will remain valid for a long time. It dissociates from purely formal transformation approaches which create a good mood, but do not awaken an enduring interest and commitment on the part of the employees and customers. The appetite to explore new paths must be stimulated.
Speed, agility quotient, and error mentality.
Such a process requires speed, agility quotient, and error mentality. Needless to say that this should not be tried on the ongoing business.
Role model: Exponential Organisations (ExO).
The majority of today’s company business models have been designed for a linear world characterised by hierarchical, centralised structures. In this world, property is based on the assumption that resources are limited. These types of business models were formed up to a 100 years ago, designed to remain successful in a scalable, relatively stable and predictable era. Our world is now transforming exponentially, mainly thanks to new technologies. As a result, we find ourselves in a world which becomes increasingly open and transparent. We are gradually moving from a world of scarcity to a world of abundance. Exponential organisations (based on the book by Salim Ismail) know how to adapt in an accelerating world characterised by abundance and have developed the adaptability required to remain competitive.
designaffairs is an ExO.
For 20 years now, designaffairs has continually reinvented itself and developed its customer base. None of our solutions in the field of hardware, software, and services and no product has ever failed. We are deeply involved in development processes and are familiar with all kinds of corporate structures. We have a high flexibility quotient, an excellent network, and a deep brand awareness. We combine design thinking with corporate thinking and scientific methods. Solely by the mere number of products placed on the market, we were able to help groups to break blockades, overcome the difficulties of change, implement a change management, and establish new products in the market despite the presence of existing brands.
Transformation with intermediate steps. Exit strategy.
Transformation can happen smoothly and gradually. Our “Enterprise Prototyping” models include different exit strategies to allow a transformation to be interrupted and modified depending on market changes or requirements. Quick wins and the big picture should not be in conflict with each other. Today, it is important to ensure that companies remains agile (“it is always Day One in startup mode” , Jeff Bezos) and do not plan according to a rigid 5-year schedule. The markets and segments are too fragmented. This so-called hyper segmentation implies an urgent need to react quickly instead of planning ahead.
China — A pioneer in transformation.
Most German companies are still afraid of digitalisation. We are wondering what sets Apple, Amazon, and Google apart from Siemens, Bosch, and Bayer? But, even if we regard the US as our role model, actual transformations are taking place unnoticed, in China. In the US, it is the large companies, whereas in China, it is almost every medium-sized company approaching the subject by trial and error and in so doing, they are rapidly gaining ground.
Converting enterprises into startups.
Unfortunately, we are increasingly seeing large companies which invest in startups but do not fully utilise the advantages of an organisation outside the group, using the startup only for testing and observing. If the results are promising, they try to integrate this solution in the parent group which causes almost all approaches to fail, falling into the corporate trap. So, why not think differently and reconvert the group into a startup or set up a new company with the best people and send them out to explore. Most companies however expect to obtain faster innovations and access to technologies from startups. But from our experience, this is not enough. This is because it is the company that must change, rather than simply increasing the pressure to innovate. The majority of companies still do not allocate the time or resources for activities that constitute a startup: Testing, developing, researching, trying, making errors, and learning, with the objective of making a difference. In Germany, approx. 76% of all companies rely on the collaboration with startups, while it is only 14% in the US. The reason is: Germany is still a technology-driven country. But at the end of the day, it is all about emotional enthusiasm and new experiences. The individual must be the focus which requires a solution with an emotional touch. Even a technologically simple and naive product may be successful, if it has an emotional component. So, if we want to lead the digital revolution, our mind set must change. There are certainly enough ideas, innovation and courage in German companies. They only need to be freed and unfettered by conventional structures.
What technologies are needed?
We are often asked: What technologies are needed for digital transformation? What app do you use for the change? For many German companies, digital transformation is an app or a technology. However, digital transformation is much more than that, often involving fundamental changes. Apps are very popular marketing vehicles. But they rarely result in productive change. On the contrary, new apps often lead to more questions and possibly more problems — and only rarely to higher revenues!
How does digital transformation take us further?
Shouldn’t the first question be: How does digital transformation take us further? Does it allow us to provide added value or does it only make things more complicated? Do we have the knowledge and which existing structures can be used? These questions are precisely what leads us to our method of “Enterprise Prototyping”. Change and the associated enthusiasm is only made visible and perceptible by means of prototyping. Our goal is to accelerate and support the German industry. The development environment in Germany is unsurpassed and we love to live here. It is not always necessary to take a “giant leap” to discover a new world. So take courage, leave your comfort zone and — “go for it”!