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How to Survive and Grow in a Digital World

Dare to be Different. Create Dialogue. Stay Relevant.

John Cleese Graffity in Eindhoven, The Netherlands

“What should business leaders do to remain successful in a digital world?”

“How can large, established businesses re-invent themselves?”

“How should startups deal with growth and complexity?”

I receive these questions all the time when I teach and speak about innovation, business and leadership at conferences, meetings and symposia.

This is not surprising. After all, we live in a digital world that is constantly changing, and there is no doubt that the resulting uncertainty creates huge anxiety about the best way to respond. This is especially true for scaling and established businesses.

Everyone can see the opportunities of a digital society, but understanding what business leaders need to do in order to succeed in today’s digital environment is much less obvious.

“But … Advice is Everywhere”

Business leaders have an abundance of books and articles to help guide them through the challenges and opportunities of the digital world. I have written several Medium posts on these matters myself.

Most such “solutions” are structured around what can be learned from fast-growth technology companies that are central to the digital economy. These high growth companies have used the opportunities of networked technology to develop new business models. Trust, value and wealth are created through platforms, connections and networks, instead of the management of workers and physical assets.

The success of these “young” companies has led many commentators to conclude that growing companies should do everything they can to retain the “startup feel”.

For established businesses, the solution is to be “more like startups”. Identifying the distinctive features of the “startup culture” and then integrating them into the existing organization is widely seen as the best way for incumbents to survive in a digital world.

And yet, most business leaders struggle to follow this advice and implement change. Think Toshiba and Uber.

For instance, imitating processes from successful startup companies often results in empty “theater”. The superficial appearance of a “startup culture” is introduced (open work spaces or more relaxed dress codes), but genuine change to working practices is not made. Such theater is usually met with skepticism (both inside the organization and by outsiders), especially when it fails to immediately bring the expected positive effects on business performance.

But this doesn’t mean that the advice is wrong. Constant re-invention is required. We just need to be a little more realistic about what needs to be done in order to achieve genuine change.

So, here are three strategies that can help all business leaders to adjust to the new realities of a digital world.

(1) Dare to be Different!

It is in the nature of organizations to be conservative. Most businesses will continue to rely on existing structures, processes and procedures, especially when such an approach has been successful in the past. Even when the business culture is ill-suited to the contemporary need for agile and imaginative decision-making, organizations are extremely difficult to change.

But change they must. Everyone in a company needs to be constantly asking whether the structures, processes and procedures are still having the right results. In the words of Jeff Bezos in his recent letter to Amazon shareholders:

“do we own the process or does the process own us.”

Everyone needs to be brutally honest in making judgments about what processes work and what don’t.

This might seem obvious, but there are many forces that push against this kind of radically self-critical approach to business organizations. Hierarchies, entrenched interests and long-established ways of operating can make it very difficult to institutionalize a new culture.

This is particularly true for organizations that are captured by intermediaries, such as lawyers, accountants, auditors and other advisors and consultants. These intermediaries tend to be conservative, risk averse and reluctant to think “out of the box”.

They usually recommend standardized arrangements and one-size-fits-all “best practice”, rather than offering their clients original, customized and more optimal solutions. In this way, such intermediaries feed a corporate conservatism.

There are several reasons for this.

First, there are a plethora of best practices in the area of corporate organizations and processes, providing intermediaries with a feeling of certainty and comfort. Consequently, intermediaries generally recommend the adoption of “established” best practices when advising their clients.

Second, intermediaries have usually invested considerable time and money in becoming familiar with such established “best practices”, making it difficult for them to recommend new and innovative solutions.

Finally, promoting a new and innovative approach could, if it is not successful, damage the professional reputation of intermediaries.

Yet, business leaders (and their advisors) should dare to be different and deviate from established solutions. They should constantly be asking: Are these structures, practices and processes still working? And, if not, there needs to be an open and honest discussion about what needs to be done to bring about genuine change.

Asking hard questions about the relevancy of organizational structures and processes needs to become an integral part of the corporate culture/DNA.

One way to build this kind of culture of constantly asking hard questions is to re-visit business communication strategies.

(2) Create Dialogue!

Business organizations have historically been closed systems characterized by a lack of transparency and information flow.

Yet, openness and transparency have multiple benefits. For example, they help build “respect” and “trust” amongst stakeholders, and — crucially — the kind of open and honest appraisal of business performance necessary to succeed. Looking at the corporate world and the sense of mistrust that can easily emerge between investors, managers, employees and consumers, building and maintaining a healthy bond is therefore paramount.

Particularly important in this context is the possibility of an unmediated and inclusive dialogue between all of the various stakeholders in a business organization. Most obviously, an open dialogue involves a different style of information dissemination and exchange.

It is not only about sharing information, i.e., the one-way dissemination of information from one part of the organization to another, or from the organization to external actors, such as investors or consumers. It is also about building an on-going and constructive dialogue with these stakeholders.

Such an approach involves acknowledging the potential benefits, such as real-time feedback, that accrue from a much freer flow of information inside an organization, but also between the organization and those on the “outside”.

Such an unmediated dialogue is characterized by a more personalized and unpolished approach to communication. In this way, diverse perspectives can be brought to the table and a “best idea wins” culture can be allowed to flourish.

Clearly, social media (such as LinkedIn, Twitter, Medium, YouTube) is a very useful means to break from traditional forms of corporate communication.

Without stating the obvious, social media is associated with a greater degree of openness. Yet, it is surprising that only a small number of corporate CEOs and other executives have run with social media (even though social media represents a cultural shift in society).

Here, it should be noted, that social media activity has less to do with corporate marketing and branding and more to do with storytelling. CEOs and other executives should use social media to tell the market where they (the business) were, what they learned and where they are going.

(3) Be Relevant!

What then is the ultimate goal of a business culture in which hard questions are tackled in an honest way by all of the stakeholders?

To succeed today, business leaders need to focus on maintaining relevancy in the marketplace. It is helpful to think about why it is that so many businesses fail to recognize and address the issue of relevance. What do these less successful companies have in common?

The short answer? A myopic and short-term focus on profitability and financial metrics.

Most leaders prefer to concentrate on the execution of settled business models built around existing products or services. Executives with a knowledge of, and focus on, innovation and consumer experience often find themselves marginalized from core decision-making processes.

Listed companies, in particular, are prone to put too much emphasis on financial metrics, such as “return on net assets” (RONA), return on capital deployed, and internal rate of return (IRR).

Of course, it is important to focus on profitability and financial metrics.

However, one must realize that an emphasis on measures that aim at quarterly earnings and short-term stock price performance, can easily distract organizations from the important business tasks of identifying strategies that can help them remain relevant in the future.

A business may, for example, still be enormously profitable, even though it starts to lose relevancy with consumers. This happened to Microsoft under Steve Ballmer after he took over from founder Bill Gates as CEO in 2000.

Ballmer oversaw a tripling of sales over the following decade, doubled profits and created a tremendous number of jobs. He acquired Skype and launched Xbox. By any of the traditional metrics, Steve Ballmer is considered a success.

Microsoft under Steve Ballmer (January 2000 — February 2014) — Financial Metrics

But if the purpose of a company is thought of in terms of maintaining relevancy then Ballmer wasn’t successful.

In a blog post, Silicon Valley serial entrepreneur Steve Blank explained that Ballmer failed to understand the most important technological developments that were taking place during his tenure as CEO. He let other, often younger, businesses move in and reap the benefits. Consider search engines (Google), smart phones (Apple), mobile operating systems (Google and Apple), media (Netflix and Apple), and the Cloud (Amazon). In every case, Microsoft failed to recognize a new opportunity.

Stated bluntly, under Ballmer, Microsoft ceased to be relevant. A new world of networked technologies and mobile consumption arrived and Microsoft failed to adapt quickly enough. The company missed these developments, because it focused on short-term financial metrics, rather than designing products relevant for the next generation.

After new CEO Satya Nadella took over, Microsoft changed direction, focusing on commercial cloud services (Azure) and cognitive services (speech recognition, artificial intelligence). From a relevancy-perspective, this new strategic direction was smart.

Microsoft was able to survive by re-inventing itself. Yet, corporate history is littered with numerous examples of companies that have failed to reverse the trend and, as a result, drifted into obscurity. Think of Nokia or Kodak. They collapsed after fast changes in their respective markets rendered their products/services irrelevant.

The Takeaway

And this is the key point. We need to build a business culture in which all stakeholders engage in a dialogue in which hard questions are addressed in an honest way. By doing this, a business gives itself the best opportunity to maintain relevancy in a digital age.

What is interesting is that these three strategies — “dare to be different”, “create a dialogue” and “be relevant” — are also important for other types of organization, such as governments or universities and not just businesses.

But, more than that, they can also help individuals in an age where everyone has to engage with artificial intelligence and robots.

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