Being a digital leader should rarely be a strategy in itself.
Digital should be about improving things like a great customer experience, efficiencies, capturing data for insight and engagement.
Arguably, a business can only be true ‘digital leader’ if it is a successful digital business, and several stand out!
However, many legacy and analog businesses can and must improve their digital capability to remain relevant, and possibly survive; although they are unlikely ever to become digital leaders unless they fundamentally transform their business model.
Here I share some thoughts about what a digital leader looks like and some questions to consider for your own business.
What does a digital leader mean?
Of course, I Googled this phrase to see how others are looking at this. I rather like Christopher Ratcliff’s definition of ‘What is Digital Leadership?’, he says:
“To be a digital leader you need to not only excel at every discipline touched by digital within your organisation but also set an example to other organisations and individuals who are struggling with digital transformation themselves.”
But businesses have to take care about having an ambition to be a ‘digital leader’, or the extent that they are prepared to invest and change to achieve it. Digital investment is certainly critical for all companies, however to be a ‘leader’ is not right for every business. Ratcliff states, digital leadership is about digital excellence in every area of your business when you may only need to focus on one area, for example the customer experience.
Well-known digital businesses like Uber, Airbnb and Atom Bank were set up from scratch in the last few years (Uber in 2009; Airbnb 2008; Atom Bank in 2014) and have had significant technology advantage against their competitors because they started with a clean sheet. The challenge is to now convert this to sustainable competitive advantage and scale.
Lisa Wood, chief marketing officer at Atom Bank, sums it up neatly: “When I joined Atom, one of the key draws was having the freedom to create a bank that really was customer-obsessed, one that was taking decisions day in, day out, standing in the shoes of a customer. Possibilities of what could be, not what’s gone before. A clean sheet. No constraints.”
This is a luxury. Other banks can’t just dump their history or legacy systems. And if you want to see just what the banking sector has created in the way of history, look at this brilliant video by Tandem Bank (do watch it – you’ll recognise many shared experiences). Where do you begin in trying to sort out these problems?
What is the digital driver for your business?
When you are evaluating and comparing digital leaders to your business, you also need to check what their success factors are. Recently launched digital businesses are focused on capturing data and customer engagement to build future value, with many not currently making profit.
Look at Twitter. Earlier this year, Fortune magazine reported “While [Twitter’s] revenue has grown over the last several years—revenue exceeded $569 million in the third quarter, up from $361.3 million in the same quarter in 2014—profits have stayed beyond its grasp. In the third quarter, alone, Twitter lost nearly $132 million.”
Similarly compare Funding Circle to traditional lenders. The Telegraph reported on their latest results last May 2015, “Accounts for the peer-to-peer lender show that its revenues grew by 122pc last year to £11.8m. However, losses increased from £4m to £10.9m as it almost doubled staff numbers.”
The value in many digital businesses is about the belief and expectation of future valuation: an essential difference between an equity-based strategy and a traditional trading-based strategy.
Which sectors are likely to have digital leaders?
There are some obvious candidates for sectors with digital leaders – as we have seen above, FinTech is one. But everything seems possible these days. Who would have thought a taxi firm could be a digital leader (Uber) or that you could create a global phenomenon from persuading people to rent out a spare room (Airbnb)?
Virtual Reality (VR) is changing the game again. Marriott Hotels has launched its pay as you go virtual experiences – as the image on the right suggests you can now virtually go to Hawaii for your honeymoon with it!
Digital allows us to think of completely new ways to live our lives – many of which initially seem completely mad to the majority, but can quickly become the norm (Facebook is just one example).
Is ‘PR’ around some businesses justified?
The noise around digital businesses is both a risk and an opportunity for traditional businesses.
Businesses like Funding Circle are sexy and in vogue and they attract significant media coverage because of this. The current notice on their website says 48,830 investors have lent £1.2 billion to businesses since 2010. Averaged out, they have made loans of £200m a year. The scale of their business is tiny compared to traditional lenders – this is the size of just a few VC (venture capital) deals.
The scale of headlines of digital businesses is out of proportion to the trading scale and commercial performance of most established businesses. One assumes that it is the market changing characteristics that attract the media interest and the potential future valuation for investors.
Some of the key questions to consider when looking at digital in the context of your business strategy are – do you want to be a market leader or a digital leader; are you focused on creating trading profit or asset value from data and customers; should and can you be digitally excellent in all areas of your business or some areas – such as your customer experience?