I recently read John Mancini’s CMSWire article about whether companies should be playing offense or defense as it pertains to their digital transformation initiatives and I thought it was a great analogy. The subject matter is worth exploring further here. In the article, Mancini alludes to a recent AIIM survey which found that:
- 45% of organizations said their organization was at significant risk of disruption in the next two years.
- 79% said that in response to this threat, digital transformation was “important” or “very important” to their organization.
While it’s easy to mention examples of ways that radical digital transformation changed and disrupted industries, the term isn’t easy to define because it may have different meanings for different industries — and even different companies within those industries. Digital transformation for a manufacturing company looks and feels different than digital transformation for a construction company, for example. A manufacturer might be focused on digitizing the quality control process and removing paper-based, manual processing of shipping documents. The construction company has different needs; they probably want to manage build projects more efficiently and control the flow of information throughout a build.
The common thread, though… Digital transformation refers to dramatic changes in the way organizations employ technology, information, processes, and people to improve workflows and serve customers.
That definition does not explain whether digital transformation for your organization requires an offensive or defensive strategy or even which investments to make. As with most business questions, there isn’t a one size-fits-all answer for everybody.
What Can You Learn from Good and Bad Examples of Digital Transformation?
Some companies and industries face serious threats if they don’t make dramatic and aggressive changes; however, other kinds of companies would simply benefit taking steps to modernize in order to save money and work more efficiently. To understand these differences, it let’s consider a few well-known examples.
By now, everybody knows about disruptive companies like Netflix and Uber. In hindsight, it’s easy to say that Blockbuster should have entered the streaming market earlier and that taxi companies could have begun collecting and using information to provide a different experience for customers. On the other hand, you can also find plenty of examples of companies that wasted their efforts with an investment that they either did not need or had not thought out very well.
Harvard Business Review spotlighted the case of J.C. Penney’s initial investments in modernization that resulted in big drops in revenues and stock price. They did invest in their stores and their online retail site to attract younger buyers. At the same time, the company made the mistake of neglecting to align their stores with their online channels, running them as entirely different entities. Instead of using information about customers and the retail market to truly deliver an experience young buyers wanted, J.C. Penney first pursued transformation for transformation’s sake. After suffering large losses, the company returned to profitability after choosing to invest in better transformation strategies, such as integrating physical outlets with their website and mobile app.
Should You Approach Digital Transformation with an Offensive or Defensive Strategy?
Your takeaway from all these stories about digital transformation experiences can give you clues about the best tactics for your own company and industry. Just as there’s no one right answer for every business or industry, you will probably find that different aspects require different approaches.
In the CMSWire article, Mancini goes on to divide digital transformation initiatives using Geoffrey Moore’s Zone to Win model. The four basic zones are:
- Performance: This describes more defensive actions to help improve workflows, collaboration, and other areas that impact a company’s performance.
- Productivity:Relate productivity to items that impact revenue and profit, such as attracting more sales and increasing brand loyalty.
- Incubation: Incubation refers to your efforts to truly revolutionize your businesses or even offer news ones to try to stay ahead of digital transformation in your industry.
- Transformation: In transformation, your business will use advances to deter threats or gain a competitive edge.
Obviously, you can regard incubation and transformation as more offensive moves. You would use dramatic improvements in processes and technology to remain ahead of your competition. While you may enjoy big wins with offensive moves, these areas probably cause you to take the biggest risks because of the size of the investment and the change involved. When you look at performance and productivity, you may explore more defensive strategies that simply help you enjoy greater profits and reduce costs. For instance, you might consider taking more defensive steps to serve customers by empowering employees with better tools and processes.
In any competitive field, defensive moves may simply help you maintain the status quo in your field of competitors. At the same time, they usually require smaller investments and risks. Of course, defensive moves may be critical because you certainly don’t want your company to fall behind.
Defensive and Offensive Digital Transformation Actions May Complement Each Other
As you consider your digital transformation strategy, you should understand the difference between offensive and defensive steps. Still, you don’t have to think about them entirely in isolation. For instance, you might consider implementing a better information management strategy as a defensive move to help your company improve important business aspects like communication, collaboration, data quality, accessibility, security, and work processes.
At the same time, lots of businesses have leveraged better information management to uncover the true market value of their data. They could never do this before because they didn’t even know what they had or found it difficult to access. By improving information quality and accessibility, they have uncovered transformative ways to use this information to improve revenue. As examples, companies might use better and more accessible data to improve business intelligence or even to fuel a new service or product.
As a first step, you might explore the many ways that intelligent information management will drive the most sensible type of digital transformation in your business. Here at M-Files, our technology helps our customers manage, process, and secure all types of information, including documents, emails, graphics, and customer records. Your company can use, analyze, and share the information you hold, even if it’s not stored in a standard format.