In my last post,” I urged the CIOs/CDOs to take a hard look at their current business models and embrace change by building competent strategies that blur the digital and physical worlds of their businesses. Ignoring this need or planning to act when the market shapes up is no longer an option—the Ubers and Teslas of the world are already engaged in defining new business models that are overtaking existing business models. I also suggested a DA2RO approach designed to help businesses take a strategic yet tactical approach to building a proactive digital business strategy.
In this post, I’ll highlight a critical factor that is often missed (or ignored) in implementing a proactive digital business strategy and competency. First, let’s agree that a digital business continuously re-creates customer value because that can be replicated by competitors. Companies that fail to continually create competitive value will likely watch from the sidelines as new entrants that do so succeed.
Typically, organizations approach strategic planning as an exercise of defining goals and metrics that lead to defining functions, capabilities and governing resources. It is extremely rare that strategic planning involves looking into how these business functions and capabilities create value through cross-functional business processes. CIOs/CDOs should take a look at their organizations and ask: “Are my organization’s senior leaders and line-of-business managers focused on managing resources rather than managing value?”
If the answer is a resounding yes, then you are one among the vast majority of organizations that have short-term financial pressures from stakeholders to focus on return on investment and return on assets. This focus distracts from the reality that neglecting the details of value creation can damage financial performance almost permanently. Therefore, it is essential to not just understand the value chain, but also to make it adaptable and dynamic.
Plenty of examples confirm my claims:
- 1Coursera, a provider of almost free online courses, is disrupting revenue stream of higher education institutions. Potential students question the value of paying for expensive full-time university courses when very inexpensive online ones are available.
- 2CProgressive Insurance came up with a device to stream driving performance of policy holders, facilitating return on insurance to policy holders to increase market share.
With value creation established as a critical factor in implementing a proactive business strategy and competency, CIOs/CDOs can begin developing a value creation map. In his book, Strategic Performance Management, Bernard Marr describes a simple technique to map an organization’s value proposition to how it relates to the strategy. There are also consultants who specialize in stepping companies through this process.
CIOs/CDOs implementing a proactive digital business strategy must make sure they focus on value creation as a primary means of digitization, using value mapping to constantly check their misalignments so they consistently create value for customers.