Digital Survival Guide
No matter what business you’re in—clothing, health care, transportation—you need to start thinking of your company as a digital one, says Venkat Venkatraman. The David J. McGrath Jr. Professor in Management, who has advised IBM, BP, Ericsson, Merck, and many others, is the author of The Digital Matrix: New Rules for Business Transformation Through Technology (LifeTree Media, 2017). In the book, he shows companies how to create new business models and partnerships around digital technology. “Digital technology,” writes Venkatraman, also a professor of information systems and strategy & innovation, “is critical to every industry and every company, including yours.” Here are his exclusive tips for Everett readers:
Everett: What’s your goal with The Digital Matrix?
Venkatraman: The main reason I wrote the book was there are a lot of managers that went through business schools in the 1990s, and even the early 2000s, that really didn’t have much exposure to why they should think about information technology differently from the past. It‘s easy to look at IT as a very specialized function that can be delegated while the middle managers and senior managers worry about business.
But if you look at the last seven, eight years, you realize that there are companies like Amazon, Apple, Google, Facebook, IBM, and Microsoft that not only produce information technology products, but are also starting to influence the way we live, work, and play, or the way we learn and innovate and transact. They actively shape what’s happening in different industries. Apple is a player in telecommunications and music. Google is no longer just about search; it could be a major player in the future of the automotive industry.
I saw these digital giants, as they’re called in the book, as becoming an important influence on every industry, whether retail or pharmaceutical or health care or financial services. So I really wanted the book to be a wake-up call for executives in traditional businesses who may not have thought about the pervasiveness of digitization. In the next five to seven years, these digital giants will influence strategies of organizations, and my book is really to get traditional businesses to recognize that and start responding systematically—failing which, they’ll go the way of BlackBerry and Nokia.
Could you give an example of how these digital giants will influence the strategies of other organizations?
If you look at the automotive industry, you’ve got the traditional automakers—Toyota, Honda, BMW—and then suddenly Google comes out with self-driving cars, and Tesla comes out with an electric car with rapid recharge, and Uber redefines the automotive industry. It’s less about products and services and much more about how to solve the transportation problem of going from point A to point B. Uber, Tesla, and Google are essentially trying to redefine the automotive industry using machine-learning algorithms and analytics, which the traditional industry players like GM, Ford, and others do not have in terms of their competence. So, they have to go from being a manufacturer of automobiles, as they’ve been for a hundred years, to being an important player in solving the transportation problem. In doing so, they have to both compete and collaborate with Google and Uber.
What’s one big thing companies can do as they try to reinvent themselves so that they’re competing and collaborating with these digital giants?
Think less about the physical products and services that you’ve been good at, and more about how to solve customers’ fundamental problems and how digital technology and the functionality can help you solve them differently. We used to think about a phone as a way to make calls, whereas phones today are a means of instant communication, commerce, access to information and entertainment; instant ways of working and learning.
What’s one big “don’t” for companies trying to move in this direction?
Don’t think that your industry is somehow not digital. And do not believe that the talent that you’re trying to attract is only going to go to you or to companies that are historically like you. That talent is also being attracted by the Googles, Facebooks, and Amazons of the world, because the talent really is at the intersection of business and technology. That means you’ve got to step up and think about the talent profile of the people that want to come and work for you in the same way as these digital giants are doing.
We see that already: GE now calls itself a digital industrial company, and their biggest new growth is in their offices in San Ramon, California, where they’re trying to hire a thousand software engineers who otherwise would go to Google or Facebook or Netflix. Ford has opened a Silicon Valley outpost to attract software engineers to work on cars. TAG Heuer, the traditional, high-end Swiss watch company, has opened up an office in Silicon Valley to go after the same talent that knows how to design elegant watches that can do the things that FitBit, Apple, and Android watches can.
Is there any evidence that the changes are working?
What I’m looking for is, “Does the senior management team recognize that what got them to where they are as a successful company is not enough to get them where they need to go?” I see the president at GE starting to realize that and reallocating resources in a significant way. And so, that’s an early indicator that the company has recognized that digitization is going to have an impact.
In my book, I lay out three different phases of this kind of transformation. The first is what I call experimentation at the edge: a commitment to start looking at digitization that could impact a company tomorrow and allocating some resources to it. The second phase is what I call a collision at the core, when the old business models and the new business models collide. We see that right now in the automotive industry. And then the third phase is the reinvention at the root of the organization itself. An example is the reinvention of how we consume entertainment. Netflix is being integrated into the Comcast set-top box, Apple gives us Apple TV, and we can use our voice to ask for a show we want to watch. We are no longer defining entertainment based on the traditional channels.
I’m really compelling executives to think that these digital companies are going to have an impact faster than they think. And I’m telling them, “Don’t assume that success in the next five years is going to be guaranteed.”
I hope that our students and graduates realize that this transformation is going to have an impact in a far-ranging set of industries. It really requires businesses to step out of their comfort zone of saying, “We’re not really a technology company,” or, “I’m not really a technology professional,” and instead, to actually embrace it, understand it, and deal with it, just like they have to deal with any other dimension of business that they’re not an expert in. As a leader, you need to recognize the shift, and put in place effective responses. Otherwise, we will see a lot more companies going down in flames.
This interview was edited and condensed for clarity.
