Last month we discussed your firm’s business design, a relatively new concept, and said as your key business issues change so should your business design. This though creates an extremely fluid situation that can make your people very nervous. One of the keys in dealing with so much fluid change is to make sure your business is as digital as possible. Once again I borrow from the brilliant work of Adrian Slywotsky and my experience and research.
Being digital in the sense we will use here is far more than having a responsive website, using social media to market your firm and the like. Being digital in our sense means you have a company-wide approach to shift out of physical assets wherever you can and replace them with digital bits of information. Or if you are physically asset laden, overlay bits on top of your these assets. On the surface digital business design is about how many of your processes are conducted on-line. At a deeper level, it is about whether you have transformed the way you do business by taking advantage of the strategic options enabled by digital technologies. This will be more difficult for a construction company than for a firm like eBay. But wherever your firm is at baseline, improvement in moving from “atoms” (physical assets) to “bits” (information) can happen, with huge benefits.
For example, Roberts Express, was an expedited freight carrier (i.e. a superfast delivery company) and was a leader in digital business). Roberts was later acquired but makes a great example. Like its rivals, Roberts must pick up and deliver a wide range of packages – accurately, safely and within hours – despite daunting unpredictable obstacles: traffic jams, vehicle breakdowns, road repairs, wrong directions or addresses, and foul weather. But unlike its rivals, Roberts delivers 96% of its packages on time (many the same day) and boasts a customer satisfaction rating of 1.9 on a scale of 2. The differentiating factor has nothing to do with the atoms. The trucks, phones and computers Roberts owns are the same standard-issue equipment owned by thousands of firms. The differentiators are its speed, skill, accuracy, and flexibility in managing bits – the constant flow of information about deliveries, schedules, truck locations, road conditions, weather, traffic and dozens of other factors. Using a powerful array of “bit engines” to manage all of the bits, including a satellite truck-location system, on-board computers, and a unique statistical package that tracks vehicles and forecasts demand – Roberts captures, manages, shares, and disseminates vital information more accurately and quickly than other delivery companies. Without their total system, Roberts would be just like any other trucking firm – truckers would rely on one way cell phones, and dispatchers would have to wrestle with cards, maps, pens and paper to figure out which truck should go where. Because of the clutter, Roberts would have to buy more trucks and hire more drivers.
Do a quick audit of your firm. What percentage of the following processes or functions are digital and thus more or completely automated?
Selling (0 to 100%)
Delivery (0 to 100%)
Supply Chain (0 to 100%)
Customer Service (0 to 100%)
Billing (0 to 100%)
Recruiting (0 to 100%)
Training (0 to 100%)
Finance (0 to 100%)
R&D (0 to 100%)
Manufacturing (0 to 100%)
Marketing (0 to 100%)
Prudence suggests digitizing along three or four key dimensions first based on your business issues. But if your business could become almost entirely digital, you would move from ….. to on a variety of dimensions:
- Your decision making shifts from guessing to knowing
- The value proposition you offer customers shifts from a mismatch to some degree to a perfect fit
- Information flow in your firm shifts from lag time to real time
- Your customer service model shifts from you the supplier service to customer self-service
- Your employees time shifts from a lot of low-value work to maximum talent leverage
- Your processes shift from fixing errors to preventing them
- Your productivity growth shifts from a normal 10% annual improvement to 10X productivity improvement
- Your organization shifts from a collection of separate silos to an integrated system in which ideas, information and solutions are shared and acted on quickly
The twentieth century has produced powerful breakthroughs in the management of bits: the invention of the computer, the development of high speed, high-capacity systems for storing and transmitting bits, and the emergence of the Internet. All of this has culminated in what Slywotsky calls the “Choice Board”. This interactive on-line system allows individual customers to design their own products and services by choosing from a menu of attributes, components, prices, and delivery and service options. The customer’s selections send signals to the supplier’s manufacturing system that set in motion the wheels of procurement, assembly and delivery.
Our next article will discuss the Choice board concept in more detail and the huge benefits for your firm.
This article is part of a series on what causes a firm’s value to increase
Bill Bigler is Director of MBA Programs and associate professor of strategy at LSU Shreveport. He spent twenty-five years in the strategy consulting industry before returning to academia full time at LSUS. He is involved with several global professional strategy organizations and can be reached at email@example.com.