WHAT’S AT STAKE?

SLOW DECLINE OR RAPID FAILURE

The Risks Of Maintaining Yesterday’s Business Practices

SEIZE THE OPPORTUNITIES

Outpace Disruption, Drive Business Outcomes, Strengthen Relationships

SLOW DECLINE OR
RAPID FAILURE

The Risks Of Maintaining Yesterday’s Business Practices

Given the wealth of both internal and external pressures bearing down on companies, failure to transform is simply not an option. Reluctance and delays to transformation efforts can open the door to any number of serious threats. Organizations must move quickly to avoid:

Risk of negative impacts from internal and external forces. Those who fail to act risk increased security breaches, difficulty retaining and attracting valued staff, limited ability to demonstrate sustainability, damaged brand and reputation, disappointed customers, and trouble overcoming regulatory compliance hurdles. If these risks come to fruition, they lead directly to lost market share and declining revenue.

Inability to handle disruption. Failure to act can also make it harder to respond to disruptions, such as those related to inflation, the workforce, supply chains, natural disasters, and public health crises. Professor Venkatraman urges leaders to ask themselves, “Are you prepared to weather the portfolio of likely events that you’re going to face over the next two to three years?” and “How good are you relative to your competitors who are facing the same shock?” Those who fail to heed the call of digitalization will find themselves unable to adjust in times of uncertainty.

SEIZE THE
OPPORTUNITIES:

Outpace Disruption, Drive Business Outcomes, Strengthen Relationships

While the negative impacts of inaction are many, there are significant advantages for organizations that seize this opportunity to take action.

Build resilience. Digital transformation builds foundational resilience to recover from unexpected shocks. This means companies have the agility needed to respond quickly and effectively when disruptions occur. To build resilience in their supply chains, consumer-goods companies can create end-to-end transparency, invest in digitization, improve communication and collaboration, embrace e-commerce, and build talent.⁴¹

Drive better business outcomes. Digital transformation creates efficiencies in a company’s day-to-day operations to minimize costs and allow human resources to focus on higher value work. It also opens the door to new business opportunities. A 2021 Boston Consulting Group survey showed that digital transformation “generate[s] clear and significant financial impact. On average, companies that addressed... [certain] success factors reported a 21% EBIT increase in the businesses within the scope of the transformation compared with only a 10% increase on average for those companies that did not.”⁴²

Advance reputation. Just as failure to act can lead to reputational harm, those organizations that digitally transform can strengthen relationships with employees, partners, potential hires, regulatory authorities, and consumers. If not transforming puts all parties at risk, investing in digital can build trust. Organizations looking to manage their brand reputation should therefore focus on their transformation efforts.
Make sustainability transparent. Digital transformation can help companies make progress on sustainability initiatives by making the data available and making impacts transparent. To enable this level of transparency, companies need to develop a cradle-to-grave view of their products, from the origin of all materials, ingredients, and components to consumption and recycling or disposal. Digitization of the supply chain is necessary to provide this view. “It’s time for executives to take an end-to-end view where digital is the catalyst that [brings] sustainability [data up to par with other company data].” Professor Venkatraman says. Sustainability reports should be truly transparent and backed up with data so they are “subject to an equal level of audit scrutiny similar to a financial report.”
Streamline regulatory processes. Digital transformation can help ease regulatory compliance by making data more available and processes more transparent. Transformation that drives efficiency can also speed up time to market. Streamlining regulatory review is one example. Having the right systems in place can reduce the rounds of back-and- forth with regulators before a new product can be brought to market.

You have to be ready to disrupt or be disrupted.”

Vinod Galani, Digital Transformation Strategist, JP Morgan

THE STAKES DIFFER FOR DIGITAL NATIVES AND THEIR COMPETITORS

Companies must understand that the competition includes new, disruptive entrants that create their own set of challenges for businesses undertaking digital transformation.

Digitally native companies are everywhere in all industries. New, innovative companies are popping up all the time, and no industry is exempt. To compete with these disruptors that aren’t bogged down by legacy systems, overhead, or cultural resistance to change requires efficiency, a deep understanding of your customers’ needs and motivators, and near-real-time information to execute rapidly.

Risk aversion is a big problem when competing against digital native competitors. This is a difficult point for many business leaders to accept as it contradicts many of the practices that made these businesses successful originally. Unfortunately, in the digital age, it’s riskier to not move forward. Jeffrey Schaubschlager notes: “Someone once asked [Ernest Hemingway], ‘How did you go bankrupt?’ And he said, ‘Very slowly, then very quickly.’

And that’s what happens to companies that ignore digital transformation. You lose your market share very, very slowly, then very quickly.” Those who ignore digital transformation will lose their market share. And the nature of growth being slow means that when you try to recover in the midst of disaster, you’re going to fail.

No one is exempt from the digital imperative. It’s not just legacy companies that need to digitally transform. Digital natives, considered disruptors ten years ago, are no longer the new kids in town. As no one is immune from the forward march of progress, both these younger companies and 100-year-old giants must evolve or risk falling behind.

The nature of culture is slow, and to try and recover when you’re already underwater doesn’t work for a lot of companies.”

Jeffrey Schaubschlager, Principal Consultant 3pointsDIGITAL