Organisational myopia stifles true digital transformation

The non-platform companies have realised the far-reaching implications of the platform business models and some are defending their market share by creating their own platforms. The charge is led through “digital transformation programs” but, surprisingly, most companies still struggle to defend their turf and transform themselves. While most leaders are now aware of what needs to be done, major challenges occur during the implementation and integration of platform business models into the existing organisation.

Generally, the fundamentals and vast opportunities offered by digital platforms are usually well understood. As part of their “digital transformation” initiatives, companies need to set priorities around better customer understanding, enhanced proximity, exceptional customer experience and new service/product offering.

Beyond technology, the leaders also understand the need for transforming their organisations and relinquishing obsolete business practices, processes and models. They are transforming their organisations, bringing in agility, speed, flexibility and innovation akin to their tech counterparts.

So why is success still elusive? Armed with the realisation of limitless possibilities of digital platforms and their own aspirations for change, the transformation journey should have been relatively easy. Astonishingly, most companies fail to successfully translate their aspirations into reality fast enough. 

The answer lies in organisational “myopia”. It is the rendition of the organisation’s bold objectives into “business as usual” initiatives.  Most companies create end-to-end processes with clearly defined roles and responsibilities to ensure that strategy, product/service development, distribution and sales are delivered. It is this very operating model that fosters a short-sighted mindset and a culture of compliance to rigid processes and rituals focused on established ways of working.

The moral justification for these rituals is usually deeply rooted in success stories stemming from previous periods of growth. It makes it all the more difficult to propose new alternatives – however logical and successful they may be elsewhere.

Traditional companies who now want to build similar digital businesses based on platform models face the difficult situation of running two different business models and processes concurrently; they must run the existing declining business model while simultaneously conceiving and growing a new platform-based business. Even a company like Apple has faced a similar dilemma with their music business. The entry of Spotify and Google into the music industry has completed the shift towards a subscription-based model. Apple had no option but to give up its iTunes business in favor of Apple Music, its subscription business.

Why is it so difficult to implement what is common knowledge? The main issue in a nutshell is the effect of mandated myopia which thwarts the effective implementation of new platform-based businesses.

Rather than forcing the integration of successfully incubated platform concepts into the existing organisation, many successful transformations concentrate on ring fencing the old business and letting new business models and leadership expand. The key to success is the identification and enablement of people who have the vision and can translate an idea into business.

The market now has many successful examples of such transformations. When Microsoft acquired Linkedin, it could have been integrated in the overall portfolio as just another HR solution. Instead Linkedin was left to keep its own culture and promote digital business models closer to its own core.

In the end such defining decisions will be what it takes to prevail in the digital era!