PRINCIPLES FOR COMPETING IN THE DIGITAL AGE.

Jackson Aneth BAPRM 42565.

STRATEGIC PRINCIPLES FOR COMPETING IN THE DIGITAL AGE.

Digitization;  is rewriting the rules of competition, with incumbent companies most at risk of being left behind.

Here are six critical decisions CEOs must make to address the strategic challenge posed by the digital revolution.

Decision 1, Buy or sell businesses in your portfolio?

The growth and profitability of some businesses become less attractive in a digital world, and the capabilities needed to compete change as well. Consequently, the portfolio of businesses within a company may have to be altered if it is to achieve its desired financial profile or to assemble needed talent and systems.

Companies that lack sufficient scale or expect
 significant digital downside should consider divesting businesses. Some insurers, for instance, may find themselves outmatched by digital players that can fine-tune risks.

Decision 2, Lead your customers or follow them?

In other situations, the right decision may be to forego digital moves particularly in industries with high barriers to entry, regulatory complexities, and patents that protect profit streams.

Between these extremes lies the all too common reality that digital efforts risk cannibalizing products and services and could erode margins.

Decision 3, Cooperate or compete with new attackers?

Companies can neutralize attacks by rapidly building copycat propositions or even acquiring attackers. However, it’s not feasible to defend all  simultaneously, so cooperation with some attackers can make more sense than competing.

Decision 4, Diversify or double down on digital initiatives?

As digital opportunities and challenges proliferate, deciding where to place new bets is a growing headache for leaders.

Diversification reduces risks, so many companies are tempted to let a thousand flowers bloom. But often these small initiatives, however innovative, don’t get enough funding to endure or are easily replicated by competitors.

One answer is to think like a private equity fund, seeding multiple initiatives but being disciplined enough to kill off those that don’t quickly gain momentum and to bankroll those with genuinely disruptive potential.

Decision 5, Keep digital businesses separate or integrate them with current nondigital ones?

Integrating digital operations directly into physical businesses can create additional value for example, by providing multichannel capabilities for customers or by helping companies share infrastructure, such as supply chain networks.

However, it can be hard to attract and retain digital talent in a traditional culture, and turf wars the leaders of the digital and the main business are commonplace.

Moreover, different businesses may have clashing views on, say, how to design and implement a multichannel strategy.

Decision 6, Delegate or own the digital agenda?

Advancing the digital agenda takes lots of senior management time and attention. Customer behavior and competitive situations are evolving quickly, and an effective digital strategy calls for extensive cross functional orchestration that may require CEO involvement.

 Relying on chief digital officers to drive the digital agenda carries some risk of balkanization.

Some of them, lacking a CEO’s strategic breadth and depth, may sacrifice the big picture for a narrower focus say, on marketing or social media.

Others may serve as divisional heads, taking full  responsibility for businesses that have embarked on robust digital strategies but lacking the influence or authority to get support for execution from the functional units.

Alternatively, CEOs can choose to own and direct the digital agenda personally, top down.

That may be necessary if digitization is a top three agenda item for a company or group, if digital businesses need substantial resources from the organization as a whole, or if pursuing new digital priorities requires navigating political minefields in business units or functions.

IN NUTSHELL, Regardless of the organizational or leadership model a CEO and board choose, it’s important to keep in mind that digitization is a moving target. The emergent nature of digital forces means that harnessing them is a journey, not a destination a relentless leadership experience and a rare opportunity to reposition companies for a new era of competition and growth.