by Cory Crosland

Digital businesses are shaking the foundation of traditional management

May 04, 2016
Enterprise ArchitectureIT LeadershipIT Strategy

Old-school management thinking will not be enough to develop truly innovative digital business solutions.

The era of the digital business has arrived and it has rocked traditional business owners and executives left in its wake. Global technology and financial analysts estimate that trillions of dollars are up for grabs over the next several years. This has legacy businesses scrambling to understand the opportunity dynamics and navigate the risks presented by this tectonic shift in the marketplace. In this ever expanding, tech-centric environment — “old-school” management thinking will not be enough to develop truly innovative digital business solutions.

The following examples highlight the impact of absent digital leadership in the c-suite and how competitors exploited the opportunity. If they were lucky, they just lost market share. If they weren’t so lucky, their businesses were eliminated.

Gillette & Dollar Shave Club

Gillette, a component of Proctor and Gamble, was surprised in 2012, by the success of Dollar Shave Club, which did produced its own razors, blades or accessories. In a very short period of time, it was able to capture a point and change of market share, which had a serious impact on Gillette’s bottom line.

Dollar Shave Club successfully created a digital business based on convenience and cost savings, and launched it with a humorous viral video that took Gillete executives completely by surprise. Additionally, it fostered relationships directly with customers, bypassing legacy channel partners. This continues to provide the Dollar Shave Club with a wealth of purchasing, usage and psychographic information about its customer base. It also generated a stronger brand experience for customers.

Its creation and success put Gillette on the defensive. For the first time in many years, Gillette was the reactionary company instead of the industry trailblazer. Gillette was forced to create its own shave club digital business. Had Gillette’s CIO, for instance, been a key member of the management team and thinking like a digital leader, it is likely that Dollar Shave Club would never have had a chance to exist.

Netflix takes on the world

For those of you that remember, at one time, Blockbuster Video was the unquestioned leader in video rentals. Netflix was originally created as a DVD-based home video delivery rental service, that successfully hobbled Blockbuster.

As a digital business, Netflix has been and continues to be incredibly nimble. It successfully transitioned from being an analog-based media entertainment distributor to a streaming media recurring revenue generator. It has now evolved to also develop original content. Using digital insights into their customers and marketplace, the company has fundamentally changed the manner that people consume shows (who doesn’t love a good multi-episode binge session?).

The effects of Netflix’s digital business are even beginning to change the way new content is developed for the entertainment industry. As consumption patterns continue to move towards binge watching, Netflix and other content developers are moving to embrace richer and more complex, ongoing storylines.

CEOs of Netflix’s competitors were unable to identify these digital opportunities that would eventually disintermediate their businesses and provide Netflix with an almost limitless path to growth and profits. TV and cable networks, studios and other content creators and distributors must start challenging their CIOs to look and think ahead of their current businesses, providing industry vision before these digital market shifts are dictated by others.

Digital markets demand a new management skill set

As we continue to transition to an ever increasingly digital economy, the next generation of business leaders must possess a distinctively new skill set and approach to business.

With their technology background, CIOs are the best positioned of all senior management to capitalize on the global trend toward digital business — from imagining the possible to perceiving potential threats. Just as the digital transformation offers myriad opportunities for businesses, we find a unique window of opportunity for CIOs to step into the CEO chair and lead their company successfully into the future.