Digital business creation guided by conviction and experimentation

Step into the digital business building

At its core, the challenge of digitization is not the adoption of any particular technology. Rather, it is about the strategic consistency with which companies deploy this technology in support of a digital business model. Businesses need to focus on building businesses that are fundamentally digital and can scale continuously, says Anand Ganapathy, who leads the EY-Parthenon Digital Business Building practice. “Digital transformation needs to happen at scale,” he says, “but the strategy for how to do it needs to be smarter, faster, cheaper and better.”

“To stay competitive, organizations need to rethink their business models to extract value from digital,” says Ganapathy. Re-engineering a business around digital requires thinking strategically about “how they can operate as digital-native businesses, so they can be more agile and scale faster and continuously to outpace their peers and handle disruption from new entrants” , he said. “They need to understand the anatomy of a digital business to energize their core business and build new businesses.”

In the traditional strategy playbook, says Ganapathy, companies take a “waterfall” approach to change in which top management designs a transformation plan and then hands it over to operational teams to implement over several years. This approach fails in today’s constant flow environment. Businesses must be continually on the move to stay ahead of competitive threats and disruptions and to take advantage of new opportunities. Agile working approaches, long used by technical teams, are becoming useful tools for product development and project management because they can drive strategic change at the speed of digital business.

Building a digital business, Ganapathy explains, is a “continuous and flexible process, leveraging agile experimentation in a rapidly changing business environment where players come and go, rules change, and endpoints are never set. individually”. This is a critical change, he advises, because companies today cannot spend five years implementing a change agenda.

Building belief

While every business is different, Ganapathy emphasizes several fundamental principles for building a digital business. The first is to build belief across the business. While strategy leaders like to focus on big ideas, Ganapathy cautions that they also need to spend time and effort building trust among their stakeholders to implement those ideas.

Startups and founders have experience in lean and harsh operating environments in their early years. Conviction carried them through, enabling them to overcome threats, fight fires and lead teams through uncertain waters. This gives them a resilience that guides them through subsequent challenges or reforms.

CEOs of incumbent or well-established companies, on the other hand, may lack this visceral experience. Consequently, they may also lack the conviction to carry out a transformation program that involves risk, disruption and opposition, whether from shareholders, staff or customers.

One way to build belief in these types of businesses, says Ganapathy, is to focus on a company’s endowments. Granted, traditional businesses have some disadvantages compared to startups or digital natives: they may face legacy infrastructure, more defensive cultural mindsets, and a digital skills gap. But they also have strengths of their own that they can rely on.