12152017

Digital vs. The Weight of History: Revamping Your Business for the Digital Age

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Most businesses have a heritage to cherish and a legacy to manage. Your strategy for adapting your business to the digital age must take your past into account, but it should also reshape your future.

Most of us are employed by companies that precede digital business. Accordingly, our companies typically have both a heritage to cherish and a legacy to manage. This has become one of the most pressing issues of the digital age, as managing what we inherited from the past is inextricably linked to how we reimagine and re-engineer our business for the future – especially in terms of our ability to compete and win in the marketplace.

One of the definitions of heritage is status acquired by birth, and this makes perfect sense in this context. A new Rolex product, born of the Rolex brand, has perceived value before its features and functions are even known. This is a good example of the positive side of the balance sheet of company history, which is effectively how I am defining the term heritage here.

Many established companies would also consider their culture to be a vital part of their heritage, and while we have known for many years that culture is fundamental in determining or constraining strategy (“Culture eats strategy for breakfast/lunch/a light snack.”), what has become apparent recently is that culture is an essential ingredient in fostering digital transformation. Interestingly, both brand value and culture are intangibles, and much of the value that established companies are seeking to preserve as they transform is intangible. 

On the other side of the balance sheet of company history, we come to the many tangible items that established companies have, and here I am using the term legacy to represent the outdated, a usage that started in IT with older computer systems. Businesses that were not born digital will have more buildings, assets and materials than their digital equivalents, and each of these represents costs, in the form of ownership or hire, and complexity in the form of associated contracts, applicable regulations and so on. Of course, we humans are also tangible and our pensions, health care, and all the other elements of our employment contribute significantly to both the cost and complexity of the business that has to be managed.

While it is obvious that excessive costs and complexity are undesirable in business, the complex elements also have the highly undesirable side effect of making the business slower both in its operation and in the pace of change it is capable of. This adds yet more degrees of tilt to a competitive playing field that is already far from level.

In addition to seeking sources of innovation, businesses are now exploring how to manage the impact of their past, and in doing so, are attempting to maximize the value of their heritage while minimizing the drag of their legacy. This is reflected in how digital is being pursued organizationally, which is one of the most fascinating elements of the transformation. 

Some companies are dividing the work between different groups; for example, with IT being tasked with cleaning up the legacy of the past and reducing costs while a newly formed innovation team is focused on the development of future. In other organizations, the CIO is responsible for a digital strategy to deliver both outcomes, and another variant is a head of digital who coordinates activities across digital business units, working closely with IT. What is certain is that whatever model companies choose, the digital strategy they pursue must address our past as well as reshape the future.

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