Many incumbents underperform digital native companies. As the pace of change accelerates, speed will be of the essence to ensure that current advantages are not eroded, according to Oliver Wyman analysis.
The success of digital businesses in transforming established markets is out in the open. However, what about the incumbents which aren’t digital from birth? The third volume of Oliver Wyman CMT Journal delves into the digital journey of such incumbents.
Incumbents have several advantages like established brands, markets, knowledge, customers, suppliers, cash flow etc.; however, they have their share of problems as well. They have the baggage of legacy to deal with, which makes competing a challenge. Transformation isn’t an easy task for such organisations but the ones who make the cut surely reap rewards that make the cumbersome journey worth it. The research has unveiled six patterns that set the leaders apart from the laggards and set out the playbook for digital success. Incumbent leaders envision how their industry will evolve far ahead, define their strategic positioning, and act to transform their business by:
Reinventing existing processes through digital thinking, reducing back-office operations
Systematically transforming underlying systems to enable digital action
Developing next-generation data approaches in every area of the business
Building structural and cultural agility within the organisation, including recruiting and developing digital talent
Creating capabilities to access, nurture, and launch innovative offerings
Growing from today’s strengths to eventually become a truly global business
Such leaders have the first wave of digital transformation covered and are now investing in long-term capability transformation.
1. Digitise what you have
The future is all about putting customers in charge, empowering them to choose what they want and how and when they engage. Leaders recognise that digitisation goes way beyond automation. They fundamentally rethink processes, turning them upside down starting with data. They zero base their design to meet only genuine customer needs, carefully weighing every step. By following this approach, the leaders can move from a situation where 1% of customers are serving themselves to where >30% are, and from one where manual interventions are the norm to one where they are the exception. This reduces opex by half.
2. Decouple old and new technology
For incumbents, IT systems are all too often a brake on digital process, as are the siloed organisations typical of incumbent IT. Replacing legacy technology often comes with the fear and risk of failure, and lack of immediate benefits.The way leaders solve this dilemma is by inserting a mid-tier layer between the front end and the core; and creating a new digital front-end organisation and ownership for the mid-tier itself. This allows for the most appropriate development approach. Decoupled environments allow for the rapid deployment of new products and applications at the points where they matter, i.e. at the points of direct engagement of the business with its clients or employees.