This is the second installment of a three-part series. Read Part 1 here.
There may never have been so sudden, so shocking, so comprehensive a disruption to business as what’s happened since the middle of March. While the optimist says this is a relatively small chasm in an otherwise healthy growth curve, the realist says that business may never be the same. And both may agree that this disruption has created an opportunity for many companies to become more germane, connected, and valuable to their customers. Previously in this space we talked about the first step in finding a way through the chaos: build the culture and double down on digital.
Step two is to reframe the problem entirely. In the mid-90’s, as the internet began to consume our culture, many businesses decided that if they were going to be relevant, they needed a website. A decade later they realized their website was synonymous with their brand. It was the front door to their business. It was central to their marketing strategy and their growth.
The cycle repeated itself in the late aughts as the mobile web gave rise to digital products and services that were suddenly ubiquitous, inextricable from the human experience. This transition saw businesses again scramble to maintain their relevance, often without clear vision, ownership, or cultural mandate. Digital transformation initiatives often took the form of new digital workflows, communications, and platforms, but they seldom went to the core of the value a business was delivering to its customer. The goal was to participate in the digital economy. Not as a fan on the sideline, but as a team on the field.
Some companies took this to heart. In 2004, Lego, the Danish toy-maker, was on the brink of bankruptcy. For them, the choice was clear. They could either treat digital capabilities like holiday decorations, stapling them to the outside of their 70-year-old business, or they could reinvent their business entirely with digital at its core. But they chose the latter.
They created award-winning content for television and movies. They built applications like Digital Designer that gave their fans a stake in the product. And made wildly popular console and mobile games. They cultivated an extremely motivated fan base that generates far more content online than the company ever could itself. And the payoff was huge. They quadrupled their revenue in under a decade and overtook Matel to become the world’s leading toymaker. They now compete head-to-head with companies like Microsoft and Sony because they relentlessly innovated in their product, their content, their marketing, and the digital experiences they are delivering.
The present crisis has made the lessons of a company like Lego abundantly clear. Digital transformation is not about a better website or a new back office platform, although it likely includes both. For most companies, it’s not just a matter of maintaining relevance. Digital is not a tacked-on feature to a legacy business. What we’ve learned instead is that providing content, goods, and services in the context of a homogeneous digital experience is the raison d’être of the entire business model. Without this, a business—any business—has no future.
As companies across every industry look to deal with the situation they now face, they will confront a paradox unlike any in at least a generation. The urge will be to cut spending everywhere it’s cuttable. Meanwhile, the need to spend on new digital capabilities has been driven home with a tent stake. The paradox, then, is how to cut cost without cutting off the future of the business.
If companies do not double down on digital capabilities, their competitors will. Because on the other side of crisis is opportunity. And every advantage will go to the digitally-driven business. They’ll be more aggressive, more connected, and measurably more valuable to their customers.
We know this. It’s a lesson as old as business school. Kellogg’s beat Post by doubling down on advertising during the Great Depression. And advertising mattered in the 1930s. Today, product matters. Content matters. Digital experiences matter. A brand and the experiences it’s tied to are indistinguishable. Another way of saying it is that marketing and product are indistinguishable.
Where legacy companies have been in perpetual stasis, neither choosing to sacrifice their horse and buggy business models nor committing to building autonomous cars, the recent chaos has changed perspectives. Digital business is now just business. We’re past the lip service and the lunge toward relevance phases of transformation. We know the path, and it runs directly through the heart of the company. At the very core of what a company is and what it offers should be world class digital experiences.
So as the chaos begins to subside, and the conversation inevitably turns to the cuts that can be made across every program, the mandate should be clear. Don’t cut off the future. Cut everything else. But double down on digital.
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