Building a digital business driven by trial and error

Enter the digital business building

Basically, the challenge of digitization is not to adopt any particular technology. Rather, it is a strategic combination in which companies deploy that technology to support a digital business model. Anand Ganapathy, who leads EY-Parthenon’s digital business building practice, says companies need to focus on building businesses that are fundamentally digital and can continuously evolve. “Digital transformation needs to happen on a large scale, but the strategy of how to do it needs to be more thoughtful, faster, cheaper and better,” he said.

“To remain competitive, organizations must rethink their business models to extract value from digital,” says Ganapathy. Re-engineering business around digital requires thinking strategically about “how companies can operate as digital natives, so they can be more agile and faster and sustainably outperform their peers and manage disruption from new entrants.” They need to understand the anatomy of a digital business to power the core and build new businesses.

In his classic book The Strategy Game, Ganapathy explains that companies take a “waterfall” approach to change where executive leadership designs a transformation plan and hands it over to functional teams to implement over several years. This approach fails in today’s constant flux environment. Companies must be constantly 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, become valuable tools for product development and project management because they can deliver strategic change at the speed of digital business.

Building a digital business, as Ganapathy explains, is “an ongoing, dynamic process in a rapidly changing business environment where players come and go, rules change and endpoints are not singularly defined.” This is a critical shift, he advises, as companies today cannot afford to spend five years delivering change agendas.

Building trust

While every business is different, Ganapathy emphasizes several key principles for building a digital business. The first is to build guilt in the organization. While strategic leaders want to focus on big ideas, Ganapathy cautions that they must spend time and effort building the trust of stakeholders to implement these ideas.

Startups and founders experience rigid, lean work environments at an early age. Conviction carried them through, allowing them to conquer threats, fight fires, and lead teams through uncertain waters. That gives them the resilience that guides them through later challenges or improvements.

Business leaders in existing or well-established companies, by contrast, may lack that visual experience. As a result, they may lack the conviction to drive a change agenda that brings risks, disruptions, and resistance from shareholders, employees, or customers.

One way to build trust in these types of businesses, Ganapathy says, is to focus on the company’s offerings. Certainly, traditional businesses have some disadvantages compared to startups or digital natives: they may have to contend with legacy infrastructure, more defensive cultural attitudes, and a digital skills gap. But they also have their own assets that they can take confidence from.