Adapt Or Die: Is There An Alternative Digital Business Strategy?

Glen Moffatt

Disclosure: I work for the world’s largest enterprise software company, and every day I talk about software with partners, customers, executives, and others in the small to mid-sized general business market in Canada.

Many of these people seem to be largely indifferent towards the idea of a “digital business.” I’d like to suggest a reason for this indifference, and I’d like to offer an alternate perspective.

The hype around digital business

Everyone loves a good story—especially a get-rich-quick story. In late 2013, a venture capitalist named Aileen Lee identified a group of startup technology companies that had been founded within the previous ten years and were valued, by private or public investors, at $1 billion or more. She wrote a post that sought to understand why these companies had become so successful so quickly. She found 39 such companies and labelled them “unicorns.” The blogosphere quickly seized on the term, and it has crept into common use, to the point where Fortune magazine now regularly updates The Unicorn List. There are 174 unicorns as of this writing.

Many of these newly created companies were built on a backbone of digital technology, and in many cases, they disrupted traditional industries. You have very likely heard the stories of Uber (the taxi company that owns no cars!), AirBnB (the accommodations company that owns no real estate!), and others. Given how much has been written about unicorns, I won’t pile on with any further details. Suffice it to say that these are fascinating technology-based businesses, and business writers write about them because business readers read about them. They make for great stories.

The gold-rush level of hype about overnight billionaires led the rest of the information technology industry to jump on the unicorn bandwagon. If you’re a business leader, then every IT vendor you encounter will likely want to talk to you about the digital economy and its impact on your business. They will ask you if you have a digital strategy, because you, too, can be the “Uber of your industry.” All you have to do is create a new and innovative business model and transform yourself into a digital business.

These vendors may even hint or suggest that if you don’t transform your industry, someone else will, and your business will be disrupted and eventually rendered irrelevant. In short, the industry hype is unanimous: You must adapt or die.

Wouldn’t you be indifferent, too?

The problem with this message is that it’s a mixed message, and it’s really, really easy for an executive to dismiss.

I’d like to invite you inside a thought bubble floating just above the head of an executive attending a meeting with an IT vendor about digital transformation:

So you’re saying I have to transform my business or I’ll be disrupted … by a unicorn? Wait – why would anyone worry about something so unlikely that even you people call it a unicorn?

The reason executives are indifferent about digital business is not that they’re ignoring a potentially billion-dollar opportunity (at best) or an existential threat to their businesses (at worst). They’re indifferent because they don’t think it’s likely to happen to them.

Can you blame them? In her original post, even Ms. Lee herself states “it’s really hard, and highly unlikely, to build or invest in a billion-dollar company.” She places the odds of a given tech startup transforming into a unicorn at 1 in 1,538 – or “somewhere between catching a foul ball at an MLB game and being struck by lightning in one’s lifetime.”

At this moment in time, in the Canadian mid-market at least, executives don’t seem to be worrying that some startup is going to appear out of nowhere, invade their space, and disrupt their business – that is, until it happens. Even then, they may believe themselves small enough to avoid attack, yet big enough to fight back if necessary.

And so executives dismiss unicorns, and by extension digital business, filing them away under “things not to worry about right now.”

Is there another way to think about this?

I’d like to offer you a new perspective, because I believe the way we think about unicorns and by extension, digital business, has led us away from real and immediate opportunities.

Introducing the “unicorn dividend”

History is filled with one group’s investments creating another group’s dividends. The U.S. military alone offers many examples: They needed reliable communications in the event of nuclear war – and the rest of us got the Internet; they wanted faster, lighter ballistic missiles – and we got better golf clubs; they wanted precise location tracking – and we got GPS in our cars.

I propose that the investments made by Ms. Lee’s billion-dollar unicorns (and by so many others as well) have created a technology dividend for the rest of the business world – let’s call it the “unicorn dividend.” As far as I know I am the first person to use this term, but I would argue that the unicorn dividend has been sitting in plain sight for a couple of years now.

What is the unicorn dividend? It’s a new generation of software, a new set of methodologies, and a new market permission, trickling down from these bleeding-edge innovators, for the rest of the business world to use.

What new software?

The IT industry innovates at a furious pace, which is to be expected when the price/performance of computing power has doubled every two years since the 1960s (aka Moore’s Law). The unicorns exploited advances in underlying technology, devices, operating systems, and languages to produce innovations in software. And in the wake of their very visible success, almost every other IT vendor has followed their lead – by making significant investments in product development.

We have seen real innovation in almost every segment of the business software world. Software connects our equipment and devices to our applications via the Internet of Things – and manufacturing and maintenance processes are improved. Software connects us to our suppliers in business networks – and supply chain costs are improved. Software connects us to our customers in novel ways, from the sentiment analysis of social media online to the emailed receipt from a mobile point-of-sale tablet in a store – and customer experiences are improved.

User experiences are now built using new web standards, creating software people actually want to use. Mobile apps are now built from scaffolding kits instead of from scratch, leading to faster, more reliable, and more secure apps.

The bottom line is that almost everywhere we look, the IT industry is now promoting a new generation of business software with capabilities we’ve never seen before. These aren’t incremental patches – these are significant new releases.

What new methodologies?

One of the recurring elements in the unicorn stories is disruption of an existing business model. And at the root of each and every disruption is a careful analysis of that business – as seen through the eyes of the end customer.

Believe it or not, this approach is a major departure for the IT industry. Historically, IT vendors only involve their customers (users) in product development by (1) asking them for requirements, and (2) asking them to beta-test the near-finished product. But the unicorns have shown us, over and over again, that real innovation arises from a near-obsessive focus on customer-centric design, at all stages, from business model concept to final product development.

As a result, we are now seeing widespread use of formal methodologies for analyzing business models and strategies, for designing and building software to support and execute those strategies, and for bringing that new software to market faster than ever before. The IT industry now uses design thinking and other techniques to design software that really “gets” the problem to be solved or the job to be done. And these methodologies are not just reserved for a technical elite – they are a learnable, trainable, repeatable competency that any business can acquire.

The IT industry has learned a lot about business innovation in the last ten years, and it is packaging up that knowledge for the rest of us to use.

“Market permission?” What new market permission?

The rise of the unicorns has given businesses an unprecedented permission – some would say even an expectation – to experiment, to try new things, and even to fail. Given the ample precedents of the unicorns (not to mention everyone else who has launched a mobile app in the last ten years), no one in your industry will be surprised if you roll out a pilot app or a new service. In fact, they’ll likely only be surprised if you don’t.

Markets and customers now judge companies on not just price and quality, but also on their commitment to innovation. This is why, in survey after survey, an overwhelming majority of executives (usually over 90% of those surveyed) have declared innovation a top priority for their businesses.

What does all this mean to business leaders?

If you’re a business leader, you should consider a new perspective: It’s time to look at unicorns, and by extension digital business, not as a source of potential threat, but as a source of potential dividends.

You don’t have to be a unicorn to take advantage of unicorn-like technology or unicorn-like methodology – any more than you have to be in the military to take advantage of GPS in your car.

Conclusion: Update your IT strategy. Collect your dividend. And fear no unicorn!

I have a simple recommendation to business leaders: It’s time to take a look at your IT strategy again. The unicorn dividend offers you three reasons why:

Software: As a result of massive investment, innovation has been trickling down into every corner of the IT industry. Most business software has been refreshed or even rewritten in the last few years. You can reasonably expect that any new software actually has enough new capabilities to generate enough ROI to pay for itself.
Methodology: Many executives have declared a commitment to innovation without a firm plan how to execute on it. Your business can use one of the new design-centric methodologies to define your own innovation agenda and then advance it with supporting projects.
Permission: Your customers are expecting innovation. What are you waiting for?

Furthermore, in the event that your industry does get disrupted by a unicorn, then at the very least, your house will be in order and you’ll be in a much better position to respond.

And who knows? In the event that you decide to be the disrupter instead, you’ll be in a much better position to transform into a unicorn yourself.

Want strategies to foster a culture of innovation at your organization? See Making Business Innovation Part Of The Job Description.

Glen Moffatt

About Glen Moffatt

Glen Moffatt is a presales enablement director at SAP Canada. He is a technical generalist and communicator, specializing in helping others understand the application of enterprise information technology. He expresses himself in a variety of ways: writing code, conducting software demonstrations, teaching, facilitating design thinking workshops, and presenting to the boardroom.