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6 Ways Legacy Companies Can Become Digital Disruptors

Scott Snyder, Partner, Digital & Innovation, Heidrick & Struggles [NASDAQ: HSII]
Scott Snyder, Partner, Digital & Innovation, Heidrick & Struggles [NASDAQ: HSII]

Scott Snyder, Partner, Digital & Innovation, Heidrick & Struggles [NASDAQ: HSII]

Digital is the new normal, and the role of the CIO is even more critical to driving digital transformation initiatives. This is especially true for legacy companies who are being challenged to quickly transform their businesses as the pace of digital disruption accelerates. But just because you’re established doesn’t mean you can’t challenge the status quo.

Our idea of what a digital disruptor looks like has become staid and cliché: A Silicon Valley startup run by tech-savvy entrepreneurs who move quickly and disrupt the industry as we know it. But the startup, “David,” doesn’t always beat out the established “Goliath.”

It’s time to disrupt the disruptors—or at least shatter the vision of what they look like. In Goliath’s Revenge: How Established Companies Turn the Tables on Digital Disruptors, my co-author, Todd Hewlin, and I examine how legacy companies can leverage their incumbent strengths, such as a powerful brand, broad customer base and data-driven customer insights, to innovate and reinvent their businesses. The trick is knowing how to use those strengths. CIOs can follow these six new rules to lead digital transformation with leadership, talent and culture at the center of their digital disruption strategy.

Rule 1: Deliver Step-Change Customer Outcomes

One thing Silicon Valley startups get right is that incremental improvement isn’t enough to keep customers and stay ahead. You need to aim much, much higher. Established companies should aim for improvements to their customer experiences and operating models that are 10X better and bigger than what they offer today to get ahead of digital disruption.

Rule 2: Channel Both “Big I” and “little i” Innovation

Established companies don’t have to choose. They should operate at two speeds to drive innovation from both top-down and bottom-up. “Big I” innovation means large-scale transformation from the top down that is essential for long-term success. Companies must be strategic about the amount of change-the-game ideas they pursue at a given time, because they require significant investment and have a higher risk of failure if they are not approached in the right away.

Bottom-up, known as “little i,” is driven by a company-wide culture of innovation that enables many incremental improvements that can add up to massive business impact. While digital disruptors can afford to be laser focused on “Big I,” established companies can play to their strengths by channeling both “Big I” and “little i” simultaneously.

Rule 3: Use Your Data as Currency

Legacy companies are rich in data. It’s one of their most valuable resources, giving them a much greater advantage over smaller companies that spend lots of resources trying to access large-scale data assets.

To leverage this gold mine, companies should do a thorough inventory of their data and focus on making data and algorithms a core part of their business strategy. Netflix, for example, uses viewing data gathered from its more than 100 million subscribers to predict what they’ll want to watch next, an approach that has enabled the streaming giant to out perform its network competitors. CIOs play a key role in organizing and opening up these data assets to innovators inside and outside the company, while still ensuring privacy and security.

Rule 4: Accelerate through Innovation Networks

Broadening your innovation channels can help deliver bigger and better ideas. Companies should tap into their broader ecosystem to source new ideas from innovators, such as research universities, strategic suppliers and customers, private equity firms, startups, corporate venture groups, business incubators, and open innovation platforms.

Take P&G. In the early 2000s, the company made an aggressive shift toward open innovation by amplifying the innovation of internal R&D employees with the efforts of scientists and inventors from around the world. This approach led to a surge in externally-sourced innovations and a series of breakthrough consumer products. Once again, CIOs are a critical facilitator in providing access to the company’s assets for external innovators while ensuring critical data and operations are not put at risk.

Rule 5: Value Talent Over Technology

Many companies become fixated on deploying new technologies, like AI or robotics, as soon as possible, but the hardest part is translating digital innovation into real business results. This requires sourcing, developing, integrating and retaining the right talent with the right skills at the right time. Successful companies are looking beyond 3D (design, development, data science) roles and are hiring and developing talent for immediate and emerging roles, such as product incubation managers, behavioral scientists and AI specialists.

Rule 6: Reframe Your Purpose

Companies that are willing to open up their range of growth options and raise their sights from their current industry position, business model, and product offerings to pursue natural adjacent market opportunities will be successful disruptors. Reframing your purpose with a mission and vision that shape the culture and define broader aspirational goals will help you attract the next generation of innovators as employees.

Becoming the Digital Disruptor

Implementing a digital transformation strategy requires continual reinvention and running at two speeds to thrive in the future. CIOs who are successfully leading digital transformation are implementing organizational changes that recognize the importance of talent and culture as a compliment to technology and enablers of innovation. They also prioritize cultivating and developing talent to accommodate the new skills needed within the industry to innovate and deliver business results.

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