Five Company Types That Should Transform ASAP (Is Your Enterprise One Of Them?)
Entrepreneur's New Year’s Guide
You're reading Entrepreneur Middle East, an international franchise of Entrepreneur Media.
The global digital transformation market is expected to reach close to US$800 billion by 2025, according to a study by Grand View Research, Inc. However, many companies struggle to successfully transform and future-proof their business in a digital-first world. When it comes to making change real, it boils down to two very simple frameworks:
1. The Transformation Box In order to fully transform and become resilient to disruption, companies must address four key areas: the internal organization, the products and business model, the way it interacts with (new) customers, and its approach to the market and competition.
2. The Futureproof Organization The second framework takes it up a notch and looks at a company as if it were a human organism. Similar to any well-functioning human being, your company should have a smart brain (i.e. a sound strategy in the digital era), a healthy body (i.e. the proper governance structure with the right people and skills), and a strong heart (i.e. a focus on customer satisfaction and positive employee engagement).
So, if it’s that easy, why aren't more companies able to transform themselves so quickly?
The short answer is because many companies simply get stuck in a rut during the process, and become one of the five following archetypes.
1. The Jock
A company that has a strong “body” (people and skills) and “heart” (customer and employee satisfaction) but lacks “brains” often falls into the Jock category- i.e. an incredibly strong company with great values, but lacking a sound business strategy. Jock companies are known to do a lot, at the same time, without really knowing why and what the outcome will be. From scaled up startups and SMEs, to publicly listed corporates, many different companies can suffer from “jockitis” over time– sprinting from quarter to quarter, keeping shareholders happy by any means.
Take Snapchat, for example: strong execution, but very limited long-term vision. The threat for these companies is implosion; the athlete on steroids always gets caught or implodes. In real life, these things happen in the face of the unforeseen (regulations change, a strong competitor makes a surprising move into the market), or they get outsmarted by the competition on their core activities. The company does not have a chance to rebound, since it has no long-term plan.
The solution? Speak to the experts, and take steps to build a sound strategy.
2. The Monk
The Monk can be described as the complete opposite of the Jock. Where Jocks are short-term minded, Monk companies are thinking ahead. So much so, that they don't really execute. In fact, the Monk is best known for its inability to execute. Combining only the “brain” and the “heart” of a futureproof organization, it lacks total speed in decision making and power in execution. Think Toys R Us, General Motors and Kodak. Typified by “fat” organization structures, Monk companies tend to over-compromise when making decisions to act. So, when things do get done, strategy is usually spot on, but most of the time already outdated.
Many large-scale corporates that have been in business for a long time suffer from “monkitis,” typically known for their fear of cannibalization and a reluctance to innovate. The threat for these companies is death by disruption, as speed is the variable in the digital age. As digital increasingly democratizes business opportunities, the Monk will need to change or risk getting left behind.
The solution? Get that body moving again, and cut the unnecessary fat. Assess your people and governance structure, upskill employees, bring in some fresh blood, and revisit legacy KPIs.
3. The Ego
The Ego company has such a strong “brain” that it can manipulate a strong “body,” proving the complete lack of a sense of “heart.” It's the company that does not care about environmental sustainability, employee wellbeing, or customer centricity. Driven by greed and profits, it is the definition of non-futureproof. Think Nike and the repercussions it faced following child labor revelations, or more recently, the Volkswagen Dieselgate scandal.
With digital and social media opening up a new level of transparency and means to connect like-minded people, such companies can no longer cover up their bad behavior. They must appreciate that customers and employees have been given a new voice. In the 90s, Ego companies were the norm. Nowadays, this is the easiest way to lose credibility amongst both employees and customers. Companies that are accountable and truly value their customers and employees are the ones that will thrive.
4. The Digitized
In the Transformation Box, we saw four distinctive areas in which a company needs to act in order to transform completely. The Digitized company is that which addresses only two key areas– the internal organization and customer relations. It's the company that has the most expensive CRM solution (most of the time untouched, apart from the consultants who are still implementing it), and/or its hallway filled with awards for the best social media campaigns and most innovative mobile apps.
The threat for these companies is that they are blinded by shiny internal objects, or the channel by which they communicate with their customers, and are not transforming the core of the relationship with those customers: the product and the business model. Digitized companies are known to address the elephant in the room (the much more relevant competitor) as their last priority. Nevertheless, out of the five types listed here, the Digitized company has the strongest foundation, and therefore, the best chance of success.
The key is to start innovating both its product and business model, and avoid distraction. This will allow the company to approach competition in a different way. Print media companies are the perfect example of this, having digitized their offering early on, and put their content online for free. They were blinded by their own early adaptiveness, and the industry is now digitized and disrupted, but not successfully transformed.
5. The Innovated
The final type of company that is failing at transformation is the shiniest one of all- the Innovated company. The Innovated company is known for its “new” way of working with unusual partners, innovating its product portfolio, or cannibalizing its own business model. This type of company talks the talk and walks the walk, but in reality is missing the crucial foundations: its internal organization screams for a refurb, and its client relationships fall very short.
The biggest threat for this company is believing its own hype, and losing sight of what matters most– customers. It only takes one serious blow by a customer-centric competitor to take them out of the game. Banks and telco companies are two such examples which suffer from “innovatitis”– focusing on acceleration projects, whilst the basic foundations of customer and employee care crumble. To stay in the game, the Innovated company should hit pause, define the customer journey, figure out their pain points, and solve them. Then repeat for their employees. Stat.