Friday, January 9, 2015

Digital Master Tuning VIIII: How to Build Digital Capabilities in 2015

Capability-based strategy-execution is the only path leading to sustainable digital transformation

After being through years of downturn and recession, there are many optimistic views for 2015; for many organizations, it is reaching the inflection point for the digital transformation; after being through cost cutting or workforce reduction, it is the year to focus on capability rebuilding. In the book “Digital Master,” we introduce the special set of digital capabilities with a METAPHOR, you can read and discover more. What are your new year perspectives for business, do you have a clear capability-based strategy & execution plan?

Building digital capability is a strategic imperative: Organizational capability is one of the key components of balanced scorecard perspectives, and organizations need to build capacity in terms training and retraining of staff and also in terms of acquisition of modern technological tools. Rebuilding capacity and shaping strategic digital capability should be a continuous process. Cutting cost to enhance corporate bottom line is a welcome idea and appropriate strategy should be adopted. Integration strategies will help setting priorities in capability building.  

It's important that you define what's core and context in your organization. Cost cutting might have damaged an organization. The core you shall not touch, that's what define your uniqueness (and if you have cut into that, than you have to rebuild it. In the context you need to constantly change, which also includes cost optimization. In the last couple of years many companies cut too deep into their capabilities and were having difficulty executing strategy. The result has actually been some inefficiency (operational processes hitting chokepoints) and inability to realize potential revenue. In different capacities, organizations are looking to fix some of the more glaring capability gaps in the short-term and identify a method for improving capabilities in the long-term.

The technological advancement will continue to help develop integral digital capability. Organizations are becoming smarter at reaching consumers, in a targeted and deliberate way, and consumers are becoming smarter at consuming and providing direct feedback to the organization. Technology actual shifts the efficient frontier out (rather than reaching an "efficiency" along the curve). More, the emerging digital technology is the most important element in the new breed of digital capabilities which are rigor, but not rigid, standardized, but not lack of innovation; mosaic, but not monolithic, it can be built on the fly and adapt to the change more seamlessly.

Digital capability has dynamic and “recombinate” nature. The particular environment organizations find themselves in today is especially difficult as compared to years past. Competition is more global and in many industries, products are becoming more commoditized putting pressure on pricing, margins and investable budget dollars. The ability to simply raise budgets to rebuild lost capabilities is going to be tough sledding. Well-run companies recognize such issues as a matter of course, and thus, to well align talent, process and technology to efficiently and effectively improve operations and invent human capital to establish more flexible talent pipeline." And building capabilities becomes a constant process irrespective of the economic conditions.The well-run companies need to do this under all circumstances. It was rare to have major budget increases beyond cost of living adjustment or moving at the rate of inflation. It always meant that if you wanted to improve or build out certain capabilities, you need to "self-fund" them or recombinate them into the new capabilities. That meant improving the productivity of (and reducing the labor intensiveness) of less-critical activities, and re-deploying the savings into other areas deemed more valuable for the long-term health of the firm.

Digital is shifting the organization from process-centric to people-centric and capability based, the main focus of the management is not just eyeing on imitating what’s competitor’s doing, but building the set of differentiated capability to lead and compete for the future. Try this Digital Master Fun quiz to learn more about Digital Capability.
6. Digital capability is a type of gem, with a “typo”, but not a flaw. What is it?    
A: Ruby  B: Pearl  C: Diamond  D: Jade


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