CDOs bear the main responsibility in all digital matters of a company. In times of digitalization, this is usually a job that demands a lot of energy. What are the biggest challenges across industries by using digital technologies to change a business model and how do successful CDOs master them?
1. Establishing a culture of proactivity and courage that bears failure, then dare new things and master digitalization
In Germany, most companies (and with them the majority of managers and employees) tend to be risk-averse and shy away from change. This is a difficult starting point in the era of digitalization. Every process, every meeting, every team constellation must undergo a test on their effectiveness during the digital transformation and be adapted if necessary. The process of moving to a digital business is a huge challenge for the whole organization. One of the reasons people shy away from change is because they are afraid of doing something wrong. In German companies there often is a culture that punishes people for their faults instead of empowering them to dare new things and in case of failure taking the chance to learn from mistakes.
An idea that is failing early allows to adapt the strategy without using up resources too much.
For example, companies are working on a product for years until they finally make it available to their users. If sales numbers then do not meet the expectations and not find the calculated sales, in the worst case enormous resources were consumed without any ROI. If a company takes an agile approach and brings a minimal viable product (MVP) to market at an early stage, the enterprise quickly gets valuable real insights on the reactions of the users. If these are negative, the early product can be reworked in a relatively resource-saving manner and thus can be optimally adapted piece by piece to serve the needs of the market.
2. Scarcity of resources can be the driving force
Startups in Germany are living like lords. Because of the need of digital innovation, companies are willing to fund the ideas of founders, even if they are not scaling as expected. But scarcity of resources can be pushing founders to aim at striving to reach profitability and milestones faster. Enterprises that are investing in young firms should limit the time of their fundings to achieve this effect, e.g. in three to six months sprints. If milestones are not achieved, no more budget is available. It is saving a lot of money and goes hand in hand with the approach of bearing failure: An idea that is failing early allows to adapt the strategy without using up resources too much.
3. Catching digital experts in the war for talents
Due to its rather traditional education system, Germany is lacking experienced developers and digital experts. Therefore, almost every industry is struggling to find employees that fit their technical expectations. The sought after experts are moving to bigger cities – but Mittelstand enterprises are still settled predominantly in smaller towns in former Western Germany. Thus, expertise is more and more accumulating in startups located in hip cities. In order to interest young and well-educated talents, companies should adapt to their needs and for example offer flexible working times among other conveniences besides a challenging job with career advancing opportunities. Also, enterprises should not only focus to reach out for German applicants but think more globally when staffing open positions.
4. Holistic approach has top priority in the digitalization of a company
Dreading the work and administrative effort of an integrated digitalization concept, many companies leave the conversion of processes to the individual departments. But if these work on it on their own, each department sets its own goals for the digital transformation. If information processing is decentralized, supposedly identical data is stored and evaluated differently. The company cannot exploit the full potential of data analysis this way and does not pursue a joint strategy: Cross-departmental processes are therefore key to quickly and successfully create scalable digital business models. If this does not succeed, the company risks being outrun by a more agile competitor and losing market share.
5. Coopetitions are key to always stay one step ahead
Companies should never only focus on the closest competitor without paying attention to emerging enterprises with disruptive approaches. One example: Microsoft and Google were always competing with each other, and both underestimated Apple. So in 2013 they were left behind by the aspiring, agile enterprise that today is one of the most valuable exchange listed companies of the world. To make sure to always stay at least one step ahead, the biggest players of an industry should strive to work closely with each other and build coopetitions (strategic partnerships to prevent being outrun by newer, more scalable and agile business models). Within these, the companies build a huge center of competence that is creating trends instead of only watching them come and go.