Here’s a simple approach from the Harvard Business Review to get started on improving your organization via digital.
An organization is essentially the sum total of its physical, financial, human, intellectual, and relationship capital. Different industries and different business models have always maintained different percentages of these asset types. Manufacturers invest most of their capital into physical assets, while high-tech firms invest in R&D to create new intellectual capital. But all assets are not created equal, especially as the technological landscape changes.
In today’s market, tech platforms enable IP and relationships to scale rapidly, and at near-zero cost. This is the phenomenon that has led to exciting platform businesses like Facebook, LinkedIn, Match.com, Uber, and Airbnb. Even when these firms rely on physical assets, like cars for Uber, they own the technology, not the physical asset. Meanwhile, the laggards continue to spend their time and money on assets that do not scale so easily — physical goods (such as manufacturing plants or inventory) and human capital (such as highly trained employees that deliver services). Digital transformation requires that companies reallocate their asset portfolio to support new, digitally enabled business models.
There’s no question why legacy organizations are tackling digital transformation now. Digital native upstarts are gutting traditional industries one at a time, leveraging scalable technology and participative networks. But shifting a firm’s asset portfolio is a lengthy process and is fraught with uncertainty for leaders comfortable with older asset types.