Embracing Digital Technologies in Traditional Worlds

In a world where digital technology is radically shifting the business landscape, one of the biggest challenges for companies is rethinking what parts of their business will continue to be valuable.

To find out how companies are adapting to changes brought on by digital technology, George Westerman, a research scientist with the MIT Sloan School of Management’s Initiative on the Digital Economy, and Didier Bonnet, a senior vice president at Capgemini Consulting and the executive sponsor for Capgemini’s digital transformation program, studied more than 400 large companies around the world in industries including manufacturing, hospitality and mining. (They left out the software, media and technology industries because, although they “get a disproportionate share of the attention, those industries account for less than 10% of the U.S. economy.”)

Some companies stood out as what Westerman and Bonnet term “digital masters” — companies that “see digital not as a technology challenge but as a transformation opportunity.” This mindset does not always come easy for many managers. But it’s critical for moving forward. “Many assumptions about what is possible and impossible, based on experience with last century’s technologies, are no longer valid in the digital world,” Westerman and Bonnet write.

In their article “Revamping Your Business Through Digital Transformation,” in the Spring 2015 issue of MIT Sloan Management Review, Westerman and Bonnet cite the example of PagesJaunes, the French Yellow Pages company.

PagesJaunes “realized a few years ago that selling ads in thick, yellow print directories would not remain viable for long in an age of Google and Yelp,” Westerman and Bonnet write. PagesJaunes used the challenge to change its business model. Here are three steps it took, as highlighted by Westerman and Bonnet:

Question assumptions about what is valuable about your strategic assets.

PagesJaunes did not assume that the strategic assets that brought it success in the physical world would continue to be valuable in the digital environment. “The company’s CEO saw an opportunity to redirect the business toward digital services,” the authors write. Instead of selling ads in books, the company could sell online advertising.

Look to leverage assets that you have (and that fast-moving digital startups do not).

PagesJaunes saw that there was an opportunity to help its small business customers build digital capabilities such as Web pages and search engine optimization. “Managers saw that the assets related to printing and delivering books would have little use in the new model, but the company’s knowledge of local businesses and the relationships its salespeople had with business owners were potentially critical assets going forward,” write Westerman and Bonnet.

Use those assets to establish and grow a digital advantage.

“By leveraging existing data and retraining the sales force, the company is attempting to reinvent itself in partnership with former competitor Google Inc. and other born-digital companies,” write Westerman and Bonnet. “Although the future of the global Yellow Pages industry is still uncertain, PagesJaunes began ramping up digital revenues in France faster than physical revenues were declining.”

For some companies, what’s really called for is creative modification of business models. “Transitioning to the new digital world does not necessarily require you to completely discard the old in favor of the new,” Westerman and Bonnet note. “Examining your strategic assets through a digital lens can help you identify which assets will keep their value, which ones won’t and which ones you may be able to use in new ways.”

Westerman, Bonnet, and Andrew McAfee, a principal research scientist at the Center for Digital Business at MIT Sloan, are the authors of the book Leading Digital: Turning Technology Into Business Transformation (Harvard Business Review Press, 2014).

For more examples of how companies are moving beyond their current mindsets to find opportunities that digital technology can enable, read the full article.