Digital Technology is not software, it is a state of mind (Part 2)


2 February 2015

In the first part of this series, we discussed the way in which organizations that work with digital technology are organized internally. In this part, we will analyze how companies create value by leveraging themselves on social networks to achieve stronger market position, thereby making them more stable.

Therefore, we see how, little by little, the companies that ‘think digitally’ face up to the conventional ones. The biggest movie and television show provider is digital (Netflix); the largest store in the world has only one physical store (Article in Spanish) and is digital (Amazon); the biggest music provider and store is digital (iTunes; however, Spotify is a rather close second); and even the world’s most innovative car company is digital (Tesla Motors) and is directed by Elon Musk, who is both a computer engineer, as well as the cofounder of PayPal. So ask yourself this question: Is the company that dominates your industry digital? And the only two possible answers are “Yes” or “Not yet.” 

How companies produce value in the digital realm

It is increasingly common for companies to leverage the creation of their value propositions through a combination of these three strategies: 

Products built to evolve

We do not like static in the digital context, as it is only mildly versatile and malleable, which is the complete opposite of the dynamic nature of the digital world. In order to develop products and services rapidly, with low opportunity costs, digital companies must focus on the basics. It’s easy to develop a complex product; what is truly difficult however, is to develop a simple one. It is better to have a simple product that satisfies users’ needs, rather than a complex and sophisticated one that doesn’t. Thus, the time required to launch the product into the market is reduced, bringing about improvements developed as a result of rapid testing. Otherwise, one ends up investing a significant amount of time and money in developing something that could later fail.

“If you are not embarrassed by the first version of your product, you’ve launched too late” – Reid Hoffman, co-founder of LinkedIn.

All companies that are considered digital know that nothing is certain, and therefore, they are constantly sharpening their creativity and know-how, in order to quickly adapt their products to market demand, using agile methodologies like scrum (Article in Spanish). This dedication “obsession” requires a great deal of conscientiousness with the organization’s resources, knowing that having a great product ensures that other resources, for example, those designated to communication, are used more efficiently.

Create a platform to collaborate with your extended community

Chances are that 99.99% of the most talented people in the world never work in your organization, and so, if you don’t have an external community that contributes to your business, it could become increasingly difficult to compete in the digital environment. To have a community aligned with and linked to your purpose as an organization is the best way to increase the productive assets, in addition to exponentially increasing the speed with which it grows and improves. An example presents itself in the case of Quirky, version 2.0 of ‘The Store at Home,’ which works alongside with its community through crowdsourcing techniques, to constantly develop new products.

However, it is not enough just to have a community; you should also provide them with a platform and tools with which to construct value for your business. One significant example of a consumer product that came to be (by accident) is presented in the case of the Microsoft Kinect platform. The Kinect is a device that was launched in 2011, and allowed users to control their Xbox consoles through body movements. Once it was launched, users managed to hack the device, and as a result, they had access to advanced body sensors with recognition features and numerous applications. In this case, Microsoft used this to their advantage, and chose to generate a free toolkit for developers around the world to use to build applications for Kinect. These developers ended up repurposing the Kinect hardware for a multitude of other new and diverse projects. In such an interconnected world, being the most connected node makes you resilient to change, thereby making you essential to your network. 

Investing in the market in which you operate

Digital companies have a long-term strategic vision and they know in advance that they are likely to generate incomes to the extent that the market in which they operate grows, and they are capable of quickly learning how to enhance the value delivered to users. This is the strategic move that led Tesla Motors to, instead of competing against other brands that produce electric cars, opt for the creation of a more favorable environment for sustainable cars, thus publicizing their patents. The underlying idea behind all of this, in addition to fighting against petrol-fuelled cars, is to enable your technology to become industry standard, which will likely generate future opportunities for monetization.

There is an emerging digital logic

Chris Anderson, editor of Wired Magazine, posed a brilliant summative in which he highlights the way that the Internet has forever changed the way we behave.

“The past decade was about finding new collaboration and innovation models on the web. The next decade will be about applying them to the real world.” – Chris Anderson, editor of Wired Magazine.

Digital Transformation is the great challenge that majority of organizations that came into being in the past century are currently facing, and they must cross the digital divide that has opened up before them. Specifically, I like the way that Aaron Dignan, CEO of the consultancy, Undercurrent, put it in a talk on how digital companies function: they are organizations with an inspired purpose for their team, which as a result, creates products that grow on platforms to serve a community bigger than their own company’s.

In Territorio creativo, we understand the logic as a way of addressing the uncertainty of the market, by coordinating a flexible and agile internal organization that relies on platforms to facilitate the interconnectivity of people, devices and data.

Image Rights: Martin Krolikowski.