Could false awareness cause your organisation to collapse like Kodak?
Throughout the history of business, organisational change has been driven by innovation. Industrialisation, transportation and telecommunications stand as examples of drivers of huge transformational change. Today, digital disruption is the force compelling organisations to change to survive.
In its 2019 Digital, Ready? Report, Vodafone examines the challenges facing organisations today. When discussing the report at a conference of business leaders in Manchester’s MediaCityUK, Vodafone’s COO Neil Blagden said, “Digital transformation is now the number-one priority for 80pc of businesses. If they don’t do it now, they may not be around in three to five years’ time.”
Awareness of the need to change is the first step to organisational change
Vodafone is practicing what it preaches. Operating in the digital space, it is closer than many others to understanding the effects of digital disruption. It has been proactive to this disruption, putting digital at the heart of everything it does, and this has compelled it to make sweeping organisational change.
It has modified and upgraded systems, transformed the organisational structure, re-evaluated the people it employs and changed how the company interacts with its customers. It is using digital to encourage innovation in a re-organised company. Instead of departments, staff have been divided into six ‘tribes’, focused on commercial segments and product areas, and encouraged to collaborate and overlap.
Vodafone has migrated its digital business from Newbury to London. Now, instead of outsourcing 97% of its digital operations, it carries out 95% of them in-house. The result is greater control and oversight of its intellectual property, lower costs, and an improvement in operational speed in its markets.
Can financial institutions survive digital disruption?
It is not only Vodafone that forecasts challenges ahead for companies that fail to embrace the organisational change that is needed to compete in today’s digital environment. In 2018, Gartner published its report ‘Digitalization Will Make Most Heritage Financial Firms Irrelevant’, in which it concludes that 80% of heritage financial services firms will go out of business or become irrelevant by 2030 if they fail to embrace the changes created by digital.
False awareness is as fatal as zero awareness
In its 2018 CEO survey, Gartner found that financial services companies are currently using digital to automate transactions, focusing on efficiency and productivity. Pete Redshaw, Vice President at Gartner believes this is an inappropriate strategy. He says, “It underestimates the degree of change that digital technology will bring to the industry. The future of the financial services industry is increasingly weightless, requiring few physical assets to establish or maintain a presence. That makes the industry especially vulnerable to disruption by digital competitors.”
Redshaw says that organisations should reduce the focus on technology and push organisational change to respond to digital business. He says, “It’s important to set the digital vision and destination first, then think about how to lead an organisation there.”
It is this false response to the effects of digital disruption that puts so many institutions at risk. However, it is not the first time that digital disruption will have led to corporate demise.
Retain a photographic memory to understand the necessity of awareness
In the mid-1970s, a Kodak engineer called Steven Sasson invented the world’s first digital camera. Yet, Kodak – which then dominated something like 90% of the global photographic products market – failed to follow up with the innovation. Its management considered that its customers would never embrace the new technology.
We now know how wrong the Kodak leadership was. Their false awareness of the disruptive (digital) technology caused complacency and poor business strategy. Eventually, the company collapsed, filing for bankruptcy in 2012.
When awareness compels change it leads to success
Where there are stories of failure, there are also success stories that provide evidence of how awareness of the need for organisational change has led to even greater success.
One of the best-known examples is Amazon. The company made its name by selling books to a public that wanted to read paperbacks, at a reasonable price and delivered to their home. Amazon quickly became the biggest bookseller in the world. However, it did not stop there.
Amazon’s leadership is extremely market-aware. The company studies industry trends, competitor offerings and customer needs. It could have taken a similar direction to Kodak – remaining focused on delivering the product that its customers were used to. Instead, it embraced creativity in a digital world, helped to create eBooks, and delivered Kindle to its customers.
In taking this strategic decision and producing the organisational change necessary to shift its product to an evolving audience, Amazon risked losing its dominance in its original market. However, its market awareness translated into its position as not only the world’s largest bookseller, but also its largest publisher.
Be like Amazon, not like Kodak
Kodak finally entered the digital market in 2000. By this time, its original market had faded to almost zero, and it was too late for it to compete effectively. Others had taken such a lead that the old guard had been put out to pasture by what it had previously considered to be loyal customers.
Are we witnessing a repeat in financial services? Certainly, there has been a proliferation of online banks, web-based financial companies, and AI-led investment funds. Heritage financial institutions are aware of the digital transformation that their markets are witnessing, but it appears not to be compelling them to make the organisational changes needed to embrace the future possibilities.
To remain ahead of the competition, organisations should act more like Amazon and less like Kodak.
In our next article, we will examine why it is imperative to make your employees aware of the need to change. In the meantime, to discover how our Learning Map System could help you to improve your employee engagement strategy as you seek to undertake organisational change to keep you ahead of your competition, get in touch with BigPicture Learning today.
(See how bringing your people closer to your company’s purpose and vision can improve engagement to achieve corporate goals in this case study.)
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