Differentiate with digital

The Four New Rules of Business

Nigel Fenwick
Vice President, Principal Analyst
November 30, 2017

Every business is different. But for all their differences, leading digital companies have some things in common that separate them from the rest. Over the five plus years I’ve been researching digital business, my colleagues and I have developed a number of frameworks to highlight these distinctions. In 2017, Ted Schadler and I worked to distill our learning even further. As a result, we revealed four rules of business which we believe will determine the success or failure of every company by 2020.

To explain our research, Ted and I recorded a complimentary Forrester webinar: “Digital Rewrites The Rules Of Business”.  In the webinar, we use the new rules of business to discuss some of the key challenges companies face when trying to digitally transform their business. Ultimately, everything starts with fully understanding your customers’ desires – and using that understanding as your north star throughout the transformation process.

In the Q&A discussion following the webinar, two main themes emerged: the role of ecosystems in digital transformation, and the extent to which digital transformation occurs.

digital business ecosystem graphicDigital business ecosystems

Business transformation is accelerated by, and built upon digital ecosystems: the customer’s personal value ecosystem, digital experience ecosystems, and digital operations ecosystems.

The customer’s personal value ecosystem is unique to each customer. It’s represented by the unique collection of digital apps each customer assembles with their smart devices. The apps they use most frequently are also the most capable of delivering an outcome of value. For example, I use my Apple TV app to navigate AppleTV because I can never keep a separate remote handy, and navigation is easier using the app because it has a voice interface – so the app saves me time. An analysis of all the apps on my phone that I most often use would reveal a great deal about my personal value ecosystem. Customers like you and me expect better digital experiences because of all the digital apps we use in our day-to-day lives.

Digital experience ecosystems help firms deliver on customers’ desires. DXEs form around specific customer needs and desires. Forrester defines the customer experience (CX) ecosystem as the web of relations among all aspects of a company — including its customers, employees, partners, and operating environment — that determine the quality of the customer experience. The DXE represents both the digital products and services that customers use to achieve their outcomes and the digital operational elements of the CX ecosystem companies use to deliver value to customers. For example, Nike+ not only allows runners to track their distance and calorie count; Nike+ is also part of a wider ecosystem of shops, social media, and even an invite-only celebrity gym that offers influencers, and active Nike+ members, the full fit-lifestyle.

While each company may assume it plays a distinctive role for their customer, from the customer’s perspective value is created when the achieve the outcome they most desire. To get there, they often require products and services from more than one company. When I Autocross my car, I not only engage in the driving experience of my car, I also need to put fuel in the car (I use an app for that), I use the Waze navigation app (even though my car has navigation built into it), I use an app for recording vehicle dynamics and another for video. While these apps are in my personal value ecosystem, they also form a broader digital experience ecosystem, working together to deliver the outcome – a great autocross day. Digital experience ecosystems constantly evolve – retail stores now offer banking services,  airlines offer cruise vacations, agri-businesses offer advice on farm management. When evolving into a digital business, you must consider markets outside of your own immediate business – because the digital leader of those markets will not only shape your customer’s expectations, they may well be competing with you very soon.

Digital operations ecosystems increase operational agility in service of customers. Behind the scenes, businesses assemble myriad capabilities to support their business model — increasingly the digital components of such business capabilities integrate the business with other companies in the market to create an operational ecosystem, with each company dependent upon others for survival. While the ultimate focus of this ecosystem is creating customer value, it’s more immediate effect is to drive operational agility in service of customers. For example, SupplyOn sits at the center of a global supply chain ecosystem, connecting the operational capabilities of thousands of manufacturers to reduce the time it takes to bring complex products to market.

The extent of digital transformation

Many people make the mistake of thinking of digital transformation as a series of projects. But true transformation is a journey, not a destination. Responding to rising customer expectations demands a state of continuous evolution. Each evolution of the experience must deliver a valuable outcome better. Done well, revenue follows. Disruptive innovation happens when a company achieves a breakthrough in delivering a specific outcome – for example when Netflix began streaming movies on-demand.  But even without disruption, there is always room for improvement, and your customers will always show you the way forward.

To succeed, digital transformation must thrive even in the far reaches of your company. You must evolve together as an organization – not just one department.

If you’d like to learn more about the four new rules of business, and what they mean for the future of your organization, please feel free to:

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