- To understand the pace of change
of the digital revolution that's upon us,
let me begin with a story.
The best performing stock of the 1980s
in the U.S. stock market was Circuit City.
The company had revolutionized customer experience
in the consumer electronic space.
And during the 1980s, when high fidelity sound systems
and VHS players and computers were becoming more popular,
being able to see how all these items
and associated peripheral technology
to enhance the experience of each was quite helpful.
Mind you, the company only went public in 1984,
so the more than 8,000% return on the stock that decade
was all the more remarkable,
as it came in less than six years.
The centerpiece of the company's success
was superior customer service.
In the 1990s, the company used its financial power
to start other companies, including a technology firm,
a bank, and a company you probably have heard of, CarMax.
The latter is now a 16 billion dollar company.
In 2001, Circuit City was featured
in Jim Collins' classic business book, Good to Great,
highlighting the practices
that the company had put in place
that others might emulate.
Only eight years later, the company was liquidated.
What happened?
In the 1990s, when Circuit City
was starting other companies,
Best Buy, its biggest competitor
in the consumer electronic space started the Geek Squad,
creating even better customer service
through in-home installation
and help with an evermore complex variety of products.
In the 2000s, Amazon entered the consumer electronic space
and Circuit City did not catch the digital train at all.
Seemingly out of nowhere,
there was a retailer with no stores
and no easy way to speak to a live person
who understood our preferences so well.
In fact, the company even offered helpful suggestions
on what we might purchase
either instead of the product that we were inquiring about
or in addition to it, to enhance its performance
and our enjoyment of it.
In roughly 20 years, the former leader
in the retail industry, Circuit City,
went from good, to great, to gone.
The mighty are falling even faster now,
as the average tenure of the S&P 500,
which was 61 years in 1958,
is less than 16 years today.
Also, the average Fortune 500 business
takes roughly 20 years to reach a billion dollar evaluation.
Uber, WhatsApp, Snapchat, Oculus Rift,
each took less than four.
All of this means that digital immigrant organizations,
those who were born prior to the digital age,
need to think more like the digital native companies,
like the ones I've just mentioned.
Where the older companies go wrong
is to be complacent in the face of this dramatic change.
Digital transformation requires four things.
First, it's necessary to digitize your culture.
This requires hiring for and encouraging
learning agility among your employees.
New technologies and techniques
emerge much faster than in the past.
The technology that one is comfortable with today
may be obsolete tomorrow.
Will your employees be willing to retrain
on the more modern technologies and techniques?
Second, it's necessary to use modern solutions,
such as Cloud and mobile-enabled technology
rather than mainframe technology of the past.
This internal component of digital transformation
is often an afterthought.
But not taking these first steps can mean
that you'll be a victim of your own success,
unable to reap the rewards that higher demand might bring.
Third, it's necessary to develop or hone
an edge-based innovation function.
This entails developing or recasting
an existing research and development arm.
Seeking new business opportunities
that exploit digital technologies
at the edge of current product or service offerings,
or perhaps in adjacent spaces to the current offerings.
It's important to give this team the liberty
to explore opportunities
that might cannibalize the existing business as well.
Fourth, the rest of the business should think further
about how digital opportunities
can transform the core business.
An eye toward better customer experience
through digital channels should be paramount,
as customers expect easier, intuitive,
and compelling digital experiences
when they become more sophisticated.
They expect that you will have anticipated
their desired journey through your offering.
The digital revolution that's upon us
is an enormous threat to a lot of businesses,
but it also can be a tremendous opportunity
for those who leverage the new ways of operating.