The Pathway to Digital Through the Lens of Competitive Advantage

Revisiting the digital imperative and responses to it

By Matthew Rogozinski

Established companies across sectors are responding to digital disruption. They are at various stages of digital transformation and building digital capabilities, but how many are confident the considerable efforts they’re making will deliver real competitive advantage?

The race to digital is a response to new threats for established companies. They recognise that emerging digital competitors are better at meeting customer expectations around convenience, relevance and price, and at targeting the most profitable customers. They understand their existing customers might vote with their feet, or at least voice opinions that will be heard by potential new customers in a globally connected world. They also recognise the threat posed by global tech companies that have become platforms that offer their own or third-party products and services in direct competition with incumbent players. 

In response, incumbents have added mobile applications, reimagined the end-to-end customer experience (i.e., including fulfilment and servicing) across all channels (bricks and mortar, online, telephone), and are building internal agile and digital capabilities to better respond to yet-to-emerge challenges. For many of these businesses, industry-level disruption is mirrored in the organisational disruption rapid, and holistic transformation can create.

The leaders of these established companies hear about the progress their organisations are making but many still have their doubts. Are we investing enough and in the right areas? Are we moving fast enough? Are we pulling all the levers available to us to convert the threat into an opportunity? Will we avoid commoditisation?

We believe now is the time to answer these questions. Further, we believe they must be answered in the context of competitive advantage and what that means in the digital age. The expense and effort involved in digital transformation must be directed towards not just learning how to function as a business in a new world but learning how to win in it, against new and old competitors.

We use a framework that focuses on how sources of competitive advantage have shifted (or are shifting) in a digital age, then shows how disadvantaged or otherwise a business is in relation to them. A company can then draw out the implications and work toward actionable conclusions.  The debate and analysis fostered by the framework lead to an understanding of:

1. The sources of our competitive advantage and how they have changed in the digital era;

2. Our new competitors and our position in relation to them against the new sources of competitive advantage;

3. How we can best reinforce our strengths and close the gaps;

4. The materiality of our new competitors’ impact on our business;

5. How committed new competitors are to winning in our business;

6. How we can leverage those competitors to our advantage; and

7. How we should (re)prioritise the actions we are taking to achieve digital transformation.

The exhibit below illustrates the application of our framework to a financial services institution.

This approach opens an established player’s thinking to the full range of moves that may be at its disposal. It also points to the importance of investing beyond improving customer experience to compete effectively in the new environment. Finally, it invites participants into the debate from across the organisation, which we believe is essential to drive innovation and impact (we discuss this in the Cut-through to Break Through article).

If you would like to discuss the application of our method to your circumstances, please contact Inhance Partners.