Where day one of Leading Digital Transformation was a gentle initiation into the peculiar world of Silicon Valley, day two was a much different affair: a time for work and for action, it thrust us into the position of the innovator, challenging us to make the decisions required to affect change.
The business model canvas
In this, we were not left to our own devices but were, rather, aided by several knowledgeable guides. Among them was a strategy designer at Business Models Inc., who introduced us to the concept of the business model canvas. A visual representation of how an enterprise creates and delivers value, the canvas compels its user to evaluate a business model in terms of nine building blocks and the interrelationships between them.
To understand the mechanics of the framework we examined the cases of Nespresso and Audi. In the course of these exercises it quickly became apparent that within any business model, there is endless potential for variation across its constituent parts. That’s why, when deploying the business model canvas, the key question to ask is not what a thing is but rather what it could be.
That subtle shift opens the door to much larger transformations, releasing us from the need to find solutions. Instead, we are free to roam, free to generate ideas and options for how a business model could be redesigned. Are there analog processes that can be digitized? Could pipelines be turned into platforms? Is shareholder value occupying the space where stakeholder value should be?
A case study in disruption: Walmart
These are the kinds of questions that demand to be reflected upon as we return to our offices – in places like Munich, Rio and Bergamo – following the conclusion of the five-day program on innovation. As we learned on day one, the ideas those reflections generate will then need to be tested, evaluated and, if found to be worthwhile, implemented.
This “search for optionality”, as we may term it, was exactly where Walmart found itself in recent years, as the world moved further and further away from brick-and-mortar shopping and more and more towards e-commerce. In what is a classic case of ‘disrupt or be disrupted’, Walmart, itself at one time an upstart on the retail scene, found its business being eaten away by Amazon.
Walmart weighed up its options for a response, eventually opting to acquire e-commerce startup Jet.com. The move was less than a success and so once again we, the LDT participants, were thrust into the hot seat. Facebook’s Global Head of Publisher Development led us through the thought exercise: Walmart is turning a profit of $7 billion a year while Jet.com is losing $1 billion over the same period. Where do you invest in order to turn things around?
We came up with all manner of answers before our session leader brought us back down to earth, enlightening us to the fact that what Walmart did in the end was roll Jet.com into the parent company and launch a marketplace just like, you guessed it, Amazon.
To be sure, Walmart’s marketplace is enjoying success, but was it the right decision? Our speaker expressed skepticism, arguing that traditional companies shouldn’t try to play digital companies at the digital game. Instead, established firms would do better to take a more incremental approach to innovation, investing in areas where they already hold an advantage over digital natives to increase that advantage even further.
May we live in interesting times
But that position is just one among many, yet another contribution to the literature threatening to overwhelm the modern executive. Although where corporates might feel anxiety over the disruption coming at them vertically – via their industry – or horizontally – via emerging technology – there is a sector that is positively reveling in all of the upheaval: venture capital.
For venture capitalists such as our speaker in a later session (a managing partner at GS Capital), it is, in his own words, “an exciting time to be alive.” As he told us, we are currently witnessing a moment where the digital and physical worlds are merging and, wonderful though this may be, it is not without consequences, including economic protectionism, nationalism, and unemployment. But none of those, our speaker forecast, will be enough to stop the global economy growing to be worth some $200 trillion by 2030 (up from around $80 trillion today), even if that growth is not evenly distributed geographically.
Do we share that excitement at the prospect of a more technologized world? Some of us surely do. For those who are not quite there yet, perhaps LDT day two was a window into the future; a glimpse of ourselves as innovators applying the skills that will ensure we flourish in times of digital transformation.
Leading Digital Transformation Day 2 Key Concepts and Takeaways
- The business model canvas describes a business model as nine key blocks. Use it to redesign your business model, exploring in the process what impact a change in one block has on the other blocks.
- Search for options, not solutions. Many successful companies don’t just stick to one business model but use several simultaneously.
- Transformation does not have to mean emulating ‘digital natives’. Instead, when it comes to competing with digital companies, think about what you already do well. Could you get even better?
- Technological disruption brings uncertainty but also great opportunity. Venture capitalists think it is an exciting time to be alive. Do you share that enthusiasm? If not, what skills could you learn so that you do?
In this article, we review the second day of the January 2020 edition of the SVIC Leading Digital Transformation (LDT) program. Taking the form of meetings and workshops with top Silicon Valley companies, the program is a journey of inspiration and learning. Apart from providing participants with personal connections to standout figures in the field of innovation, it teaches them how to achieve business growth in times of disruptive technological change.
Click here to see forthcoming program dates.