How to Structure Your Organization for Digital Success
1. Align Digital Strategies with Broad Company Goals For manufacturing businesses to catch up in the digital space, they need to create a strong association between company success and digital goals by aligning broader company goals with the digital goals themselves. Digital goals should become a part of longer-term time horizons of 2-10 years. Manufacturers can use the zoom-out/zoom-in approach of Silicon Valley companies to land on relevant strategies. The zoom-out/zoom-in approach is one of the best ways to see the importance of and focus on digital efforts in the short and long term. It forces manufacturers to not just think digitally, but think digitally in the near and long term in a way that demands investments in innovation.
2. Put the Right People in Charge Somebody must be in charge of driving digital success, but who? The answer is that while it may be attractive to assign dedicated personnel or build out digital departments, market leaders agree that it should be the CEO that is responsible, and no one else. This is in keeping with the first and foremost rule to align digital strategies with broad company goals. For manufacturers to structure themselves for digital success, the impetus must come from the top. The CEO comes first and should be fully supported by the entire executive suite even if there are teams exclusively dedicated to digital innovation.
3. Investments The digitally maturing companies surveyed by Accenture placed a strong emphasis on innovation and were over twice (87%) as likely to invest in innovation as early-stage entities (38%). More than 80% of digitally maturing companies plan to develop new core business lines in the next three to five years in response to digital trends. Only about half of early-stage companies have similar plans. Digital organizations are making major investments in ecommerce, e-business, mobile commerce, and social commerce. Although B2B has been slower to move online, the industry is in the midst of a digital revolution and is expected to see an annual compound growth rate of nearly 8 percent through the year 2020. To succeed in the digital space, manufacturers must make investments towards digital success.
4. Elevate all of Your Online Revenue Channels For manufacturers, elevating online revenue channels doesn’t come naturally. Between longer sales funnels and endless variation of product and scope, manufacturing doesn’t have it as easy as other industries. Still, our customers are looking for digital solutions and manufacturers who provide them can expect the most growth. B2B at large is expected to experience significant growth in digital advancement over the next several years, reaching $1.13T by 2020.
This speaks volumes about the maturation of digital adoption within the B2B industry, which has traditionally lagged behind its B2C counterpart. As B2B industries such as manufacturing move their businesses online, there is a unique opportunity to sell downmarket to help increase profit gains and use digital to optimize existing sales and fulfillment support to scale without increasing cost.
5. Measure Success Market leaders’ primary metric for digital success is digital revenue (75 percent) and digital share of market (70 percent). Meanwhile, new and emerging markets and lagging manufacturers in established markets make the mistake of getting sidelined by popular metrics like digital traffic (63 percent), which may or may not be correlated with revenue. Market leaders are also in the habit of digging into their revenue sources, understanding those clients that are the highest value, and focusing on growing those customer segments. For manufacturers to succeed in the digital space, they must focus on the metrics that indicate success: revenue, share of market, and customer lifetime value.
6. Company Culture Creating an effective digital culture is an intentional effort: Digitally maturing companies are constantly cultivating their cultures. Nearly 80% of respondents from digitally maturing companies say their companies are actively engaged in efforts to bolster risk taking, agility, and collaboration. Manufacturers can take great strides towards elevating their company culture by making innovation a core focus of each department.
7. The Size of Digital Organizations: Bigger is Better Even though CEOs should ultimately be in charge of digital growth, market leaders in digital typically have the largest digital teams. According to a study by Accenture, the size of the digital teams that leaders are tasked with managing is directly correlated to the percentage of digital revenue they generate – one third of total respondents had more than 200 employees on their company’s digital team compared to more than half (55 percent) for market leaders. In short, the larger the digital team, the more digital revenue they see. Whether it’s the chicken or the egg, the message is clear. To see results in digital, invest in digital.
8. Team Structure For market leaders, the organizational structure tends to be a fully-integrated and centralized digital strategy. DCoEs, or digital centers of excellence, have become popular. DCoEs are teams, a shared facility, or an entity that provides leadership, best practices, research, support and training for a focus area. They help organizations with defining roles and responsibilities, accountabilities, establishing policies and standards, digital backlog and project prioritization and more. DCoEs turn digital transformation from a one-time activity to an ongoing organizational strategic initiative.
9. Hiring Digitally-minded, flexible employees are a critical resource for organizations that are looking to bring in new talent .. It takes a concerted effort to ensure that companies don’t continue to target and attract the same type of applicants as they have in the past, and reviewing HR hiring criteria is a good first step. Hiring engineers and computer scientists with high technical aptitude is always a goal, but looking for those skills while hiring for openness to criticism and breaking down the wall between IT and the business is equally critical.
10. Vendors and Partners Manufacturers don’t have to take on the full measure of digital alone. In fact, market leaders outsource more work than ever, though the number of digital vendors companies are utilizing is decreasing (see Figure 7). One third of respondents outsource more than half of their digital work. US respondents are outsourcing even more of their digital workload than they did last year (22 percent in 2016 vs. 16 percent in 2015).
Nearly three in four respondents (74 percent) said their organization works with 20 or fewer digital partners, while 21 percent surveyed said they work with less than five. A majority of US respondents tend to work with fewer than 10 partners (59 percent). These organizations are looking to sophisticated vendors that provide a comprehensive set of digital offerings.
To organize themselves for digital success, manufacturers first need to unequivocally associate digital success with overall success by creating short and long-term plans that involve the CEO alongside the full executive suite. From there, strategies can involve new investments in supply chain, customer service, or marketing alongside an elevation of online revenue channels with the most important metrics to gauge success. Finally, manufacturers can work on the company culture, the team, and vendors and partners to ensure that the entire company is angled towards digital success and market leadership.