Anthony Stevens (pictured below) is the founder and CEO of Digital Asset Ventures and co-author of Chasing Digital: A Playbook for the New Economy. In this guest post, Steven’s talks the value of pivoting when transforming any business digitally..
The word ‘pivot’ denotes a rapid change from one strategy to another, which quite often involves changing your business’s original strategy, its target market and its pricing. Most pre-digital incumbents don’t pivot, and perhaps don’t even know how to.
The pivot is mainly about risk and reward. Those making the decisions recognise that to continue as they are will yield a lower likelihood of long-term success. When a start-up pivots, it effectively abandons everything to do with its past strategy and approach in favour of a new direction.
It makes sense in this context, as there isn’t much for the start-up to lose, and keeping both strategies running in parallel would be an expensive distraction and would likely create confusion for prospective customers. But for an established business, the pivot requires deeper consideration, as millions (or billions) of dollars in revenue and thousands of jobs may be at stake.
How do you pivot with losing momentum?
So, as the leader of an established business, the question you need to ask is: how do we pivot without compromising our entire operation? A successful pivot would, in the medium term, mean changing the nature of the product or service offered to meet new and emerging demands, while in the short term continuing to exploit current resources and investments.
It becomes a juggling act of sorts that involves digitally optimising your existing economic engine, so as to squeeze as much as possible out of it, while building out your new economic growth engine to meet new demands. I refer to these two engines as Engine A and Engine B. The idea is to serve your current customers while also building out the capabilities to meet the needs of your future customers, even if these sets of customers are the same.
From A to B: Why two engines are better than one
Innovation consultant Scott Anthony refers to this approach as dual transformation. It is essential to make the distinction between your Engine A and Engine B, because monolithic transformation is simply too big a task when you’re dealing with thousands of employees, expectant shareholders and legacy systems. This twofold approach has its own challenges and complexities, but will help you create an organisational design that remains relevant well into the digital future.
Two engines are better than one if you want your business to stay in the air. Over time, resources should move from Engine A – your current economic engine – to Engine B, which is focused solely on creating new revenue streams. This will help drive scale.
There are four key areas you need to focus on with regard to Engine B:
- Support and empower your Engine B team. While your Engine B team should have complete autonomy, it should also leverage the capabilities, IP and resources of your core business. Your objective is that Engine B will eventually become your primary economic engine, so make sure you give it the right fuel to get out of first gear.
- Software will be at the heart of your value and delivery model. Software allows your business to scale exponentially and allows people to focus on high-value activities, such as customer relationships.
- A data-driven leadership mindset is key. Data’s ability to help drive operational performance or create new revenue streams is critical. Think about data first and everything else afterwards.
- Start on the demand side of your business. It has never been easier for your competitors to reach your customers, and for your customers to buy from your competitors. Therefore, it is now more critical than ever to focus your Engine B on your end customer.
