Digital transformation is no longer merely a buzzword that describes the disruption of information-heavy but low-asset industries, as experienced by the music or the news media industry, but the connectivity of physical infrastructure spreads digital disruption to entirely different environments. Think of the classic cases of Uber and Airbnb, which circumvented the high entry-barriers of the taxi and hotel market, respectively, by running a platform-mediated approach and saving on high up-front expenditures – but also think of the logistics industry, for example, where large and dominant incumbents such as UPS or DHL have to adjust their business operations to encrypted blockchain consignment tracking technologies and the delivery by drones. Technological innovation in the form of digitization is not necessarily harmful for former (or current) market leaders – in the words of Michael Porter, it is in fact easier for established companies to implement digital technologies than for digital-born companies to build operational competitive advantages (Porter, 2001). However, large incumbents, especially in asset-heavy industries, suffer from bureaucratic organizational structures and missing digital knowledge among its employee base, which exacerbates a shift in the operational strategy. In addition, the management of these companies is traditionally focused on supply-side of economies of scale and income statement KPIs such as revenues and profits – to flourish in the digital era, platforms must think in terms of in terms of demand-side economies of scale and interactions between users and suppliers to leverage networking effects and maximize value generated on the platform (Alstyne, Parker & Choudary, 2016)
Since large (and cash-rich) companies lack the internal knowledge and determination to independently implement a digital strategy, consultancies increasingly concentrate on providing this service. I was allowed to spend the past three days in Paris with the BCG Technology Advantage Group, which is a recently founded division that supports large players in different industries in digitizing their business operations. Digital-focused consultancy teams have the required expertise and experience to take a rational perspective of digital benefits in light of their inherent risks and implementation costs, which provides a solid foundation for many established companies to take the step into the digital world. Moreover, strategy & IT consultants in general, and Bain, BCG and McKinsey in particular, have the reputation and the management contact to implement a digitization strategy from the top with CEO support, which is vital to successfully move the organizational structure and the employee base into the digital era. By reshaping organizational cultures and structures and communicating a new way of tech-driven and innovative thinking, digital consultants provide companies with new space for agility and intrepreneurial spirit to compete successfully and sustainable in continuously changing industries – if implemented appropriately, the potential upside to companies also vindicates the usually exorbitantly high consulting fees.
