E-Strategy, Pure & Simple: Connecting Your Internet Strategy to Your Business Strategy

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Initially it occupied a very precarious place—its industry is broadly viewed as being disrupted. But as it embarked on a digital transformation, the company discovered that although many customers wanted to make their travel plans digitally, they also wanted to interact with people in retail locations, asking questions and becoming comfortable with complex itineraries. Often companies try to access new technologies or ideas by acquiring start-ups and then integrating them. Smart companies prefer to build hybrid relationships with start-ups—strong enough to learn and find synergies but weak enough to avoid destroying the culture.

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So even though they may own the start-ups, they allow them to operate as semi-independent businesses. The company made two important digital acquisitions: Hackster. These companies operate as semi-independent entities and interact with Avnet through Dayna Badhorn, its vice president for emerging businesses. Her role is to protect the acquired companies from the inefficiencies—such as excessive planning and slow product development cycles—of the parent organization while helping Avnet learn agility and the importance of doing quick experiments.

Hackster and Dragon Innovation call her their guardian angel. Although GL executives spend a lot of time interacting with start-ups in the accelerator, the company struggled at first to translate such interactions into tangible projects inside GL, because no project leader was assigned to follow through. The situation has improved since GL appointed a manager to fill that role.

GL does not buy start-ups from the accelerator to avoid killing their innovative culture , so having someone to permanently liaise with them helps it maintain close relationships with accelerator members and implement the resulting initiatives. The other corporate members have followed suit, and their uptake of collaborations has improved as well.

In each case a guardian angel fights to take advantage of the best of both organizations, not only helping the start-up hold fast to its mission which is what motivates much of the talent to stay but also linking it to the mission of the larger organization while protecting the start-up team from all the bureaucracy and reporting that traditionally eat up company time. Managers often think that digital transformation is primarily about technology change. Of course technology change is involved—but smart companies realize that transformation is ultimately about better serving customer needs, whether through more-effective operations, mass customization, or new offers.

Because digital enables—even demands—the connection of formerly siloed activities for this purpose, the company must often reorganize both people and technology. In practice this may mean changing structure—for example, in situations where a more agile structure is merited, creating internal squads with the capabilities and authority necessary to follow projects from beginning to end.

Although a squad is a team, it differs from most big-company teams in being empowered to solve key problems quickly, as an entrepreneur would. The credit card giant Mastercard has a systematic process for building such squads, overseen by Mastercard Labs. Employees from various functional areas can submit ideas to qualify for three stage awards: Orange Box, Red Box, and Green Box.

The Orange Box gives employees a chance to explore their ideas and pitch them. The Green Box was designed to create a commercialized product from an official incubation project inside the labs. At this stage team members leave their jobs for six months to work on the project. One major global bank, ING, teaches an important lesson about getting such squads to work in more-traditional organizational structures.

It recognized that to assign the right employees to cross-company initiatives, and to keep them from staying too long on an initiative that should be cut, it needed to support these intrapreneurs in transitioning between roles. It has developed a set of internal processes called PIE: P for protect, meaning that employees who leave their jobs to work on a squad project can return to those jobs if the initiative fails; I for independence, meaning that squad members have their own resources and can make their own decisions; and E for encouragement, meaning that if the squad is successful, its work will be widely celebrated in the company.

Of course, it must also be OK for these squads to fail. Failures, even relatively late ones, should not jeopardize a career. We also have to be honest about all that we learned in the process and that by using a different approach, we learned these lessons in a fraction of the time it takes competitors.

As the Norwegian telecom giant Telenor for which Nathan has done consulting makes its digital transformation, it has experimented with job definitions.

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This shift encourages them to operate like mini-CEOs, externally focused on the customer problem and able to work quickly across internal boundaries to deliver a solution. In a radical example of such reorganization, ING eliminated divisions and functions and instead embraced an agile organizational structure with squads tasked to deliver improved customer journeys.

When it reorganized, over a weekend, all the employees were fired and had to reapply for their jobs, through the lens of the customer need they solved. Not all transitions will be so dramatic, but in most cases some friction is inevitable when jobs are redefined. Digital transformation may ultimately require radically altering back-end legacy systems, but starting with a sweeping IT overhaul comes with great risks. Smart companies find a way to quickly develop front-end applications while slowly replacing their legacy systems in a modular, agile fashion.

This can be achieved by building a middleware interface to connect the front and back ends, or by allowing business units to adopt needed solutions today while IT transforms the back end in an ambidextrous manner. For example, when TUI embarked on its digital transformation, it faced a difficult challenge: Its business operations in retail, telephone, and online were geographically and operationally separate, and back-end reservations systems in the UK were 35 years old.

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Technology was critical for the company at the time: The rise of Expedia and other OTA channels was threatening to totally disrupt the travel agency business. In this context it was very tempting for TUI to start its digital journey with a sweeping IT overhaul. But experience suggests that attempts to replace multiple complex, mission-critical systems all at once nearly always end in disaster.

Rather than embark on a complete overhaul, TUI developed a three-year plan to replace its technology, initially working with bespoke solutions to focus on a better customer experience.

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The company used this time to learn from customers what they wanted in a digital world. It then connected the front-end application to the legacy back end with a middleware interface. Next it divided the back end into modular subsystems and slowly replaced them, adding front-end functionality with each step. Monash University Library.

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