How Digital Is Your Business?

Introduction

Why this book? And why now? After all (you may be thinking), this isn't the first book on e-commerce and the Internet. It may not even be among the first hundred books on these topics, as a casual glance at any bookstore's shelves makes clear. What can this book say that's new and different?

That casual impression is correct in one sense, wrong in another. Correct because the digital revolution has been under way for years and has spawned hundreds of books, including several excellent ones. Wrong because How Digital Is Your Business? is not a book on e-commerce or the Internet. It's a book on digital business. And that means it could not have been written even eighteen months ago.

We define a digital business as one in which strategic options have been transformed--and significantly broadened--by the use of digital technologies. Under this definition, it's not enough to have a great Web site or a wired workforce or neat software that helps to run a factory. A digital business uses digital technologies to devise entirely new value propositions for customers and for the company's own talent; to invent new methods of creating and capturing profits; and, ultimately, to pursue the true goal of strategic differentiation: uniqueness.

Digital business, so defined, is a phenomenon that has emerged only since 1996. It gathered momentum in the last two years of the twentieth century.

* Not until 1998 did Dell Computer's on-line configurator--one of the first Choiceboards, a powerful new tool for digital business--appear in anything like its current form.

* Not until May of the same year did it become apparent that what we call 10X Productivity--order-of-magnitude improvement in cost, capital requirements, and cycle time--could be and in fact was being realized through the use of digital technologies.

* Not until early in 1999 did it become clear that AOL, Yahoo!, and eBay had all developed viable business models for doing business on the Internet.

* And not until the early months of 2000 did it become clear that GE, one of the business world's great incumbent companies, was moving forcefully to bring about the first successful large-scale transition from a nondigital to a digital business model.

Add to these facts the reality that the creation of a fully developed digital business design takes four to five years to complete, and it's apparent that what we now know about digital business was impossible to know, except in vague outline form, prior to 2000. Thus, we'd argue, this is the first book about digital business. It won't be the last.

Having been exposed to the hype and furor that digital technologies have aroused, we have no desire to contribute to them. But we believe that digital business represents a fundamental change from past business models. By comparison, other business movements, like the quality movement of the 1980s or the reengineering movement of the 1990s, will prove to be significantly narrower and more technical, and will have less impact.

The breadth and depth of the digital revolution are so important that no one in business can afford not to make digital business a leading priority during the next half-decade. The situation of today's business leaders--those responsible for decisions that affect customers and determine how talent, money, and other resources are deployed--is comparable to that of any professional whose field is being altered forever by the emergence of a new and better way of working.

Think of an architect during the early years of the twentieth century, when steel-girder construction and the invention of the elevator were making skyscrapers possible; or imagine a physician in the middle of the nineteenth century, when the discoveries of anesthesia (in the 1840s) and of sterile technique (in the 1860s) were transforming surgery from a torturous horror into a life-saving miracle. No responsible professional would want to ignore such developments. It's now clear--far clearer than it was even two years ago--that the changes made possible by new digital ways of doing business will be equally radical, beneficial, and liberating.

The history of digital business is just emerging from the discovery stage. But early developments have already revealed some important lessons for those who would lead--or join--the second wave of business digitization. This book makes available to anyone in business the economic and organizational implications of the success stories (as well as the struggles and setbacks) of companies that are showing the way toward the Digital Business Designs of the future.

These companies are the digital pioneers, and several chapters in this book tell their stories: Dell Computer (Chapter 4), Cemex (Chapter 5), Charles Schwab (Chapter 7), and Cisco Systems (Chapter 9). Taken together, these chapters illustrate the extraordinary outcomes that Digital Business Design makes possible, and they suggest the qualitative changes in business culture and values that accompany digitization. The stories of these four companies offer profiles of the digital businesses of the future.

Chapters 12 and 13 present a different kind of case study: the current experiences of two large and powerful incumbents, GE and IBM, as they transform themselves into digital businesses. These chapters sketch out what it takes to change a traditional enterprise into a digital business, and some of the problems and obstacles that must be overcome.

Chapter 14 tells yet another type of business story: the success of the few large-scale Internet-based businesses that have developed viable (and profitable) digital business designs. AOL, Yahoo!, and eBay are examples of what it takes to start in a digital space and build an effective business model. Legions of struggling dot-com companies have begun to learn some of the hard but necessary lessons.

Other chapters focus on specific aspects of digital business design: the Choiceboard, a powerful but little-known digital tool; 10X Productivity, one of the remarkable benefits that digitization offers; and the organizational effects of going digital. Each element of the digital business picture provides ideas and methods that can help every company that is crafting a transition from a conventional to a Digital Business Design. The chapter sequence allows the ideas, information, and stories to be mutually reinforcing and cumulative in their effect.

We hope that, after reading this book, the importance and urgency of digitization for all businesses today will be clear. The current business climate of relative prosperity (and the record-setting bull market) can dampen the sense of urgency about fundamental business reinvention. "We're doing fine," is the feeling, "so why rush into something we don't really understand?" That reaction is human, understandable, and very dangerous.

Consider the people for whom you're responsible: your customers, your employees, your partners. Within the next three years, it simply won't be possible to do a world-class job of serving them, and the other stakeholders who rely on you, without becoming digital. But if you begin today the process of transforming your company through Digital Business Design, you'll be able to offer them benefits no other company can match--the unique value propositions that are the ultimate reward of digitization.

The time is now, and the starting gate is right here.