Interdependent Principles
Summary
The six principles behind the Digital Manifesto are interdependent. They
reinforce each other, creating a positive feedback loop.
Information technology is not a neatly packaged box with a guaranteed
return on investment stamped on it. Information Technology is like a kitchen:
spending $25.000 on a new kitchen does not automatically result in a great
dining experience. You also need a cook. In this case, the cook is the IT
professional, embodied by the principle less defensive, more offensive. The IT
team no longer delivers a piece of hardware or software to the business, but a
solution or even better: a value proposition. A value proposition fulfills a
specific want or need of the business, creating value (e.g. additional
benefits, less risk).
While advanced automation and robots are substituting humans in several
service-related areas of the value chain, employees remain necessary for truly
added value activities like strategy setting, innovation, performance
improvement and exception-handling.
Employees serve Customers
For the foreseeable future that is. In 2016, Google launched a
research project to see if computers can be
truly creative. It is only one of the projects part of a global
effort to create machines with artificial intelligence and ‘deep learning’ capabilities.
The constantly evolving technology landscape also has a profound impact
on the value propositions offered by the business to its customers. Music
lovers used to record their favorite music on tape, replacing them over time
with DVRs, hard drives, MP3 players, and more recently, streaming from the
cloud.
Customer have (increasingly differentiated and technology-rich) needs
The rate of change is not constant, but increases both in
volatility and complexity. The tape recorder was invented around 1930 and
enjoyed a stable and predictable lifecycle for almost half a century. No such
luck for more recent substitutes.
Customer needs change over time (at an accelerating rate)
More generally, every new product is more capable than its predecessor,
but also far more difficult and expensive to design and produce. This
translates into a network of hundredths, if not thousands, of specialized
companies to deliver one coherent value proposition from a customer perspective
(I).
Figure 1: Six interdependent principles (source: book Digital Manifesto )
Together, these companies form a virtual entity, bundling a broad set of
capabilities, skill sets and other assets to realize one or more shared
objectives. The larger and more complex the value proposition and network, the
more organization (as in “the act or process of planning and
arranging the different parts of an event or activity” (II)) is
required to achieve the required effectiveness and efficiency. Do this well and
the result is wealth for all the stakeholders involved.
Constantly changing
needs require organization (e.g. end-to-end approach, leadership, investment in
new skill sets)
Done well, organization results in added value (read: improved revenue
and margin, reduced risk)
By investing part of that wealth into the quality of the working
environment, employee satisfaction is improved, the first step in the so called service-profit chain (III). The service-profit chain establishes
relationships between value creation, customer loyalty, and employee
satisfaction. Loyal customers buy more and generate referrals, both key drivers
of growth and profitability. To become loyal, they need to be consistently
satisfied by the value proposition offered by the company.
The larger the service component of the value proposition, the higher
the impact of those responsible for designing and delivering the service.
Hence, the emphasis on employee satisfaction as content employees are more
productive, go that extra mile, and are less likely to look around for other
job opportunities.
People are the most important asset a company can invest in
The end-result is a positive feedback loop, from which all stakeholders
benefit.
Notes and references
(I) Sustainable success requires companies to invest the available
resources (e.g. available budget, management attention) its distinctive or core
competencies. Other competencies should be sources from external partners. Prahalad
and Hamel consider a competency core when it is not easy to copy by
competitors, can be used for other products and markets and contributes to the
end consumer’s experienced benefits and the value.
(II) Source: Merriam Webster dictionary.
(III) Heskett, J. L. , Jones, T.O., Loveman, G. W., Earl Sasser, W.
Jr., Schlesinger, L. A., Putting the
Service-Profit Chain to Work, Harvard Business Review, 2008.
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