During digital transformation, an organization must still deliver and support existing products and services:

• Many organizations fail when digitally transforming, they must continue to deliver the norm while progressing through transformation efforts
• Often the goals of the old and new conflict or contradict (creates its own level of chaos that is hard to predict and harder to manage)

Must include a mechanism to maintain a steady state while transforming like parallel operating models (POMs) (approaches to executing digital strategy while maintaining a steady state):

• Cannibalism
• Erosion
• Concurrence
• Synergism

1. Cannibalism

Focus: the rapid destruction of the existing business model and complete replacement with a new digital business model:

• Most forms aim to reduce the degree of parallel operation as much as possible
• Most aggressive of POMs and is an extreme reaction to threats
• Driven by overcrowded market spaces (e.g., many competitors, reducing consumer base)

Examples:

• Moving from print to fully digital information (PagesJaunes)
• Proactive cannibalism: DVD rentals, consumer provider, streaming video, content creator (Netflix)
• Continuous cannibalism: Apple (Mac with iPad; iPod with iPhone)

2. Erosion

Kinder, gentler form of cannibalism:

• Intent is to use the revenues of an existing and still profitable business model to fund a new digital business model
• Eventually destroy existing business model (slow decay, measured destruction)

Characterized by three basic conditions:

• The existing business model does not benefit from the new digital business model
• The new digital business model needs the existing business model for a time (for its revenues)
• The new digital business model tends to destroy the old business model over time

Example: New York Times

3. Concurrence

An approach where the new digital business model neither helps nor harms the existing business model. Works best when:

• Organization is attempting to increase/gain market share
• Consumers are difficult to reach via existing channels

Example of Brick-mortar clothing store:

• Small market of loyal clients but new clients can’t physically shop
• Open an online shop
• Result: expanded customer base, both models exist equitably

4. Synergism

Two models combined produce a greater or different result than they could have produced individually (1+1>2):

• Works best in situations with existing adjacent or complementary sales channels
• No competition within channels
• Customers prefer omnichannel delivery (e.g. sometimes in store, other times, online)
• Most mature/advanced POM, most benefit, most difficult to execute (customer excellence and operational excellence dichotomy, need both)

Example of Sephora:

• Selling make-up is the ability to try it first, but customers influenced by reviews, videos, recommendations
• App allows in-store customer to scan a product and view the media
• Product can then be re-ordered online

5. Ineffective models

Worst POM is none at all:

• Some organizations fall into a POM reacting to change
• Others adopt a model that is inappropriate

Characteristics of ineffective models:

• Being constructed without an outcomes-based view
• Not accounting for alternative models or realistic scenarios
• Being constructed as a response to extreme risk attitudes
• Being based on a misunderstanding of the current business model
• Not being sufficiently flexible, and not accounting for the potential need for repositioning

6. Transition pace between old and new

Factors to determine transition pace:

• Consumer demand: when in doubt, ask the consumer
• Organizational capabilities and culture:
  • Two approaches: jump in feet first or be more pragmatic
  • Use digital positioning to help understand
• Maturity of supporting digital technologies: don’t base a strategy primarily on technology but rather on what the organization wishes to achieve
• Threats from competitors and emerging technologies: monitor competitor to ensure digital business model is paying off before investing

7. Continual improvement

Organizations that have successfully transitioned, enjoy an appetite for change: change is the norm, there is no fear of failure or satisfaction with leading the pack

Change equates to continual improvement and it’s the way business is accomplished: look for opportunities to tear apart current digital model and replace with a model that will further sustain them in the future

Go back to ITIL 4 Strategic Leader Certification Course: Implementing a Digital Strategy to finish this chapter or to the main page ITIL 4 Strategic Leader Certification Course.