Grant Frear. Photo / Norrie Montgomery
The number of companies on the Deloitte Top 200 index that were "born digital" can be counted on one hand.
Born digital generally refers to organisations founded from the mid-90s with internet-era information and digital technologies at the heart of their operating models. We can see the impact of these "born digital" companies in our day-to-day lives — the likes of global giants Amazon, Google and, more recently, Uber.
Though the impact of companies born digital is muted in our current Top 200 it's a safe bet we will start to see more appearing on the index, and climbing up the rankings.
Every Top 200 company is grappling with how the so-called Fourth Industrial Revolution will impact their business, and how digital technologies can transform their business models.
We collectively refer to these companies as "becoming digital" noting there are many stages of maturity to mark this journey.
What can companies that are becoming digital learn from those born digital? One key difference between the two is that those becoming digital tend to focus on using digital to improve what already exists. This approach can be seen as defensive, focusing on incremental improvement and lightly challenging the orthodoxies within an industry.
Companies that are born digital are the challengers, they have less to lose and fundamentally challenge industry orthodoxies, often ripping up the "rule book" in an attempt to reinvent an industry. These companies tend to focus more on what their industry might look like in 10 to 20 years' time and undertake investments in the present that might accelerate the business toward the long term view.
We refer to this as a "zoom out, zoom in" approach to strategy, which creates the conditions for breakthrough innovations and is something born digital companies do particularly well.
While the case for digital transformation is clear, those companies becoming digital don't necessarily know where to begin or how to choose from the ever-expanding list of critical initiatives. This creates a "strategy paradox" where the lack of a certain view of the future and an overwhelming to-do list leads to strategic paralysis and a reluctance to embrace change and take on risk.
To break the paradox, and move beyond a defensive approach to digital transformation strategy, organisations have plenty of options to apply the approaches of born digital businesses. "Zoom out, zoom in" strategy development, lean startup methodologies, agile operating models and cloud platforms are some of the ways companies can develop the capabilities to break out of a continuous improvement cycle and tackle something bold.
Starting small and expanding allows you to unlock new capabilities, and move an organisation along the path toward meaningful innovation. For executives preparing their companies for a more advanced digital future, developing innovation as a strategic capability is an important component for success.
Leaders embarking on this journey need to deliver across the board including strategy, technology, talent and culture. Both boards and management tackling true transformational change need to tightly hold on to the long term view for their industry while flexing their risk appetite to ensure they can break the "strategy paradox" and tackle meaningful innovation.
Companies on the path to becoming digital can and do eventually succeed at "being digital", even if they weren't born that way. It all begins with a view of the future that compels a business to take a transformational approach and a leap of faith that the journey itself will influence the ultimate destination.
Grant Frear is a Deloitte Digital partner