Ask any dozen business leaders how they define ‘digital’, and you will probably get just as many different answers. For some, digital is just an upgraded term for what their IT function does. For others, digital refers to the use of online tools and technologies to make process changes, or performance improvements, or to pursue organisational transformation.
For still others, it’s an excuse to question the how and the why of their core business. Given the prevailing fuzzy definition of digital, it is not surprising that business leaders are often unsure how to evaluate the myriad technology-enabled initiatives being proposed to them and how much value they may create.… Our advice to these business leaders? Don’t get tripped up by digital labels. Follow the same principles that apply to all investment decisions.… For digital projects, the alternative may be to do nothing. But especially in the case of digital projects, the do-nothing case may not mean net-zero change; it may actually mean a steady (or accelerating) erosion of value.
Consider the decision many banks have faced over the years about whether to invest in mobile-banking apps: if all of a bank’s competitors have mobile apps and the bank doesn’t invest in one, its market share will likely fall over time as it loses customers or fails to attract new ones. Therefore, the base case is not stable profits as well as cash flows; instead, it is a decline in profits and cash flows — along with a reputation for being a stale brand.