Preface

Organizations are reimagining, reshaping, and retooling for an era in which traditional business rules and industry frontiers have been blown wide open.

The accelerated progression of technology and its rapid uptake by consumers have pushed the issue of digital business transformation to the top of the agenda for organizations globally. The opportunity, or existential threat, that these seismic changes represent is focusing the minds of business leaders and business owners on the future of their companies and industries as never before. You may be one of them.

Every week, I am in meetings with C-level executives of some of the best-known and beloved brands in the world. Invariably, the conversation centers on the challenge of transformation: the identification of new sources of value for their customers; fending off competitive threats from digitally native entrants; learning how they too can operate with digital at the core of their business; and doing this all in an agile, iterative fashion that keeps pace with the ever-increasing rate of change in the world.

Competitiveness and the "Digital Moat"

Warren Buffett, the CEO of Berkshire Hathaway, knows a thing or two about identifying and investing in companies with strong competitive advantage: He's built a $68 billion personal fortune off the back of that knowledge. In early 2020, Buffett lost an estimated $21 billion in net worth as a result of the economic impact of the global coronavirus pandemic yet is still understood to be the fourth richest man in the world in a list topped by Amazon founder Jeff Bezos. As we'll see, both of these are interesting asides.

The reason for our interest in Warren Buffett is that he popularized the idea of the "economic moat": the investor's approach to identifying the longevity of a business's competitive advantage.

At an annual meeting of Berkshire Hathaway shareholders, Buffett explained his principle as "trying to find a business with a wide and long-lasting moat around it, protecting a terrific economic castle with an honest lord in charge of the castle . it can be because it's the low-cost producer in some area, it can be because it has a natural franchise because of surface capabilities, it could be because of its position in the consumer's mind, it can be because of a technological advantage, or any kind of reason at all, that it has this moat around it."1

It has, as noted above, generated significant returns both for Buffett and his Berkshire Hathaway shareholders. It is, however, worth noting that the annual meeting at which he explained the "economic moat" approach was in 1995, a quarter century ago. It was in 1995 that the commercialization of the Internet really began. It was also the year in which two companies were founded: eBay and Amazon. However much the "economic moat" investment approach might have stood the test of time, it is accurate to say that it was conceived in a largely pre-digital age and, self-evidently, before Amazon set itself on a course to exceed a $1 trillion market capitalization in early 2020 and before Bezos in 2018 became the world's richest man.

What the reader of this book needs is to build and maintain their "digital moat." The following chapters are designed to help you do that. What's the difference between an "economic moat" and a "digital moat"? Certainly, they're not mutually exclusive because both focus on the development of your competitive advantage.

Warren Buffett's original "economic moat" focuses on one or a combination of moat types: low-cost production or distribution; scale; high switching costs for customers or suppliers; and intangibles, such as brand, intellectual property rights, or government regulation and licenses.

A company such as Coca-Cola has many of the qualities that define a wide economic moat. It has one of the strongest brands in the world and extraordinary geographic coverage, which adds to its awareness and customer loyalty. It also has the production advantages associated with scale (Coke and Pepsi between them control 70% of global volume in the carbonated soft drinks market), and its structural focus on producing the concentrate for drinks, rather than on the processing, bottling, and distribution gives it two advantages: lower cost and control over product quality in a taste-sensitive market. There are no high switching costs for customers here, yet the strength of Coke (and, in fact, Pepsi) is that core customers tend to remain loyal to their preferred brand regardless of price and promotion activity from their main competitor.

A "digital moat" is the sum of the capabilities you put in place to create value and be competitive in a digital world. It is your company's ability to evolve hard-to-duplicate, digitally supported products, services, and experiences that continually align with changing customer behaviors and technology.

A company that has one of the largest digital moats today is Amazon. It created a culture that continues to enable digital evolution through the use of agile teams with distributed decision making to the lowest part of the organization. This has created an unparalleled ability to pilot and scale adjacent products and services on its commerce platform: from its own private label goods to food delivery and even turning an internal capability, cloud computing, into an external business with Amazon Web Services.

Similarly, Uber, at its core, created an ecosystem which was based spatially around a person. Wherever you were, things could come to you. From people going to food, food could come to people. From people having to find cars, cars could come to people. From people having to interact with multiple service providers for trains, planes, buses in their vicinity, those could all now start to get connected. The Uber app digitally enabled the physical world around you and created an interface for you to engage with it. In addition, Uber created a model that attracted a supply of drivers. Through digital, drivers had an easy way to access income while enjoying the flexibility of work hours that accommodated their lives.

Both Amazon and Uber are examples of companies with wide digital moats: They were born digital and maintain their moats by being digital to their core. This book is for established businesses who want to build their own strong digital capability through digital business transformation. To effectively transform a business, its leaders or owners need to look at their business model as a whole and need to shift their companies or organizations significantly from where they are today.

Why I've Written This Book

A great deal of the work I do involves meeting, advising, and helping the CEOs and leadership teams of large, established organizations on the transformation of their business for a digital age. Often, these are far more than "pre-digital businesses." The companies we work with have deep and centuries-old foundations, unparalleled industry expertise, and brand names that are not so much famous as imprinted on our collective psyche. Never mind "pre-digital," some of these organizations are "pre-electricity." This is important because they have proven, more than once, their ability to adapt to change. They have been through some of the most fundamental technological advances, generational changes in consumer behaviors and expectations, and geopolitical upheaval including world wars, macroeconomic shifts, and globalization. They have still come out on top.

Despite the proud history of these companies, their leaders recognize they have a problem and an imperative to address it. Their problem is the same as my problem, which is the same as your problem, and, in all likelihood, that of anyone who has been moved to pick up this book.

My purpose in writing this book is to help leaders get past what can be the hardest part of any personal or enterprise transformation: the choices we make every day to move toward what will drive our future success. Often, this will mean letting go of things that made us successful in the past, to make room for new skills, relationships, ways of working, and opportunities.

In this book, we decode the digital DNA of leading businesses: those things that successful companies today instinctively do or qualities they naturally possess. Decoding and understanding digital DNA is a crucial first step. It comes before transplanting that DNA into any established business.

My company, Publicis Sapient, has been in the business of digitally transforming our clients' businesses for more than 30 years. We've partnered with clients across all industries and helped them stay relevant in the digital age through the launch of the first online banks, travel portals, stock trading platforms, and retail commerce platforms. For the vast majority of those years, I have been part of that journey and it is safe to say that without Publicis Sapient, my colleagues, and our many extraordinary clients, none of what follows would have been possible.

This book is intended to help readers with the understanding and practice of transforming a business for a digital age. It is written from a practical perspective developed from decades of partnering with clients on how to take a holistic and multidisciplinary approach that infuses digital into how companies produce stronger business outcomes....