Six 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).

Six interdependent principles of Digital Manifesto
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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