Digital Transformation Game Plan

Chapter 1. The Simplified Business Model

Before diving into simplifying your business model toward customer value and how digital technology is reshaping it, you must first consider the broader backdrop of the corporate management landscape to understand why customer value should be at the center of tomorrow’s business strategy, instead of other factors like revenue and profitability. In this chapter, we discuss why creating value for customers should be at the center of your business strategy and how focusing on the delivery of value to customers can create a single coherent focus for simplifying your business model.

Shareholder Value Versus Customer Value

The most influential management theory of the past three decades has been shareholder value maximization; that is, companies should aim to maximize returns to shareholders above everything else. Although this should in theory better align the management team’s interests with those of the shareholders, it has also resulted in some bizarre and detrimental behaviors. For example, by linking pay to share prices, some corporate executives focus more on manipulating those prices than running a healthy business; as many as 80% of managers are willing to cut R&D spending to hit their numbers. There seems to be a close association between shareholder value maximization and the pursuit of short-term profit.

The Downside of Shareholder Value

Once when we were working with a major financial institution on adopting more technology solutions, ...