Startup founders and leaders hear it all the time: that digital transformation is the single most important issue facing companies today, a message that has only gotten louder during the pandemic. The conventional wisdom is that if you're not laser-focused on digital, you're doomed to be left behind, an extinct dinosaur from a bygone era.
This line of thinking has become so ubiquitous that it doesn't occur to most founders and leaders to question it. That's why I was intrigued when I heard about the new book by Stanford lecturer and Silicon Valley venture capitalist Robert E. Siegel - The Brains and Brawn Company: How Leading Organizations Blend the Best of Digital and Physical.
In his book, he writes that while digitization is, of course, important, "it's not the only kind of competency that matters. The less flashy, more grounded aspects of business, such as logistics and manufacturing, are still crucial to the success of any company, large or small. Amid the insistent drumbeat of digital transformation, those traditional, old-fashioned competencies are easily overlooked and underappreciated."
Siegel emphasizes that nothing is exclusively digital or physical anymore, and the best companies - like Amazon - are the ones that successfully blend both brainy digital competencies (data, AI) and brawny physical competencies (supply chains, customer service, and quality control).
Siegel said there are ten competencies that matter the most - five brainy and five brawny. Here are ways that startup founders and leaders can think about six of the 10 attributes.
1. The Left Hemisphere: Using Analytics
With big data increasingly available for all kinds of products and services, every company needs a strategy and ethical model to use all this information to serve customers better, improve their offerings, and control costs. He calls this capability the left hemisphere, after the brain's center of logical thinking.
For example, Charles Schwab has access to a staggering amount and variety of customer data. It has found smart ways to draw insights from all that data, while also taking a thoughtful, values-driven approach to protecting privacy and promoting customer trust.
2. The Amygdala: Tapping the Power of Empathy
Empathy is symbolized by the amygdala, the seat of emotional processing. A management team with a strong amygdala will be good at understanding and connecting authentically with customers, employees, and outside partners alike.
For example, Kaiser Permanente has learned to focus on empathy for patients and using technology to study what its doctors and nurses really need to align incentives for all of its stakeholders to deliver the best possible care.
3. The Inner Ear: Balancing Ownership and Partnership
Every company faces a fundamental strategic question: Which functions should it own and manage directly, and which should it pay outsiders to manage? The rise of mobile computing, the cloud, data analytics, and AI have made it impossible for any company to provide all parts of a technical solution. Owning more aspects of the technology stack can increase customer intimacy, while owning fewer makes it easier to master the ones that matter most.
Take Instacart, for example. It has developed a sophisticated approach to balancing its many partnerships, especially with the supermarket chains and CPG companies that can make or break the quality of Instacart's offerings.
4. The Spine: Logistics
A strong spine - logistics, supply chains, and getting the right things to the right places at the right times - is essential to delivering great experiences to customers, even in sectors that are rapidly going digital.
Consider how three major retail chains--Best Buy, Home Depot, and Target--have defied the so-called retail apocalypse by blending the best aspects of physical retail with innovative new approaches to e-commerce.
5. Muscles: Leveraging Size and Scale
Economies of scale are still a huge advantage, but in some ways it's harder than ever to manage a sprawling organization across regions, countries, or continents. It takes strong and agile muscles to act "glocally"--making the most of both global scale and local expertise in challenging, distinct markets. For example, Michelin benefits from the global scale of its manufacturing and materials science engineering while empowering its local managers to customize offerings for their regions.
6. Hand-Eye Coordination: Managing Ecosystems
The relationships among suppliers, channel partners, investors, regulators, and competing firms in a business ecosystem are frequently in flux, requiring a juggling act to address every ecosystem member's competing needs. Like any juggling act, doing it well requires great hand-eye coordination - like knowing when you should be tough and assertive in shaping the ecosystem, and when you should hang back and let others lead. For example, Google's Android division has been notably successful at managing its complex ecosystem.
According to Siegel, the door is open for traditionally brawny companies to vastly improve their brainy competencies, while brainy companies boost their brawny competencies. No person or organization need be trapped in an old mindset. At any level-- as individuals, teams, departments, companies, or entire industries--there are opportunities to bridge the gap between brains and brawn, creating a durable competitive advantage.