Wiritten by Fraser Gillies
Why do more than 50 percent of European startups fail in the first five years despite having innovative ideas, great teams, and some having even secured venture funding?
In many cases, the cause is a misguided focus on digital transformation. Founders lack a customer-centric mindset, which means companies miss the opportunity to innovate with the market.
Sanjib Sahoo, Chief Digital Officer at Ingram Micro, spoke this month at the CCE conference about the importance of being digitally fit, and the key factors that determine it.
As a company that helps businesses adopt technology, including some of the 22.5 million SMEs on the continent, Ingram Micro is very aware of these challenges for startups and small businesses. According to Sahoo, entrepreneurs need to analyze their digital fitness at every step of the time. Only then can they meet the product mindset and the customer mindset while innovating, operating, and integrating.
“The first point is that digital fitness requires a lifestyle change, just like physical fitness,” Sahoo explains further. “You don’t go from being overweight to running 10 miles the next day,” but you must constantly improve your fitness. The same is true for startups and their mission to survive and thrive. So instead of talking about digital transformation, companies should first figure out if they are actually digitally fit and then set up a program for incremental change, Sahoo added.
So what does it mean to be digitally fit? And what should European startups and SMEs look for to improve their digital fitness? Let’s dive deeper into the insights Sahoo shared with us.
Digital fitness is both a mindset and a spirit.
In a nutshell, a startup’s digital fitness is how it adapts to the changing technological environment and adopts digital transformation successfully. There are four key steps to a digitally fit regime, as Sahoo outlined:
Firstly and most crucially, there’s the digital mindset and spirit. This means altering the DNA of a startup towards performing and transforming simultaneously rather than one or the other. This step is the most important, as it typically indicates a company-wide culture and attitude change.
Secondly, startups must better plan for the challenges and opportunities of transformation. Transformation doesn’t happen overnight. It’s a gradual process that must become habitual and be embedded into the broader industry ecosystem rather than an action in isolation.
Thirdly, companies must optimize operational architecture. Systems must be able to respond to change and work with new technologies such as machine learning and AI, and they must also be able to stem the processing power needed for scaling.
Lastly, creating a system of governance that connects both value and technology is vital. This structure tells companies what makes value in the organization and what doesn’t. Everybody should think like a chief value officer and consider every decision in the company under the aspect of how much value it will create for the customer.
Fail fast, eliminate fear.
Sahoo emphasizes that having a digital spirit means embracing change. European startups and SMEs must turn challenges into opportunities and make mistakes boldly.
Too often, organizations are risk-averse at the wrong moment. They focus on the 40 percent chance of failure rather than on the 60 percent chance of success. By focusing on the art of the possible rather than the art of the impossible, startups can identify opportunity gaps in the market. Once they identify the gap, they can optimize fast and focus on the right values.
A trend that Sahoo has identified startups adopting is the speed of product creation. In the case of startups, the go-to-market time has decreased significantly over the past ten years. Better said, startups aren’t waiting two-to-three years to launch their products in the market anymore.
“After condensing ten years of transformation into two during the pandemic, the idea that time is about speed has been crystalized for both private and public organizations.”
As a result, entrepreneurs are investing more in the product mindset. Sahoo gives Apple’s iPhone as a perfect example of the product mindset. Apple didn’t invent the phone. They improved on it. With a design concept and a customer-centric approach, Apple took something they were really good at and continuously improved on the original iPhone through incremental innovation and strong customer feedback loops. As a result, they’ve been able to focus on delivering value while adhering to the digital transformation happening in the market.
Fitness isn’t just about looking good, it’s about health and longevity, too.
Successful entrepreneurs analyze fitness at each step, according to Sahoo. For example, can they integrate the customer mindset into their work? And can they identify opportunity gaps in the market? These are some of the questions that founders must ask daily if they want to achieve long-term digital fitness.
Sahoo’s medical analogy perfectly sums up digitally unfit behavior: “Imagine you’re a doctor operating on a patient and say, ‘the operation was successful, but the patient died.” Companies with a single-focus mindset have tunnel vision on either performance or transformation rather than being aware of both. A lack of customer-centered awareness or product innovation mindset means inefficiencies and an unsustainable approach to change.
A data-driven approach to decision-making means companies must embrace emerging technologies such as machine learning and AI to create a clear roadmap for long-term digital fitness. Particularly AI in Europe is being increasingly used for pricing and AI generated imagery for the bloc’s roughly 450 millions citizens.
In fact, to better understand what problems need to be solved, companies must be able to rely on data and statistics to make reasoned judgments about the best steps for resolving inefficiencies.
Digital fitness: It’s an attitude more than anything else.
To be digitally fit, startups must strap themselves in for the long haul. It’s a process of gradual commitment, iteration, and progression — not a simple overnight success story.
While digital fitness is all about optimizing the speed of decision-making, it also recognizes that the phenomenon is continuous. Therefore, implementing positive change daily with a customer-centric and product mindset allows companies to innovate and focus on value simultaneously. This is a lesson that can be applied to all European entrepreneurs.
Sahoo summarizes this with his example of Blockbuster. A company that cornered the video rental market became extinct because it failed to adapt to digital streaming, unlike Netflix, which has since built a new and highly-popular video streaming market.