It’s hard to work in the digital innovation department

It is hard being part of the digital department. Your work is always under close observation of everyone in the company. Whatever you do, everyone has an opinion on it.

Of course, we need to understand that everyone has a phone these days plus the tablet and probably a laptop as well. So it is easy to judge, what the progress is that has been achieved within the digital team.

In the last couple of months I’ve heard more and more chief marketing officer’s and chief digital officer is complain about the fact that they do not get the breathing room that other departments receive within their organization.

I can can follow the commotion. But in all fairness, it has not changed in the last decade.

Yet, there is a notion of digital business ideas needing to create a positive contribution margin within a relatively short period of time. It is perceived to be normal that a digital project makes money within 24 to 36 months. On a variable cost basis this might be possible. But especially if you’re looking to scale your business to a certain size, you need to be realistic about your goals.

The most important thing is to create a common playing ground for all departments to show what they’re capable of and to be measured in fair means.

Consistent communication is key

In most cases, the problem lies in the way that we communicate what needs to be done to reach our goals.

Digital projects are thought to be the future of anything that we do. It is commonly believed that digital projects are cheap, fast to implement, and highly scalable.

The latter might be the biggest issue here. The challenge for most e-commerce departments is that the cost of running their website, apps and other projects are seen as variable cost. Even the overhead that goes into running the project are an important part of the total success.

Most chief digital officer is complain about the fact that they are the only department that need to justify their own P&L.

The fact that digital revenues are so tangible makes it easy for us to calculate how well the digital business unit performs from a top level perspective.

Especially companies who are used to spending significant budgets on marketing communications tend to forget that performance marketing and traditional marketing efforts do not live by the same rules.

Digital business are new businesses

When a company starts on a digital endeavor, they do not only create more value with their existing customer base and business model. Any company who starts a digital business from scratch, needs to understand that this is a living and breathing company within your own company.

Digital businesses do not work well had a very small scale. They need to grow in order to thrive.

The initial cost of setting up a new digital business, especially within a larger organization, are significant. The thing is, starting a website or a new app is very easy and quick to do. But, what happens after you have launched the first product?

It is the scaling of the digital business that requires both know how, man power, deep pockets, and lots of time

Of course in this case, time is only relative. The amount of time necessary to scale a business from zero to US$1 million or even US$10 million is significantly shorter than the traditional way of scaling a business.

New projects take time

However, due to the relatively high initial sunk cost, and partially unrealistic expectations, what is digital business is to not get enough time to florish.

We shouldn’t forget, that even the best funded start ups in the world take between 6 to 10 years to create a positive contribution margin. The biggest fashion retailer in Central Europe, Zalando — founded by Rocket Internet-Took more than seven years to turn a profit. And there’s positive contribution margin was only a tiny percentage of the money they had burned up until then.

Generally speaking, we are last patient with digital businesses and new business units then we are with our core business. Yet it is exactly this type of investment that is necessary to continue to grow the core business in the long run.

New innovation doesn’t come from incremental changes, alone.

The pace at which digital businesses can move a new business ideas can evolve is tremendous. But we need to learn to understand what the growth dynamics are of new digital businesses. We cannot only look at revenue as the primary and first key performance indicator for a new and young business.

We need to have a close look at the potential of the customer base that can be build up using this tool, and take into consideration how this business unit can support the core business in the long run.

It takes courage

It takes an entrepreneurial mindset and a lot of courage for business owners and management teams I like to invest in the future.

But, there is no real way around it. What would be the alternative to letting others create solutions that will offer a superior service to your customers in the long run? Is there really any?

It is imperative that the world has changed in the last decade. New business models have started to emerge and we need to understand that the expectations of our customers have changed as well.

Even if we are not able to meet up to the expectations of our customers right now, it is better to the start and learn to walk the walk and talk the talk when it comes to digital than stand on the sideline and leave the playing field to others.

Get started and educate yourself

We are right in the middle of a strong digital movement. But we’re also still at the beginning of it. They’re only very few people and companies who really understand how we can reap the benefits of the digitalization as we can see and know it.

Hence, I urge any company out there to invest heavily in digital education and try out as much as they can. Now is the time to make mistakes. I believe that the coming decade will be full of strange and unstructured concepts and ideas. But some of these might become real winners.

You don’t need to become the next Apple or Google to join the pack. But you need to understand what they are talking about and how they are approaching the market as we know it.

Most of all it is incredibly important to believe in your digital team. Give them the support they need and room to breathe especially so that they can explore the possibilities in the decade to come.

The gold rush is not over yet. It has just begun.