Editor's Note: Take a look at our featured best practice, Digital Transformation Strategy (145-slide PowerPoint presentation). Digital Transformation is being embraced by organizations across most industries, as the role of technology shifts from being a business enabler to a business driver. This has only been accelerated by the COVID-19 global pandemic. Thus, to remain competitive and outcompete in today's fast paced, [read more]
Also, if you are interested in becoming an expert on Digital Transformation, take a look at Flevy's Digital Transformation Frameworks offering here. This is a curated collection of best practice frameworks based on the thought leadership of leading consulting firms, academics, and recognized subject matter experts. By learning and applying these concepts, you can you stay ahead of the curve. Full details here.
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At the pinnacle of the Industrial Revolution, not many organizations realized the complex subtleties of the Financial Capital. The organizations that were able to develop innovative methodologies to administer their financial capital outsmarted the rivals by achieving a competitive edge.
At the advent of the 20th century, two more forms of capital became known and gained prominence, in addition to the financial capital. These assets included: the Human Capital—the value acquired as a result of development and deployment of employees and contractors—and the Natural Capital—the manageable value of land, water, and other environmental resources. Altogether, these 3 assets are categorized under the Traditional Capital.
In this digital age, with the tremendous pace of technological innovation, 3 additional types of capital—referred to as the “BeCoN Capital” or the “Digital Age Capital”— have been found to be essential for creating value and staying ahead of the curve, together with the Traditional Capital:
- Behavior Capital
- Cognitive Capital
- Network Capital
Behavioral Capital
Behavior Capital is gathering and demonstrating data to track the behavior of people, companies, and products. The application of behavioral data has reached new levels, nowadays. Apple watch monitors the heart rate, Google monitors every activity that anyone does on its platform, and GE’s aircraft engine business uses sensors built into its engines and turbines to describe what the engine is doing in runtime and generate high levels of behavior capital.
Cognitive Capital
Cognitive Capital is the set of algorithms that signify codified information streams pertaining to people and organizations in the electronic world. With each passing day, these algorithms are becoming increasingly complex and mature enough to make decisions on their own, or to execute a machine-learning process leading to automated, constantly-progressing sequences.
There are many practical utilities of the Cognitive Capital. For instance, Bridgewater, a large hedge fund, employs artificial intelligence-based algorithms to make decisions. GE’s aircraft engine business utilizes machine-learning algorithms to conduct diagnostics and engine controls. Likewise, Amazon drives algorithms—utilizing specific product sales and customers’ purchase data—that modify prices, formulate deals, and present better offers in real time.
Network Capital
Network Capital is the set of connection points that an organization can utilize to develop and implement a successful strategy. The Network Capital is built by establishing strong connections, affiliations, and linkages. Organizations with large network of affiliates, followers, and loyal customers have a profound competitive advantage over the rest.
For instance, over the years, Netflix has developed scores of followers who watch shows there, share messages with one another on social media about the programs watched, and rate programs. This network not only increases the value of an individual show, but also add to the value of Netflix’s programming.
Similarly, the venture capital firm, SignalFire, maintains an extensive database of talent—i.e., software engineers, data scientists, and designers—with profiles of more than 10 million engineers in its database. SignalFire uses this information as an input into investment decision making—along with performance metrics—to make sure it is backing the best teams. The firm utilizes its network of resources and other websites (such as, Bitbucket and Github) to identify the contribution of its engineers to academia or to open-source projects, and how successful their prior companies were through their contribution.
The Bionic Companies
The 3 forms of BeCoN Capital are most effective when applied together. But their understanding is as limited as the financial, human, and natural capital were in the 20th century. Organizations that are able to develop sound capabilities in the Traditional Capital as well as the BeCoN Capital are referred to as the “Bionic Corporations”. Some of these Bionic Corporations have grown manifolds in a very short time period—e.g., Apple, Alphabet, Amazon, Facebook, Microsoft—and account for around 13% of the capitalization of the entire U.S. stock market.
The Bionic companies have expanded rapidly by utilizing their physical assets—such as, people, land, and funds and investments effectively—as well as by establishing and linking digital cross-boundary platforms and tools that make the most of their BeCoN Capital. For these organizations, developing BeCoN Capital is a foundational to their overall Digital Transformation Strategy.
How to Develop the BeCoN Capital
Senior executives in traditional companies who are aspiring to develop their BeCoN Capital to reinforce their growth should start by finding answers to the following key questions:
- Do we know about our customers’ behavior?
- Do we capture it, analyze it, and model the ways it might change?
- If not, why not?
Interested in knowing more about how to develop BeCoN Capital in your organization? You can learn more and download an editable PowerPoint about Behavior, Cognitive, and Network (BeCoN) Capital here on the Flevy documents marketplace.
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Want to Achieve Excellence in Digital Transformation?
Gain the knowledge and develop the expertise to become an expert in Digital Transformation. Our frameworks are based on the thought leadership of leading consulting firms, academics, and recognized subject matter experts. Click here for full details.
Digital Transformation is being embraced by organizations of all sizes across most industries. In the Digital Age today, technology creates new opportunities and fundamentally transforms businesses in all aspects—operations, business models, strategies. It not only enables the business, but also drives its growth and can be a source of Competitive Advantage.
For many industries, COVID-19 has accelerated the timeline for Digital Transformation Programs by multiple years. Digital Transformation has become a necessity. Now, to survive in the Low Touch Economy—characterized by social distancing and a minimization of in-person activities—organizations must go digital. This includes offering digital solutions for both employees (e.g. Remote Work, Virtual Teams, Enterprise Cloud, etc.) and customers (e.g. E-commerce, Social Media, Mobile Apps, etc.).
Learn about our Digital Transformation Best Practice Frameworks here.
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