What is digital transformation?
Digital transformation may sound like a tech buzzword, but it's an important process for transitioning your business’ vision, models and infrastructure into a new digital ecosystem.
While that may sound simple, digital transformation can be a complex, and often daunting, process across multiple projects that impacts every aspect of your business; allowing you to create an efficient digital operation. In this article, we aim to answer the most common questions around digital transformation and provide clarity, including lessons learned from our own projects and digital transformation experts.
What is digital transformation?
The Global Center for Digital Business Transformation suggests that "organisational change is the foundation of digital business transformation". That's because digital transformation often involves reorganising and retraining, and even a change in leadership or the creation of new jobs within the company. In essence, changing the nature of an organisation means changing the way people work, challenging their thinking and encouraging the innovation of new business models and daily work processes.
The success of companies depends on their ability to control these processes, to obtain process knowledge, and to make the knowledge inside people's minds more and more available for the growth of the company, and increasing their value. In other words, in order for a company to achieve great results, transformation or change management will need to be deeply rooted in the company and work in all strategic and operative processes.
Why is digital transformation important?
In 2019, the number of internet users worldwide was over half of the world's population, or ~4.39 billion, up from 2.21 billion in 2015. According to another report, 79% of internet users own a smartphone and have used it to make an online purchase in the last 6 months. This means that, in the current scenario, businesses are expected to leverage digital technologies to launch new products, processes and services, as well as to provide personalised experiences for their customers.
Digital transformation can help businesses provide a superior customer experience and remain competitive, by remodeling outdated business processes and opening up new revenue opportunities. By automating workflows with the use of machine learning and AI, for example, digital transformation can have a great impact on how the business runs. An additional benefit of this is that customers often notice when a company embraces such changes, as it makes it easier for them to communicate and connect with your brand.
And perhaps most importantly, digital transformation can help bring operational costs down. As an example, augmented reality allows employees to test and evaluate new procedures and products without actually building them or buying them (they rely on the virtual version).
Digital transformation strategies: Where to start?
According to Deloitte's report, 'Strategy, not technology, drives digital transformation': “What separates digital leaders from the rest is a clear digital strategy combined with a culture and leadership poised to drive the transformation”. But, where should you start? How do you select the right digital transformation strategy for your organisation?
In today's increasingly digital world, most companies are already using digital in one shape or form; by providing interactive web sites, improved customer service or enhanced customer experiences. However, in industries where the product is mostly physical and customer requirements for information are not yet advanced, companies may want to begin digital transformation with operations. While others, such as retail brands, where new revenue-based services can be offered online and through mobile devices, the immediate focus should be customer value proposition. However, Michael Wade, Professor of Innovation and Strategic Information Management, advises that independent of the industry or the offering, a successful digital transformation always starts with the organisation asking itself three fundamental questions:
Why do we need to transform?
What do we need to do to transform?
How can we transform?
The first question aims to help organisations discover where they are positioned in the current marketplace and encourages them to think about the opportunities they are not able to leverage due to some setbacks. Things like: Is the company’s technology outdated? Are the employees lacking in knowledge of today’s digital tools? How does the company stack against competitors who have, or in the process of digital transformation? The second question, on the other hand, tries to determine what specifically is lacking in your company’s current operations, products & services, or organisational culture that demands immediate action.
And, the answer to the third question should contain the ingredients for the company’s strategic and tactical approach to digital transformation; not just how can the company digitally transform, but what is the optimal way for this particular company to transform?
What is a digital roadmap?
Although digital transformation will vary widely based on an organisation's specific challenges and demands – for instance, not every organisation is ready to operate its business in line with the Agile methodology – there are a few common elements.
To illustrate, these digital transformation components are often cited:
Customer experience: Customers are clearly the most important stakeholder of any organisation and, in order to serve them well, we’ll need to know them well. Using CRM, companies can identify which products a particular customer has historically purchased; or what complimentary products similar customers buy who have a similar purchasing history.
Operational agility: By automating, standardising and globally sourcing processes; organisations can become more agile, more responsive to changes in demand, and better able to increase and sustain profitability
Organisational culture and leadership: To work effectively within an integrated ecosystem, employees need to work together in a new way, breaking down silos and collaborating across different departments. Employees need to learn from each other in order to respond more quickly and consistently to changes in the market and within their own organisation.
Experience has become the new social currency in today’s market. But to have a good experience, customers should be taken on a journey through the process. To accomplish this, organisations need to think about how they can stay in touch with customers all along their journey.
Digital transformation challenges
Despite the growing acknowledgement of the need for digital transformation, most companies struggle to get clear business benefits from new digital technologies.
Often, they lack both effective leadership as well as relevant experience to know how to best drive transformation through technology. Also, with today’s emerging technologies; like social media, smartphone technology, analytics and embedded devices; digital transformation itself needs to undergo important changes in skill sets as opposed to previous waves of transformative technology. Although there is no single factor that impedes digital transformation, MIT Sloan’s research report shows that there are, in total, nine specific hurdles that organisations need to overcome to achieve digital transformation. These are:
Lack of urgency
Not enough funding
Limitation of IT systems
Unclear roles and responsibilities
Lack of vision
Unclear business case
Business units implementing independently in silos
Culture not amenable to change
Lack of leadership skills
Regulatory concerns
Digital transformation tips:
Digital transformation is a big undertaking, especially for larger, established companies. Our experienced strategic consultants have worked on a range of award-winning digital transformation initiatives throughout the years; from developing the 5-year digital roadmap for European utility giant, EDF Energy Group, to constructing a roadmap for the University of Buckingham. So, here’s a list of valuable tips that we’ve learnt through our diverse experience:
Build collaborative best practices
Remove silos
Promote creative problem solving
Welcome challenges to received practices
Be prepared to fail fast and iterate
If you’re not making mistakes, you’re not trying hard enough
Build small, agile teams for tasks, then dissolve upon completion and rebuild
2. Listen to your customers – internal and external
It is critical that you understand both sides of the customer equation
Your staff know what needs to happen
Your customers know what they want
Whilst listening to your customers, don’t forget to innovate and create new “better” solutions to their needs that they maybe haven’t thought about yet
3. Be bold, be courageous
Digital disruption is not for the faint-hearted
Often leaders at the top (the ones making the decision to change) are casualties of the change. That takes a special kind of individual to do what's right, not what's easy. So, be special!
If you can’t change the people, then change the process
Find and nurture your leaders and your followers
4. Be strategic, then be tactical
Make sure your digital evolution matches your strategic vision
Ensure it maps to your planning and activity, and vice versa
Execute whilst constantly reviewing activity, the direction of travel and outcomes
Remember it’s ok to fail fast and iterate
In a nutshell, the potential of digital transformation is wide and varied, from projects aimed at modernising systems to ones that evolve core processes of an organisation; as we said earlier, digital transformation is a massive, but rewarding undertaking.