What does Digital Transformation really mean?

June 28, 2019

 

As digital technologies dramatically reshape industry after industry, almost every business is now forced to look into Digital Transformation in order to capture new opportunities or to keep up with competition.

 

As IDG noted in their 2018 State of Digital Transformation Report: More than a third of organisations (44%) have already started implementing a digital-first approach to business processes, operations and customer engagement.

 

Some 19% are in the integration process of making operational and technology changes throughout the business, and 18% are executing their digital plans and making process, operational and technology changes on a department and business unit level.

 

Just 7% of companies have already fully implemented their digital first approach and are in the maintenance phase. However, what does Digital Transformation really mean?

 

Wikipedia defines Digital Transformation as the novel use of digital technology to solve traditional problems. These digital solutions enable new type of innovation and creativity, rather than simply enhance and support traditional methods.

 

If digital transformation is about capturing new business opportunities enabled by digital technology. Then, what is digital technology?

 

Digital technology is essentially the breakdown of messages, signals or forms of communication between the creating device and the receiving device through the use of a string of information known as the binary code. American engineers began developing digital technology in the mid-twentieth century and you would think that by now every business has mastered it.

 

Why do so many businesses find it difficult to translate Digital technology into an action plan? 
 

This is not a new challenge in business since computers and software have been around for decades. However, from what was previously siloed (in terms of activities, information and processes) is now all interconnected and therefore will need to be managed end-to-end without having full control of it.

 

Businesses say their biggest obstacles in achieving success with digital business initiatives include lack of sufficient budget (39%), lack of staff and/or correct skill sets (36%), and cultural issues (35%). 

 

Digital Technology is no longer solely the domain of IT but it is applied everywhere in the business value chain and in the tech-convoluted customer journey.

 

Digital Transformation is about leveraging digital technology to deliver a business core value proposition as a result of better serving the customer needs and the needs of any other stakeholder involved in the process.

 

How do you deliver a business core value proposition through Digital Transformation? 
 

Circumstances may differ in fact some companies might require a completely new business model, while others might require incremental improvements from the current model. Nevertheless the answer remains the same focus on customer needs and on cross-function/cross-business collaboration enabled by digital technology.

Here is a proposed three step approach to Digital Transformation:

  1. Start a digital-first business programme rather than function pilots and move away from a budget by function to a wide cross-functional one: Although digital technology is expected to improve productivity and better customer experience, 11% of organisations have yet no plans of a starting a digital transformation mainly due to budget constraints and to a function by function approach to deliver projects.

  2. Prioritise few projects to solve big business challenges rather than multiple projects to solve discrete business problems: Among the companies I have worked with — and others, such as IBM, EY, Amazon, Pepkor Europe, BP that have highly developed senses of priorities — the payoffs are considerable. Companies that start prioritising projects can experience significant reductions in costs (in my experience, at least 15-20%) as less-vital activities are cut and duplicated efforts are consolidated. Furthermore the most successful businesses tend to be more risk taking and have a laser-like focus on a small number of priorities and therefore fewer projects to deliver, sometimes this might mean simply having a single priority. The more focus, the better.

  3. Embrace data-driven decision making rather than experience-based or leader-driven decision making: At present many business executives and CEOs understand in principle the value and potential that data offers yet do not fully trust and act on what the data tells them. It is time for CEOs to lead from the front and to fully grasp the importance of integrating a data culture throughout the organisation showing authority in the subject to convince and inspire others to do the same.

 

For many businesses, the foundational pieces of Digital Transformation are in place, and they are actively working on adopting newer technologies like Blockchain, AI and IoT. Nevertheless every CEO needs to think very hard about where their business fits into the new data ecosystem before time runs out.

 

What does Digital Transformation mean to you? I look forward to hearing from you, please get in touch and share your thoughts.

 

To work with me or to discuss more about Digital Transformation, please email me at andrea.frino@thinkethandco.com or message me on LinkedIn and Twitter @thinkethandco

 

About the Author

 

Andrea is a problem solver and a management consultant working alongside his global clients to solve their biggest challenges and achieve their most important goals.

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