By Joshua Dinneen, President of Strategic Services
In my last blog I said that digital transformation can produce extraordinary results when well executed. However, genuine transformation is a complex process that must be tailored to the unique needs and strategy of each organization. There are no shortcuts or off-the-shelf transformation kits. Successful transformation requires rigorous and careful thinking, deep commitment, time and effort, resources, tenacity and superb leadership. In this blog, I will begin to outline many of the elements you must consider when defining your needs and forming an accurate baseline from which you will shape your strategy and execution plan for your digital transformation.
Digital technology allows businesses to shift from a supplier-centric ecosystem to one that’s customer-centric. For example, digital transformation in the automotive and transportation industry has produced “connected vehicles” that provide car buyers with additional sources of value, such as car-sharing. Furthermore, these sources of value and convenience are unrelated to the manufacturing of the vehicle, the showroom or the supply chain. Through their creative business models and technological innovations, Uber and Lyft enabled a global transportation revolution that generates financial opportunities for millions of freelance drivers and produces convenience and other benefits for riders of such magnitude that in a short period of time they have reshaped taxi and transportation service models around the world. Their success has spurred similar models that are being adopted to release trapped rental value in the homes of ordinary people by providing compelling alternatives to hotels and other traditional sources of lodging across the globe.
Successful digital transformation requires an organization to focus on its business, both on internal factors and its external environment. The journey to digital transformation is highly dependent on an organization’s business sector, whether it’s manufacturing, financial services, healthcare or technology. A highly competitive market with a lot of players and easy market entry will most likely require a different digital transformation strategy than one with few players and steep barriers to entry.
An improved ability to quickly adapt to a changing market is one of the greatest benefits of digital transformation. Organizations must review their business model and strategy regularly based on current market conditions and continuously refine it to achieve the best results and remain competitive and vital.
Organizations in highly regulated markets such as finance and healthcare need to adapt their strategy to handle changes in regulation, especially when that regulation becomes tighter. Interestingly, a more exacting global financial services regulatory environment spawned tremendously advanced business and operating models involving bank and regulator collaboration to combat money laundering and other sources of illegal transactions. Shared interests and the use of sophisticated analytical tools, machine learning, and AI were combined by multiple parties to comb countless global financial transactions on a real-time basis to spot patterns of suspicious behavior and potential money laundering in a process far more effective than “traditional” means while also creating new businesses and consortia and making markets safer, more transparent and reducing crime.
Market volatility is also a critical factor in digital transformation, particularly when it’s due to an increase in competition. Another factor for an organization to consider is whether its market is local, regional or global.
Technology certainly plays a role in digital transformation, but most often technology is an enabler of new business models rather than the other way around. The life cycle of new technologies is shortening rapidly, so leaders must implement agile frameworks that use “disposable technology” or can adopt new technologies quickly.
One expects industries that are currently sophisticated users of technology, such as life sciences and medicine, to continue to define new and exciting business models and technology-infused innovations. Established organizations with traditional business models will find it more challenging to work technology into their infrastructure than “born in the cloud” companies. These less technology-centric firms will require completely unique and perhaps more patient strategies to successfully achieve digital transformation. However, we must be mindful of potential opportunities for today’s limited users of digital technology—construction and consumer durable goods are two industries that come to mind. We are already seeing some early stage uses of technology in consumer appliances, Internet of Things (IOT) applications, a focused adoption of GPS enabled tools, and mapping devices to facilitate a host of activities from permitting to on-site construction activities. One can only imagine what breakthroughs may be possible. Remember, few if any of us envisioned the profound impact of Uber and Lyft during their formative stages.
Organizational leaders need to identify any business processes that will present a barrier towards digital transformation. Optimizing these processes for a digital strategy generally involves increasing their automation and monitoring to increase productivity. For example, the specific objectives of improving business operations may include increasing agility to shorten product development times and providing frequent refreshes to existing products to extend their useful life span. The reduction of cost, time and risk for business processes is also a key goal of digital transformation.
Customer & Partner Factors
An organization undergoing digital transformation may already have a strong relationship with its customers and partners. However, improving those relations is often a key purpose of digital transformation. The course of this journey may also be influenced by whether the organization is a B2C business that directly interacts with end users or a B2B firm that sells through third parties.
Many organizations need a partner to help them create value from their digital projects. Although the organization may understand their pain points and the problems they’re trying to solve with digital transformation, they may be lacking the experience and resources to implement the necessary technology and the needed process changes. The right partner can help an organization navigate the needed enhancements by applying new solutions to old problems.
Digital transformation is a long-term investment rather than a short-term expense. Its funding should therefore be separated from operational expenditures to illustrate its importance, especially to senior management and other stakeholders. The funding of the transformation may be funded in part from projects designed to create efficiencies in operating and support units.
Cost factors that can affect digital transformation include competition emerging from new sectors and geographies, particularly from new entrants that are not burdened with legacy infrastructure, processes and costs. A business with trapped value or dropping profit margins has to consider these factors as well. The need to identify and develop a new or enhanced supply chain capable of adapting to new technology is another cost factor for consideration.
How Ready Are You?
Peter Moore states in his blog “In the Digital World, Success Requires a Willingness to Pivot” that a true pivot is a fundamental change in the way a company delivers value to its customers, employees and supply chain partners. This is the essence of transformation.
Are you willing to begin a journey of substantive change and reinvention with the view that agility will become a fundamental part of your organizational DNA, or are you more interested in simply reducing costs, and improving and streaming your existing model? Are you really looking to modernize and improve your model with meaningful objectives, but without having to commit to a full transformation?
Do you have the skills, staff, processes and determination to begin the journey to digital transformation? Would you be more inclined to make significant changes if you had trusted and experienced external help? Ask yourself if you need professional help and tools to guide you through the development and execution of your digital transformation strategy.
In our next blog, we will focus on the development of your unique strategy. Before you read the next blog, take a moment to check out Rob Llewellyn’s podcast, and answer the question: “Do you want and need true transformation or a really fast caterpillar?”