‘Digital transformation’ appears to be a catch-all term for anything and all that has to do with automation and digitalisation. Business leaders, who want to take on digital transformations, often feel like a deer in headlights: it is dark out there, they want to get to the ‘other side’, something is approaching very fast and they can’t but freeze on the middle of the road …
It is natural that anyone feels like a dear in headlights when they have not properly immersed themselves into digital transformation. Even some that have taken the time to understand better what digital transformation entails, have not been able to deploy it properly in their business.
In this ESCIMCO Insight you will find some of the most valuable information on digital transformation available pulled together in a concise way. This will allow you to understand what steps are needed to move to ‘the other side of the road’ confidently.
What is a digital transformation?
Simply put a digital transformation is a complete make-over of your business by using the full benefits that digitalisation has to offer.
Digital transformations therefore develop basically in three directions (Kane, Palmer, Phillips, Kiron, & Buckley, 2015):
- There will be an increase of the integration between offline and online experiences
For example ordering a shirt online and having it send to your home address at the time you want while being in the brick-and-mortar clothing shop because they did not have the colour you prefered.
- Data will increasingly be used in processes
For example an app that detects people with Covid-19 symptoms in your vicinity so that you can take precautionary actions like staying inside
- Business models will reach their ‘end of life’ more quickly
‘Classic’ examples are Uber and other sharing platforms which show that actual ownership has become less important
What technologies are deployed in a digital transformation?
Companies that are successfully riding the digital transformation deploy more of the available technologies than the less successful do. In general the technologies deployed in a digital transformation can be captured as follows (de la Boutetière, Montagner, & Reich, 2018):
- Traditional web technologies (i.e. making computers ‘talk’ to each other)
- Cloud-based services (e.g. Software as a service)
- Mobile internet technologies (i.e. mobile devices that connect to the internet)
- Big data and big data architecture (i.e. analyse and extract information from data sets that are too large for conventional data-processing software)
- Internet of Things (i.e. connecting smart devices through the internet without human intervention)
- Design thinking (i.e. problem solving with a hands-on, user-centric mindset that delivers innovative solutions)
- Artificial-Intelligence tools (e.g. devices that have traits of learning and problem-solving skills)
- Robotics (e.g. intelligent machines that can support humans in day-to-day tasks)
- Advanced neural machine-learning techniques (e.g. self-learning machines)
- Augmented-reality technologies (e.g. enhancing real-life world interactively across the human sensory system)
- Additive manufacturing (e.g. 3D-printing)
How do you perform a succesfull digital transformation?
Digital transformations are done to various degrees. Some businesses focus on upgrading current processes and for example digitalise the information flow with their logistics service provider. Others, on the other hand, take a more drastic approach and completely review their way of working in light of the possibilities, some of which might even still need to be invented.
Most successful digital transformations consider these 10 successfactors (Tanguy, Lorenz, Sternfels, & Wilmott, 2017):
- Secure commitment of senior management
A digital transformation can not just be sanctioned by a CEO, he or she must develop and communicate a strong compelling vision of the ‘what’ and ‘why’, and follow through on this consistently by challenging the organisation. Communication of that vision should happen both traditionally and digitally in a collaborative way to achieve the biggest possible reach and impact.
The CEO -or business leader- preferably is digital-savvy (not necessarily an expert user of digital technologies) and understands what potential a digital transformation can bring to the organisation (de la Boutetière, Montagner, & Reich, 2018).
- Set clear ambitious targets
Setting clear and ambitious targets is needed to secure the investments required for the transformation; the targets keep everyone focused when things are not progressing as expected and they will help to prioritise inititatives with the highest impact.
- Secure the investment and invest like you mean it (Puthiyamadam & Clarke, 2020)
Investments in digital transformations will pay off in the long term, whereas short term they will hamper profits, so companies need to think about the ‘bigger picture’.
In essence we are talking about a trade-off between short term ‘sure’ profits and long term risks, something that most are not very comfortable dealing with.
- Start with lighthouse projects
Prioritise initiatives which will prove that the investment is worth it (i.e. have a significant pay-off for limited risk and can achieve results short term), generally these are customer-focused initiatives
- Build a high-caliber launch team
Appoint a Chief Digital Officer that coordinates and manages the digital transformation, while securing the right talents to drive the digital transformation forward, and balances the ‘old’ with the ‘new’ in a company.
- Organise to promote new ways of working
Agile ways of working are necessary to allow rapid small innovative changes to happen, and quickly see the benefits of a digital transformation.
Employees should be allowed to make mistakes and learn from them to come up with better solutions in future (Kane, Palmer, Phillips, Kiron, & Buckley, 2015).
- Nurture a digital culture
The agile way of working needs to be spread throughout the organisation whereby the focus lies on the value that is created for customers.
Roles, responsibilities and goals of individual employees should be aligned with the digital transformation goals (de la Boutetière, Montagner, & Reich, 2018). In addition (remote) collaborative ways of working should be promoted and supported.
- Sequence initiatives for quick returns
Transformations cost vast amounts of money before they deliver, so achieving quick wins at the start of the transformation with a limited number of manageable initiatives is utterly important to keep the momentum going.
- Build capabilities
Securing the right talents from outside the company is needed at the start of the digital transformation. Parallel to that digital capabilities of all employees need to be build and increased, like working in an agile way.
Assure that the training for this is available in bite-size packages, immediately applicable, motivating and hands-on (Puthiyamadam & Clarke, 2020), and supports the direction you are moving in technically and organisationally.
- Adopt a new operating model
Traditional hierarchical and even matrix operating models will be too limiting to drive the digital transformation forward. Instead work with small flexible self-organising cross-functional teams that are arranged around specific customer experiences and which form and dissolve as needed.
The term ‘Digital transformation’ indeed is a catch-all term, used for rethinking your business in light of a new era where the next working generation embraces digital solutions in a sharing-economy (Tanguy, Lorenz, Sternfels, & Wilmott, 2017).
It is up to each business themselves to decide how far they will go with their digital transformation, albeit that there is no option to startle in the middle of the road if you want to survive in the long run.
de la Boutetière, H., Montagner, A., & Reich, A. (2018). Unlocking success in digital transformations. Retrieved from www.mckinsey.com: https://www.mckinsey.com/business-functions/organization/our-insights/unlocking-success-in-digital-transformations
Kane, G. C., Palmer, D., Phillips, A. N., Kiron, D., & Buckley, N. (2015). Strategy, not Technology, Drives Digital Transformation. Retrieved from www2.deloitte.com: https://www2.deloitte.com/cn/en/pages/technology-media-and-telecommunications/articles/strategy-not-technology-drives-digital-transformation.html
Puthiyamadam, T., & Clarke, D. (2020, Feb 19). Move beyond digital transformation – and improve your ROI. Retrieved from www.strategy-business.com: https://www.strategy-business.com/blog/Move-beyond-digital-transformation-and-improve-your-ROI
Tanguy, C., Lorenz, J.-T., Sternfels, B., & Wilmott, P. (2017). A roadmap for a digital transformation. Retrieved from www.mckinsey.com/: https://www.mckinsey.com/industries/financial-services/our-insights/a-roadmap-for-a-digital-transformation