What is digital transformation? Digital transformation (DX) bridges the gap between business and IT, for example business strategy is now merged with IT strategy. It requires integration and alignment for both areas to maximize business outcomes. More organizations aim to become a truly digital business to remain relevant in the digital era. According IDC FutureScape: Worldwide Digital Transformation, 2018 predictions. "By the end of 2019, DX spending will reach $1.7 trillion worldwide, a 42% increase from 2017."
To get a better understanding of what is digital transformation? It is best to define the meaning of each word separately. "Digital" is driven by rapid pace of technology innovation and adoption in the market. It represents new ways to doing business. For example: it transforms value proposition of products or services; introduce flexibility, agility, convenience and richer customer experience. It fundamentally change how most businesses engage with their customers and in the process, disrupt customer relationships.
Business dictionary defines "Transformation", in an organizational context, a process of profound and radical change that orients an organization in a new direction and takes it to an entirely different level of effectiveness. Unlike 'turnaround' (which implies incremental progress on the same plane) transformation implies a basic change of character and little or no resemblance with the past configuration or structure.
Transformation is how the organization re-imagine and re-invent itself, rather than simply improving its traditional methods or ways of doing business. It involves creating new business models that will eventually disrupt old models, enabling the organization to innovate and change how value is captured, created and delivered.
Based on these descriptions, Digital transformation comprises of change management, talent management to deliver digital capabilities, business model innovation and a need for continuous learning and adaptation. Change management permeates the entire organization and foster cultural shift to meet the digital needs of the business.
Myth 1: Digital transformation is all about technology.
Fact 1: Digital transformation is fundamentally not about technology but about strategy.
Strategy is essential to enable organizational transformation. It creates competitive advantage. Digital technologies (AI, Big data analytics, mobile, social media, cloud, IoT) are the means to deliver that competitive advantage. People, culture and processes sustains it.
In many instances, leadership gets side tracked by operational issues and focus more on stability, losing sight of strategic innovation, for example using, digital technologies to create competitive advantage and deliver differentiated value to customers. Achieving the right balance between the known and the emergent for competitiveness is essential.
Understanding new and emerging technologies is essential and will enable the organization to create fit for purpose digitized solutions. According to MIT Sloan research, focusing only on individual digital technologies will present some incremental benefits. The confluence of these digital technologies fundamentally changes the opportunities that are being created, reducing the limitation on how we run business. These digital technologies are now easily accessible to customers. The competitive advantage is achieved by using these technologies better than competitors.
Leadership ensure organizational resources (digital capabilities, people and processes) are effectively utilized to address critical business issues (strategic or operational), for example, improving customer engagement and implementing digitized solutions. These resources must continuously evolve to meet the needs of the dynamic and changing market/industry conditions. To achieve this, organizations need to embed strategic thinking as part of their DNA. Our strategic thinking process comprises of four rigorous and iterative steps to help organizations with this crucial task: Imagine, invent, ignite and measure.
Myth 2: Digital transformation is a once-off project.
Fact 2: Digital transformation journey never ends, it continues to evolve and adapt to changing business and customer needs.
Digital transformation is not a quick to implement overnight project, or a sprint. It's a marathon, time consuming, complex and affects every aspect of the organization. It requires continuous strategic planning, huge investments and capabilities to make it happen. New metrics needs to be formulated and governed, to monitor, measure and provide real-time dashboard views to leaders to make decisions and fine-tune the organization or adapt strategy.
These metrics may include, net promoter score, social media sentiment, collaboration, digital adoption, proposition of new ideas that reach concept design, new business model, to name a few. The metrics used to measure the return on investment (ROI) must be clearly linked to the business vision, strategy and goals. The willingness to take risks, address blockers and dependencies either internal or external should be rewarded or acknowledged accordingly to ensure the teams are motivated and energized.
The ability for an organization to respond quickly to changing market conditions and internal environment without losing focus of the business vision and goals is essential. This is referred to as strategic agility.
Myth 3: Improving customer journey is digital transformation.
Fact 3: Focusing on the organization as a whole, integrating business capabilities to deliver digital transformation will lead to richer customer experience.
Customer journeys are the mechanisms that enable the organizations to interact and deliver value to their customers. An attempt to simply digitize existing customer journeys without any prior process improvement will not yield good results. It is rather more effective to optimize existing customer journeys looking at the organization as a whole, not in silos. Take a system approach and eliminate redundant steps, integrate complementary functions and then digitize customer journeys. Taking an enterprise wide approach to digital transformation will enable the organization to co-create with customers, employees and entrepreneurs. For example, Lego ideas allows customers to submit ideas for Lego products. This allows Lego to co-create products with customers and to design customer journeys with the customer in mind.
The convergence of digital technologies and processes will enable the organization to fundamentally transform its ability to create and deliver new products and services.
Myth 4: Adopting new ways of working is digital transformation.
Fact 4: Organizational culture need to change. Lean, Agile, Scrum, DevOps are development tools that help deliver minimum viable product (MVP) and incremental value to customers.
These new ways of working are fundamentally changing traditional processes, structures, skills and organizational roles. However, simply adopting new ways of working will not accelerate digital transformation. Organizations need to completely re-imagine how they do business, use strategy to re-invent new business models. This will translate to empowered teams, collaboration across teams, and synchronization of organization's activities.
Organizational culture need to change to adopt new ways of working. The organization should expand its focus beyond technology trends and managing disruption. It must adopt a digital-first mindset which inspires new ways of thinking, utilize change and talent management capabilities to transcend old behaviors and attitudes. For example, cross functional teams should collaborate and not compete. Organization should embrace innovation and avoid being risk-averse.
Myth 5: Delivering new products is digital transformation.
Fact 5: Focusing on solutions not products will enable successful digital transformation.
Focusing on solutions will enable the organization to be proactive in identifying and eliminating problems customers don't even know exist. Re-inventing value chains, for example, shifting from mass production to on-demand production (build-to-order) and personalized products. The confluence of things and synchronization of activities to deliver value propositions are re-imagining existing value chains.
These are some of the myths and facts that organizations should consider when embarking on the digital transformation journey.