By
Imran Hanif, MBA (UK) CMgr, FCMI, FIML, MAHRI, MIPSA
(CEO-Blue Life Pty Ltd)
Introduction – Basics
In last two year’s COVID-19 shutdowns, information technology domain spun nearly overnight, launching technology-driven initiatives to enable remote work and distance learning. New customer experiences and new online sales channels followed close behind. Many industries are being rapidly transformed – some permanently, resulting in unprecedented challenges in adapting to the new business environment. Organisations need to redefine strategies, undertake organisational change and workforce upskilling at scale, and manage increased digital, data and cybersecurity risks
In recent years, businesses in almost all sectors have conducted a number of initiatives to explore new digital technologies and to exploit their benefits. This regularly involves transformations of key business operations and affects products and processes, as well as organizational structures and management concepts. Businesses need to establish management practices to oversee these complex transformations. An important approach in this regard is to articulate a digital transformation strategy that serves as a central concept to integrate the entire coordination, prioritization, and implementation of digital transformations within a business.
Digital transformation is hard to explain because it looks so very diverse for every industry. Yet, in general terms, it is explained as incorporating digital technology into all business areas. The result is a fundamental change in how businesses function and interact with customers. It is a radical rethinking of how an organization uses technology in conjunction with processes and people to change business performance.
Digital transformation is not a single massive entity. Often corporations are focused entirely on organizational transformation and overlook the fact there are four major types of digital transformations. As a result, they’re limiting themselves from taking full advantage of all digital transformation has to offer. Let’s explore these one by one:
Process Transformation
From data, analytics, APIs, and machine learning to other technologies, much focus within the corporate environment has been on new ways to reinvent business processes to lower costs, improve quality, or reduce cycle times. Examples of successful process transformation include companies like Domino’s Pizza, where today customers can order from any device. They’ve completely reimagined the food ordering process. This innovation has helped them to overtake their rival Pizza Hut concerning sales.
Many other businesses have executed robotic process automation to simplify their back-office processes, including legal and accounting as examples. Process transformation can create tremendous value in a company.
Business Model Transformation
Process transformation focuses on limited areas of the business. Business model transformations aim at the foundational building blocks of how value is delivered in a specific industry. In essence, companies are using digital transformation to change traditional business models. Examples of this type of reinvention of the business model include Netflix’s redesign of video distribution and Apple’s reinvention of music delivery: iTunes.
Domain Transformation
A prominent example of how domain transformation works is the online mega-retailer, Amazon. It marched into a new market domain with the launch of Amazon Web Services (AWS) and is currently the largest cloud computing/infrastructure service in a formerly owned field by giants such as IBM and Microsoft. AWS is a clear example of how new technologies redefine products and services, distorting industry boundaries and creating entirely new sets of non-traditional competitors. Domain transformation currently offers one of the most significant opportunities for company growth.
Cultural/Organizational Transformation
A redefining of organization mindsets, processes, talent, and capabilities for the digital world is always needed to achieve long-term digital transformation for any industry. The most successful corporations recognize digital transformation requires a flexible workflow, a decentralized decision-making process, a bias toward testing and learning, and a greater reliance on different business ecosystems.
One of the best examples of this cultural/organizational transformation is the consumer credit agency Experian. It was able to change its organization by instilling collaboration and agile development into its workflows. Additionally, it spearheaded a fundamental shift in employee focus from equipment to data throughout the company.
Three approaches to digital transformation?
Wait for proof of digital success
This first approach will help organizations focused on experimental results. The difficulty with this approach is the tremendous risk of remaining idle until your digital transformation catches on. It provides competitors with a distinct advantage if their digital success happens faster than it does for your company. Since most organizations have a mixture of digital and non-digital solutions, this first approach is usually the first choice for most companies.
Develop an all-inclusive digital strategy
This approach focuses on getting the strategy as comprehensive as possible from the start. It requires a strong long-term plan. The all-inclusive digital transformation strategy focuses on changing the culture and rapidly implementing innovation. It is usually quite an expensive approach with many dangers.
Incremental delivery of digital skill
This approach focuses on delivering benefits as a company moves toward a potential changing digital purpose after identifying an initial target and route. But as the organization progresses, lessons learned and new inputs are considered, thereby changing the digital goal and sometimes the path to the destination. Therefore, this approach concentrates on delivering a solid yet flexible strategy that can evolve with industry changes throughout its lifetime.
Why does a company need digital transformation?
A company may take on digital transformation for several reasons. However, the most crucial reason is the economic survival of the business. COVID-19 demonstrated the importance of adapting quickly to dramatic changes, including disruptions to supply chains, time-to-market pressures, and rapidly changing customer expectations. Expenditure on the digital transformation of business practices, products, and organizations has never been more critical for its survival.
Customer-centric approach
Digital technology is changing how we connect and create value for customers. Traditionally customers were seen as mass markets, we created one communication message and sent it out to a broad cross-section of people. There was no level of differentiation; however, in the digital era, we are moving away from mass marketing to customer networks. In this paradigm, customers are dynamically connected, and their interactions with each other are changing and influencing each other’s relationships with businesses and brands. We already know that word of mouth is one of the most effective forms of marketing; now imagine a world of social media where word of mouth is on steroids. That interaction between customers has the potential to change brands and business reputations forever.
Competition beyond boundaries
The next domain of strategy that is being changed by digital is competition. Previously, businesses competed with other businesses that looked and operated just like themselves, however nowadays companies face competition for businesses outside of their geographical boundaries and from businesses not even in the same industry as them. Particularly, as those companies are offering a competing value to customers. Another interesting factor here is that one can compete with one company’s division and cooperate with another.
Data-driven decision making
Data is one of the other domains of strategies that we are more intrigued by because it is the area where we do not pay as much attention. Data needs to be seen and used as a strategic asset in our businesses. Data is being generated in an unprecedented quantity from conversations with clients, social media, mobile devices and practically any touchpoint with customers. While some data may be collected systematically, such as a survey through survey monkey, google forms etc, that is not always the case. It is up to all of us to now find a way to use all the generated data to make some strategic decisions in our business and generate new value for our customers.
Innovation & Creativity
Innovation & Creativity has become a buzzword in the digital era; we look at innovation as how new ideas are developed, tested and brought to the market. Usually, innovation was managed by the senior leadership in an organization. They had a laser focus on the finished product, and no emphasis on market testing as this was seen as an expensive process.
Today with digital transformation, businesses can take a different approach to innovation, which is modernization by continuous learning and rapid experimentation. Technologies in digital world have made it easier to test ideas and get market feedback from the beginning of the innovative & creativity process. In digital transformation, we speak about the minimum viable prototype. This is where different assumptions are tested on an ongoing basis, and decisions on which products to launch are made based on feedback from actual customers and not what the manager thinks should happen.
Adding Value
The last domain of digital transformation is the value a business delivers to its clients. Customarily, the value proposition of a business was fixed and defined by the industry that the business was operating in. Today focusing on a fixed value proposition that does not change will lead a business to potential disruption by new customers. In the same way platforms like Netflix disrupted blockbuster videos, customer value can change quickly, and the competition is constantly looking for new ways to provide value for our customers.
Conclusion – Nutshell
In actuality, it is reasonable to say that digital transformation is often a ‘reactive process’ that happens when a business is forced to gauge its existing business model and introduce one or more digital solutions to facilitate business growth and remain competitive in the current marketplace.
We are lucky to live in a time when so many innovative technologies are available to help us improve our business operations and reduce operational costs. However, it’s important not to lose sight of the vision and the objectives that are driving your business decision toward digital transformation, whether it be changing your operational model or one or more elements of your infrastructure. It’s also important to recognise that digital transformation isn’t just about the end product. It is also about people, processes, and change.
Five important factors to focus on when approaching digital transformation:
- Objectives – Why are you implementing a digital transformation?
- Strategy – Do you understand where you are going with digital now and in the future?
- Technology – What digital tools, software applications and platforms are the best fit for your business?
- Processes –Do you understand how digital technologies should be used to change the way you work for the better?
- People – Do you have the skills or have you identified a service required to make the transformation? Does everyone in your business understand the reasons for digital transformation?
It is important to be aware that any new digital technologies you implement should provide value to your staff and be useful both to the customer and your business.
We should also understand that digital transformation is about improving business operations and doing things in better way. This is accomplished through the introduction of spontaneous technologies instead of adapting a technology to fit an existing business model.
The era of digital transformation is here for companies of all sizes and types, from Fortune 500s to start-ups. In simple term it refers to companies leveraging enhanced technology to improve their business capabilities, operational efficiencies and ultimately, their customers’ experiences. If companies approach digital transformation in a structured, timely way, they can gain benefits that could give them an improved competitive advantage & multi-fold revenue increase.
