6 Steps to Become a Digital Transformation ExpertNitin Karkara
What is Digital?
The term digital is used in many ways these days, but what does it really mean? There are a variety of terms related to this that are noted, such as digitization, digitalization, digital transformation. Are these the same thing? Let us offer some definitions, as well as examples of each.
Digitization is the conversion of analog or physical information to a digital format. Think of it as converting atoms to bits, creating digital opportunities in the process. Think of paper instruction manuals. Converting those from physical paper to a digital format represents digitization.
Digitalization is the use of digital technologies and digitally-enabled approaches to enable or improve business models and processes. Think of this as the process of exploiting digital opportunities. For example, using smart glasses to provide mechanics with a line of sight digital instructions can improve efficiency and reduce errors.
Digital transformation is the coordinated digitalization change efforts at scale, diffused through the operating model and all aspects of the business, including people, processes, technologies, and metrics. The goal of this is to bring meaningful outcomes to the organization.
The Digital Revolution
To understand this let’s start with a story:
- The best performing stock of the 1980s in the U.S. stock market was Circuit City. The company had revolutionized customer experience in the consumer electronic space.
- The centerpiece of the company’s success was superior customer service. In the 1990s, the company used its financial power to start other companies, including a technology firm.
- Only eight years later, the company was liquidated. What happened? In the 1990s, when Circuit City was starting other companies, Best Buy, its biggest competitor in the consumer electronic space started the Geek Squad, creating even better customer service through in-home installation.
- In the 2000s, Amazon entered the consumer electronic space and Circuit City did not catch the digital train at all. Seemingly out of nowhere, there was a retailer with no stores and no easy way to speak to a live person who understood our preferences so well. In roughly 20 years, the former leader in the retail industry, Circuit City, went from good to great, to gone.
- The mighty are falling even faster now, as the average tenure of the S&P 500, which was 61 years in 1958, is less than 16 years today. Also, the average Fortune 500 business takes roughly 20 years to reach a billion dollar evaluation. Uber, WhatsApp, Snapchat, Oculus Rift, each took less than four.
Why Digital Transformation?
A digital transformation may seem like a new buzzword for an old topic. Digital transformation is a leading force in business today. In some cases, this is driven by so-called digital native organizations wreaking havoc on older companies in an industry. In some cases, those older companies are seizing the opportunity before the change is forced upon them. Whether it’s based upon employing a shrewd offense or cautious defense, this change will impact all companies.
But what is digital really? Who should own it within the enterprise? What processes and technologies are necessary to bring it to life. Let’s try to answer some of these questions in the coming sections.
Components of digital transformation
From the story above it’s clear that digital immigrant organizations, those Who were born prior to the digital age, need to think more like the digital Native companies, like the ones i’ve just mentioned.
Digital transformation requires four things.
This requires hiring for and encouraging learning agility among your employees. New technologies and techniques emerge much faster than in the past. The technology that one is comfortable with today may be obsolete tomorrow. Will your employees are willing to retrain on the more modern technologies and techniques?
Second, it’s necessary to use modern solutions, such as Cloud and mobile-enabled technology rather than mainframe technology of the past. This internal component of digital transformation is often an afterthought. But not taking these first steps can mean that you’ll be a victim of your own success, unable to reap the rewards that higher demand might bring.
It’s necessary to develop or hone an edge-based innovation function. This entails developing or recasting an existing research and development arm. Seeking new business opportunities that exploit digital technologies at the edge of current product or service offerings, or perhaps in adjacent spaces to the current offerings.
Fourth, the rest of the business should think further about how digital opportunities can transform the core business. An eye toward better customer experience through digital channels should be paramount, as customers expect easier, intuitive, and compelling digital experiences when they become more sophisticated.
Example of digital transformation
Integration of various digitalization initiatives, such as augmented reality guided instructions, 3D printed tools that have an Internet of Things-enabled sensors connected with them can result in the fundamental transformation of the manufacturing process.
For example, the New York Times which started as a newspaper print company has reoriented itself as a digital-first organization, having increased digital subscriptions 418% between 2011 and 2016. And the company’s on track to hit $800,000,000 in digital revenue by 2020.
As you can see, there’s a logical sequence from digitization, to digitalization, to digital transformation. It’s important to understand
the differences, communicate them effectively, and chart the progress you and your team are making.
Stages of digital transformation
Digitally active companies take advantage of the transactional, digital or e-commerce solutions to increase revenue. Combined with a basic level of analytics and operational improvements such as the introduction of agile development methods, organizations in
this tier are beginning to utilize the peripheral advantages of a digital organization. These organizations develop metrics or key performance indicators to gauge their progress or lack thereof as well and use that as the basis of further improvements.
Digitally competitive organizations push the envelope on how digital solutions and processes can be utilized to not only drive revenue but also to help forecast future needs and respond quickly to identified gaps.
Only a few organizations in the world are truly digitally mature. And those are the likes of Google, Amazon, and Facebook. They’re requiring droves of artificial intelligence talent from around the globe to fuel their growth. You need not have as a goal to
become a digitally mature organization but it is useful to understand some of the differentiating factors in growing as a digital organization so you know what to shoot for as the company advances. Greater levels of maturity are likely to translate to
greater levels of value.
Steps for digital transformation
- First, create a mandate for change. Highlight the current status of technology, the risks of not modernizing, and then paint the future picture with relevant advantages noted.
- Second, develop more loosely coupled technologies so that changes to one platform can be made independent of others. This includes using microservices and container technologies.
- Third, develop a cloud-first strategy. Cloud technology is more flexible, scaling up and back as needed. It is also more variablized from a cost structure, which means paying for the technology you use rather than buying more than you need.
- Fourth, leverage enterprise architecture, applying architecture principles and practices to document and refine the business information, process, and technology changes necessary to execute strategy.
- Fifth, retire old technology. Many companies are great at introducing the new, and they’re often poor at eliminating the old and redundant.
- Lastly, standardize as much technology as possible. Even if you have different business units, it is always best to adopt the common core technology for the overall organization.
How to plan for digital transformation?
You’ve probably gotten the sense that the pace of change in the new digital world is faster than ever. That’s true, and it will only get faster. How does planning work under those circumstances? Does a three or ten-year plan that some companies prefer still apply? Does it mean the plans should be investigated more frequently? The answer is both. It’s true that shorter strategic planning cycles are necessary. For instance, the plan you set a year ago might be partially moot if, for example, the technology or processes that are being implemented as a result of the strategy are rendered obsolete by new technologies or processes.
There are four steps that we would advise undertaking.
- Investigate the art of the possibilities regarding innovative new technologies.
- Work with customers to develop new plans on how digital technology will enhance customer experience.
- Identify outgrowths of the current strategic plan.
- And finally, refresh your plans frequently.
Companies fail to create the future not because they fail to predict it, but because they fail to imagine it. It is creativity and curiosity they lack, not perspicuity. Experimentation, together with solid strategic planning is the winning recipe.