Digital transformation is not just about streamlining or automating touchpoints. It’s redefining the way an organization works with its customers and partners to reshape the channels that deliver value, writes Yvonne Brennan, director of The Strategy Group.
For the change to be solidified, the organizational levers must align with the new value proposition. This includes considering structures, incentives and culture. Boards mandate “digital” and demand it accelerate as the world embraces change. CEOs appoint “Chief Digital Transformation Officer’s”. Are they doing it right?
Our point of view is: they are “sort of right”. There is a huge amount of material and examples of how the world is going digital. We really don’t need to rehash here the rise and rise of Uber, Alibaba and Amazon, each driven by digital technology at their heart. We ourselves live and breathe digitally every day.
During Covid-19, businesses fast-tracked their digital strategy and plans to be executed and scaled. We learned to adapt quickly and learned what worked and what didn’t. Companies have adapted to change by protecting their business. Savvy companies have optimized their digital offerings.
The use of cash is on a significant downward trend and the use of smart cards, phones and watches for payments is on the rise. The smartphone in our pocket is a digital “Swiss Army Knife” that does much, much more for us than just making phone calls. On a personal level, we are already “digital”. We communicate digitally. We approach the news digitally. Most of us live in a digital world.
Transformation supported by digital
The solution is clear, isn’t it? Take an existing business model, streamline all processes with technology and tell clients “we are now digital”. Right? Poorly. This is where companies fail to understand what digital transformation is all about. It is not about applying digital technology to existing processes. It is “digitally enabled transformation” and less about “digital transformation”. It’s about rethinking business in light of “what’s possible.”
Start with a deep understanding of your existing business model. Then they ask 20 years ahead whether the model will even work in the future. Look at restructuring the old model to ensure the company’s longevity, using digital technology in the process. And guess what? The business model that comes up in this process may bear little resemblance to today’s business model. And that’s fine – it provides a new platform on which to build the future of society, rather than today’s dinosaur.
Key steps in digital transformation
When it comes to corporate digital transformations, research suggests that only 5% of them are successful. Moreover, many business leaders do not even begin to understand the problem they face. Before “digital transformation” can begin, organizations need to understand:
- its current business model. Business Model Canvas is an ideal tool for this when applied correctly
- how the digital economy is disrupting its model. Do we appreciate competitors in and outside the industry?
- opportunities for transformation – again within and outside the industry
- the time frame in which it needs to transform given the pace of the industry
- potential new portfolio business models – both immediate and long-term opportunities
- culture change and the process of bringing the whole organization along
This provides a very pragmatic view of what levers need to be moved and what steps to take going forward. An organization facing disruption will benefit from a “digital transformation” process. It takes time and careful thought and can provide a platform for success over the next 20 years.