Digital Transformation Is Business Critical
We live in a dynamic era one in which a new trend today can become a way of life tomorrow.
Those who don’t adapt to these changes are at risk of falling significantly behind.
It can be worse for organisations because those who don’t adapt are at risk of perishing.
The Pandemic Has Accelerated Everything
Today we live in a truly digital era.
The penetration of mobile phones and the internet has completely changed our lives with the pandemic accelerating digital innovation further and deeper into our societies and everyday way of life than we could have possibly imagined just 18 months ago.
Social distancing forced people to be confined inside their homes and virtually connected to the rest of the world. As a result of the global lockdowns, digital platforms including e-commerce, remote work, changed from being “nice to have” to “need to have” capabilities in running our lives – personal and business.
Governments, businesses, schools, colleges, etc. had to dramatically shift their entire models and transactions online from meetings/classes to offering services through digital platforms.
Even those people who were not familiar or particularly comfortable with online platforms pre-COVID had to become accustomed to more regular use.
So the world of 2021 is more heavily dependent on the outcome of digital transformation than ever before, but here is the question I hear many times …
What Exactly Is Digital Transformation?
As every organization approaches digital transformation differently, it may be hard to define, however, I came across the following definition from The Enterprisers Project :
“Digital transformation is the integration of digital technology into all areas of a business, fundamentally changing how you operate and deliver value to customers. It’s also a cultural change that requires organisations to continually challenge the status quo, experiment, and get comfortable with failure“
Focus is on transforming the business and reimagining of business in the digital age, with technology serving to support the changed or new business model.
Typically, a company’s digital transformation includes:
- Enhancing customer experience
- Optimization of business processes
- Integration of digital technologies
- Digital Innovation
- Changing the organizational culture
To follow a famous example, Audi completely changed the way customers buy cars with its digital transformation by introducing an innovative showroom concept in 2012 called Audi City.
Audi City promised to provide a one-of-a-kind brand experience and allowed customers to browse through the entire catalog of the Audi range hands-on in stores, where large showrooms were not possible to set up.
At Audi City, London, sales went up by 60% as compared to the traditional Audi showroom that previously occupied the site.
Moreover, the digital showroom only stocks four cars, thus reducing the cost of having to hold a large volume of stock that often outnumbers the periodic profit.
But is digital endeavor easy?
Most definitely not. What should be a positive change for organisations can go terribly wrong and rebound against them.
In this article, I highlight five of the potential challenges an organisation might encounter and fail, if not mitigated against.
- Ignoring organizational culture
Culture is the integration of values, practices, behavior, and experiences of the employees as well as the vision, mission, and values of an organization.
According to Capgemini Consulting’s 2017 study on “The Digital Cultural Challenge: Closing the Employee-Leadership Gap” the majority of respondents (62%) consider culture as the number one hurdle to digital transformation.
Capgemini defines digital culture as a set of seven key attributes integrated with employee centricity.
Customer Centricity: Use of digital solutions to transform the customer experience
Innovation: Behaviors that support risk-taking, disruptive thinking, and the exploration of new ideas.
Data-driven decision making: Use of data and analytics to make better business decisions
Collaboration: Creation of cross-functional, inter-departmental teams to optimize the enterprise’s skills
Open Culture: Partnerships with external networks such as third-party vendors, start-ups, or customers
Digital First: Adopting digital solutions as default
Agility and Flexibility: Speed and dynamism of decision-making and the ability of the organization to adapt to changing demands and technologies
Organizations that failed to nurture such a digital culture, failed to empower their employees to innovate in delivering value propositions that deliver better value creation and better experience for the customers can find it very challenging to remain competitive.
Zoe Fragou’s recent article Forget Tech Change, It’s Culture Change That Matters Now, describes the common factors that lead to culture change failure.
2. Absence of competitive strategy
According to Michael Porter, there are three potentially successful generic strategic approaches to outperforming other firms in an industry, as a competitive strategy that is relevant for digital strategy as well:
Overall Cost Leadership — increasing market share, enhancing the production capabilities
Differentiation — being unique
Focus — market segmentation or product segmentation
Organizations may encounter unexpected competitors from the marketplace due to the low barrier to entry that digital technologies provide.
To remain competitive and successful, an organization shall implement a competitive strategy considering the strategic approaches based on the analysis of the threat of new entrants, threat of substitutes, bargaining power of suppliers, bargaining power of customers, and industry competitive rivalry.
3. Stand-alone digital strategy
HBR’s recent article Digitizing isn’t the same as Digital Transformation articulates the differences between mere digitization and digital transformation. Digitization is just an optimization initiative rather than a transformation initiative.
An organization’s strategy shall embed digital as part of it while considering strategic approaches for being competitive. Organizations that tend to define a separate stand-alone digital strategy may not sustain the competition.
To remain successful in the digital era, an organization shall implement a competitive strategy that embeds digital strategy and implement transformation initiatives rather than isolated digital optimization initiatives.
4. Lack of agility
In the rapidly changing environment, organizational agility is another critical factor to become successful with digital transformation initiatives.
Organizations shall develop various capabilities including:
Awareness — be aware of market, competition, technology, business models, etc
Data-driven decision making — make better and informed decisions through the use of data and analytics
Faster execution — execute the decisions faster
While building the capabilities to enhance organizational agility, organizations shall consider capitalizing on internal cross-functional collaboration rather than silos and external ecosystem collaboration with partners in the supply chain for optimizing and digitalizing integrated processes in providing faster, cheaper, better products and services to enhance the digital experience for the customers.
Organizations that don’t invest in developing such capabilities and building agile culture may find it challenging to remain successful.
5. Outdated skill-sets
Organizations shall invest in upskilling, re-skilling their employees to nurture the capabilities for the digital era supporting the digital transformation and empower them to innovate.
Best innovations are results of contribution from the empowered employees who understand the products, services, and customer needs.
The creative factor of innovation and human adaptability to upskill and re-skill augmented with technology is more effective.
People determine the success of digital transformation combined with organizational agility capabilities.
Organizations must consider people’s aspects and upgrade their skill sets to ensure a successful rollout of digital transformation initiatives.
About the Author
Gunasundaram Gnanamuthu is a Digital and Agile Transformation Leader with a fantastic career journey from humble South Indian village to his current role as Head of IT at NLG Oman. He is a lifelong learner and a great friend of CTO Academy.
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Disclaimer: The views, thoughts, and opinions expressed in the text above belong solely to the author, and don’t reflect views of the author’s employer, organisation, committee, or other group or individual.