Co-Authored by: Scott Funnell
Digital, and going Digital, means different things to different people. So in thinking about being digital it helps to think about the variable scale of the digital landscape and about your specific digital landscape. Digital changes can bring small incremental changes, right through to larger and disruptive transformation. Therefore, when you first start exploring “Digital business” you need to understand your perspective.
So, where to start? Let’s break it down into two distinct stories that can be easily confused, and which are sometimes confused deliberately by vendors with a pitch: Digitisation and Digital Transformation.
Digitisation
When thinking about marketing or advertising, we think digital marketing. This brings together multimedia methods and tool-sets to engage with the public, and with existing or potential clients. We connect to the right people with the right media, telling the story over digital media, and connect people to products or services. This is really an evolution of how we deploy devices and software applications, such as adopting social media into the website and communication platform. This type of automation reaps many benefits in operational performance, but doesn’t fully represent the transformative shift.
From a customer service perspective, “digital” might be how we connect with customers over mobile devices or web chat – perhaps connecting them to the right self-service solution, reducing human interaction or improving the quality of engagement using CRM toolsets. The net result: quicker service, improved efficiency for customers and providers and, if done as a good customer experience, increased loyalty.
These are digitisation, or automation, improvements. That is, taking a set of technologies, applying them to a business function and adopting more efficient processes as a core element of value, such as: reduced time to service, better customer response, more work visibility and leaner operations. The characteristic value available from digital automation:
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Gaining efficiency, by using information and technology to raise human performance. Taking the available technology to improve our people efficiency, from CRM, ERP, MRP, GPS … it goes on in typical abbreviated form. The common thread? Delivering a smarter and simpler solution to gain improved performance.
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Gaining insights using BI (Business Intelligence), now essential to making informed decisions. The old adage, “you can’t manage, what you can’t measure” applies. Examine, cross reference and double check your data from all systems to help make informed decisions.
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Being digitally connected. Engaging with customers across their preferred media is essential, and always has been. We’ve been doing this for years, with fax and toll free phone numbers, for example. The choice of media has simply exploded and we need keep up with the pace. It’s no coincidence that all of the new media is digital. More on that later.
We’re all digitising our businesses and along the way, parts of our lives. Some of us even work for companies that digitise all day. Dimension Data, Datacom, Spark Digital, Fronde, Intergen, there’s plenty of “Tech” companies ready to help businesses gain efficiency, insights and to be digitally connected.
And is it needed? Try to imagine a thriving business using only typewriter, carbon paper, postal mail and faxes. Digital has become the de facto format for business and part of the organic evolution of leaner, smarter, data-driven operations.
This is digitisation, or automation, your technology roadmap for digital improvement. It’s generally applied as improvement to systems and tools with some process and organisational change. It’s not the shift that digital transformation brings. Not surprisingly, the term Digital Transformation gets used extensively, from commentators and consultants through to integrators and software vendors. And why wouldn’t they? “Transformation” has so much gravity, it’s easy to get caught up in the hype.
What is Different About Digital Transformation?
Fig. 1 Transformation is achievable through, and only through, combining the tangible aspects of engagement, innovation and agility, to achieve an enduring breakthrough. A major mind-reset and attitude shift for many of the people involved.
Digital Transformation will do just that: Transform how you deliver value to your new and existing customers. It may even disrupt your industry, creating a distinct advantage for your business. Consider TradeMe, which is changing the way consumers purchase and sell peer-to-peer in New Zealand, or Netflix with simple on-demand service and Airbnb as an accommodation alternative to hotels and motels. Typically these disruptive digital business are new start-ups with new commercial models not constrained by the overhead and fixed thinking of the status quo.
Can an incumbent business achieve digital transformation? Yes, it is possible, but not without its challenges. Digital transformation is not just a re-engineered commercial model, but a completely new way of thinking about how a business delivers value through an ecosystem of providers.
Digital transformation results in a culture that challenges the status quo and actively explores opportunities to deliver value in more innovative ways, often resulting in new business models:
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Customer experience becomes hyper-focused, to develop a comprehensive understanding of customer needs; to radically improve the customer experience as the “make or break” factor for a re-invented value offering. That by-now familiar story Uber, is a working example, and one that constantly looks for new innovations, such as UberAssist, a dedicated transport option for the disabled
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Similarly, re-engineered processes and interactions are required for realising new value potential. It’s critical the enterprise becomes nimbler, more responsive to the customer needs
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New processes will deliver increased efficiencies and with that, lots of new data. This data creates new decision making opportunities, needing data analysis for decision support
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Leadership and culture must change to promote and embrace the larger changes in process and organisation. A deep understanding of the new digital offerings and customer stories will need to be understood by everyone in the organisation
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A value-driven strategy is, in our view, the most critical element to digital transformation. New approaches to supply, to work practice and to customer value, that keep pace with the evolving digital marketplace are required as part of an effective value-driven strategy.
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The organisation will be flatter, non-hierarchical and have a self-organising ethic, finding it’s way into culture and work practice
So as you start to explore the digital landscape and think about your next steps, be mindful that an organisation’s digital transformation is not simply achieved by adding applications – even ones that use innovative technologies. A Digital Transformation will need to start with a fresh strategy that refocuses on value, brand, reputation and engagement with all stakeholders.
And it must be followed up by the leadership and culture drive needed to enable exceptional execution and the essential behaviour shift within the organisation.
Without these core work-streams the digital strategy will sputter, risking failure and disappointment.
Comparing the Two Digital Stories for ROI
A 2013 Capgemini study examined the state of digital leadership. While several years old, this research remains very relevant as technology innovation in consumer products, health, retail, bioscience and agriculture keeps building. The study also differentiates between these two approaches.1
Where the study’s authors have draw the line aligns with the two digital stories outlined above – on one side there is “digital intensity”, being their term for digitization. This is the extent to which high-tech is speeding operations & enabling smarter processes, along with better and new forms of customer engagement. This can be done, and is done, without a transformational agenda.
On the other side they examine “transformation management” which is the companion to digitising, but a whole-of-business change programme leveraging digital technology. Specifically, they identified two key findings:
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Digital intensity (digitising) helps companies gain and manage more volume with existing capacity
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Companies that are mature in transformation management intensity are more profitable
And the big question – if we’re choosing, which approach will deliver the most value?
Conclusion
Through understanding the difference between the “digitisation agenda”, an ongoing one to deploy high-tech for operational advantage, and the wider transformation programme, we then see where the best ROI lies, relative to effort.
Comparing the two paths, we should look at the digital workstream as offering choices that require a business strategy response. These choices need not be exclusive, depending on timing and priority.
First, if the goal is to improve a key business driver, say customer engagement, then the digitise approach will be the path, meaning that a high-tech project can be designed & deployed without the bigger effort of the transformation programme. And that may be the best decision, say, to compete effectively on service, or to expand the customer base with innovative products, or to shorten or even eliminate your supply chain.
If however the business goal is in shifting performance drivers up, to strengthen innovation culture, to improve engagement overall, meaning a redesign of the organisation around digital operations, then it’s the transformation agenda. That work cannot be short-changed – find the most efficient path of course, but be careful not to ignore the essential steps.
In my next article, I will examine the specific steps to make this a reality.
Sources:
1 “The Digital Advantage: How Digital Leaders Outperform Their Peers in Every Industry.” (n.d.): n. pag. Capgemini.com. Capgemini Consulting. Web. https://www.capgemini.com/resource-file-access/resource/pdf/The_Digital_Advantage__How_Digital_Leaders_Outperform_their_Peers_in_Every_Industry.pdf
About the Author:
It could also be true that a digitisation strategy to improve customer engagement can be undone when the customer has their next person-to-person encounter with the business, and gets the impression they are an interruption to the customer service person’s day. It could be that when the culture is right, digitisation allows a business to go from good to great. But perhaps digitisation can’t be a bad to good strategy. Just a thought!
Very well written, thank you for sharing.
I especially like the way you make a distinction between digitization and digital transformation and highlight the dangers of an overemphasis of current leaders on digitization. The CAP Gemini article is an excellent reference and a research report I myself often use when talking to executives about the dangers of just chasing the next big technology solution without also/first building the pre-requisite business technology competencies for making changes stick.
You may also enjoy a similar article I wrote (which incidentally references the same Cap Gemini report – http://www.xuviate.com/blog/2015/12/15/a-mid-sized-business-needs-least-4-strategic-leaders/). Even though the article is about the different kinds of leaders we need in mid-sized organizations, it also takes a more continuous view of the topic and in it I argue that the level of transformation management and digital intensity increases as we move up the stack of the 4 Value Propositions of IT. This view has proven very effective for helping business and IT leaders understand that even their current work has value, but has to evolve as the organization matures.