The phrase Digital Transformation is commonly used today, referring to everything from an overhaul of a legacy system to leveraging online systems to engage customers. As champions of digital transformation, our team believes in the power of smartly planned and efficiently executed digital transformations to enhance business strategy; we believe that effective digital transformation is a cornerstone of business, and it is imperative that individuals understand the definition, potential impact, and processes that lead to success.
Effective Digital Transformation: How do we think about it?
Effective digital transformation puts business strategy ahead of digital strategy, whilst interweaving the two. Successful digital transformation solves business problems by focusing on the customer — for example, by decreasing costs, or increasing value — and using technology solutions that cut through business functions, industries, processes to affect change. In short, technology is a means to an end.
Digital transformation may help reduce product costs, but what does that do for the business? It provides resources to be routed into other aspects of the business. Leverage those freed up resources to enhance the customer experience and you are left with improved margins and happier customers and an effective digital transformation.
Consider Amazon — a company that digitally transformed its business of book selling to a Big 4 technology company. Amazon leveraged digital transformation initiatives to change its supply chain and operational efficiency in order to provide a better customer experience. Their culture (the world-famous 14 Leadership Principles) and business strategy are interwoven to focus on the customer: Amazon Prime has some of the fastest delivery options in the market and Amazon Web Services provides some of the best cloud solutions for enterprises. They digitally transformed their business and now provide customers with digital solutions to digitally transform theirs. From their website: “Amazonians… share a common desire to always be learning and inventing on behalf of our customers.” Leverage culture and technology to improve customer experience; digitally transform the business to help the customer.
Digital Transformation contains components of digital strategy, the use of digitalization, as well as digitization efforts. These terms, often thrown around interchangeably, are in fact pieces of the larger puzzle rather than equal to the overall process. Digitization is the process of moving from analog to digital, pen and paper to Microsoft Excel. Digitalization, according to Gartner, speaks of the use of digital strategies, technologies, initiatives to tap into new business opportunities or change a business model. If anything, one leverages digitization to digitalize, and the overall transformation of a business from one to another, becomes digital transformation. The definitions are debated and often vague, as discussed by Jason Bloomberg in this Forbes article. It is important to remain consistent in thinking of digital transformation as the overarching umbrella of strategic digital initiatives to improve the business with the customer at the forefront.
Digital Transformation: Consider “The Process” towards success
What does Digital Transformation success entail? What does it look like?
As enterprises restructure their strategy to evolve amid a changing technological and economic landscape while centering around the customer, it is important to consider the process and what it takes to succeed.
Key Stages to Success
According to Keller and Price in Beyond Performance: How Great Organizations Build Ultimate Competitive Advantage, successful transformation involves a few key stages — from goal defining, to organizational assessment, to designing and initiating transformation and sustaining it. It is critical to understand where the enterprise is and where it wants to go — and it is critical to be consistent and practical.
Ensuring Success
to move forward with a transformation initiative, it is imperative to align Keller and Price’s stages with McKinsey’s 5 themes to a successful digital transformation, which involve digitization to prepare an enterprise for digitalization:
- Having the right, digital-savvy leaders in place
- Building capabilities for the workforce of the future
- Empowering people to work in new ways
- Giving day-to-day tools a digital upgrade
- Communicating frequently via traditional and digital methods
Think about the Amazon example again — they didn’t just leverage digital solutions to overhaul their business; they leveraged cultural practices to ensure that Amazonians are driven towards the integration of technology and customer centricity. McKinsey’s themes encompass a similar outlook: empowerment, communications, capabilities, leadership — core cultural understandings that can support a digital transformation initiative.
At Valence, we focus heavily on thinking about the future. It is critical to be ever ready for tomorrow, whether it means continuous learning, or building systems and solutions to prepare for what is next. These stages and themes will ensure enterprises are thinking about the next step, focusing on being proactive rather than reactive. At this important juncture of the 21st century, where we have crossed into a new decade and face the challenge of economic reinvention due to a global pandemic, it matters how we use technology to transform our enterprises to meet changing customer needs.
In summary, as stated by Jim Darrin, CEO of Valence,
“No industry or company can ignore the importance or impact of Digital Transformation, and must embrace a digital strategy in order to evolve into the next generation.”
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