Your steps in digital transformation
Recently, I was invited to give a keynote speech on the impacts of digital disruption at a company’s Innovation Day event. The participants, consisting mainly of the company’s senior management team, were enthusiastic and motivated to develop innovation strategies for their business. During the course of the event, the team discussed digitisation of their business operations as the core of digital transformation.
Although in many cases, digitisation (converting something analogue to digital formats e.g., replacing paper based filing system for online document management) is a key element in organizational transformation for the digital age, I believe it is only one part of digital business transformation in its entirety. Incumbent organisations looking to gain competitive advantage in the digital economy will need to address several levels of change, improvements and development. I have developed a simple illustration of these levels to help companies understand the scope, impact and potential outcome of initiatives at each level.
Level 1 – OPTIMIZE the foundation
The ‘Optimize’ level focuses on initiatives that strengthen and improve the existing business elements to create strong foundation. As a business, basic operations need to function smoothly for the company to exist and sustain itself. These include the physical operations, day-to-day activities, financial management, among other things. The focus here is really to ensure these basic operations are optimized – reduce redundancy, high efficiency, low costs etc. Many ‘Optimize’ activities may involve digitization of the operations, for example process automation, implementation of ERP systems, launching a responsive website, or using social media channels for customer interactions.
‘Optimize’ initiatives are activities that companies should be implementing to improve operations and efficiency, whether ready for digital transformation journey or not. Companies that have not optimized will struggle to stay relevant in the digital economy.
Level 2 – EVOLVE the business
The ‘Evolve’ level focuses on transforming selected foundation elements to prepare for dynamic needs of digital disruption. The rapid development of disruptive technologies are enabling new ways of doing things in an organization. Companies now have the possibility to apply these technologies to enable, improve or transform their business. For example, the use of chatbots on Facebook messenger to improve customer interaction and increase sales conversion, or using machine learning or AI in data analytics to gather predictive insights on customer behaviour or preferences.
‘Evolve’ initiatives typically focus on digitalization of a specific function or business area to improve or transform by leveraging digital technologies. For example, I recently saw a smart factory demonstration where speed and efficiency of the assembly line was improved through the use of smart bins. The bins were programmed to order parts as soon as it hits a minimum threshold level to avoid delays.
Initiatives at this level can go a long way to creating competitive advantage for companies. However, it is not as simple as throwing new technology at a business problem. I have seen many examples of companies launching a mobile app in the name of digital transformation. Here, real benefits are gained only by leveraging technology in a strategic and targeted way to resolve or transform an existing business challenge.
Level 3 – INNOVATE for the future
The ‘Innovate’ level focuses on exploring innovative initiatives to transform the business and create a sustainable competitive edge in the digital economy. This level involves true organization wide digital business transformation. For example, disruptive business model innovation falls within the Innovate level.
I believe that digital disruption will hit every industry at some point over the next five years and change the global business landscape. However, some industries will be hit quicker than others, simply due to the nature of their business. For example, the first big wave of disruption will be technology, media, retail and financial services due to rapid developments in technology, evolving consumer behaviours and high number of digital entrants. On the other hand, oil and gas or utilities may be hit at a later stage.
Despite this, every company should be exploring Innovate initiatives in order to prepare for this disruption. As a result, new operational activities, products / services, or business models may surface, creating a need for organization wide transformation.
Evolution process, not one time change
The digital business transformation journey can be viewed as an evolution process, with change happening over a course of time. As a knee-jerk reaction to disruption, business leaders may be tempted to implement a new technology in an effort to ‘digitize’ the business. However, it is worth exploring initiatives across the various levels to determine where a company needs to focus for highest returns. Keep in mind that not all levels need to be implemented simultaneously. As a starting point, focus on implementing ‘Optimize’ and ‘Evolve’ initiatives. But leadership teams need to already be exploring the ‘Innovate’ level, particularly in the highly disruptive industries.
Kamales Lardi is a digital business transformation strategist and dynamic keynote speaker. She helps companies leverage digital disruption to create new opportunities for business and generate revenue. Kamales is also a published author, lecturer, mentor to entrepreneurs and member of the MBA Advisory Board at Durham University, UK.