What is Digital?
Digital should be seen less as a thing and more a way of doing things1. Digital has three attributes, namely creating value at the new frontiers of the business world, creating value in the processes that execute a vision of customer experiences and building foundational capabilities that support the entire structure.
Being digital requires being open to re-examining a company’s entire way of doing business and understanding where the new frontiers of value are. Digital’s next element is rethinking how to use new capabilities to improve how customers are served. The final element of our definition of digital is about the technological and organizational processes that allow an enterprise to be agile and fast.
Digital Transformation of Industries
Strategy, not technology, drives digital transformation2. Jeremy Burton, President, Products and Marketing, EMC describes five make-or-break business attributes that businesses must gain through Digital transformation:
- The capability to predictively spot new opportunities in markets
- The capability to demonstrate transparency and trust
- The capability to innovate in agile ways
- The capability to deliver unique and personalized experiences
- The capability to operate in real time
However, digital transformation projects are relatively new but all the elements of digitization have been underway for decades now, but where are the lessons learned3?
- Webifying interactions and processes through e-commerce began in the 1990s
- Big data analytics in the 2000s
- SOA and web services in the 2000s
- Mobilized engagements starting in the early 2010s
Many enterprises see the collection of technologies that comprise Digital as a grand strategy that move things to the next level. But decision makers have to sit down and define how they’re going to get to the next level, and what it takes to transform their businesses first.
Transformation versus Optimization4
Digital Optimization may be viewed as augmentation of existing services using digital tools along with using digital tools to improve productivity, existing revenue streams, and customer experience. In contrast, Digital Transformation fears disruption or intends to disrupt its industry, and pursues
net new revenue streams, products, services, business models along with creation of new digital business units, acquisitions. It also ventures in adjacent markets or new industries.
Paradigm shift in business?
Industrialization (Capitalism) has seen use of heavy machinery, division of labor, time-bound production and a labor/leisure binary. In comparison, Digital Capitalism (Informationalism5) is witnessing the generation of information capital over digital networks, digital labour6, fluidity of time and Playbour7. Also, traditional businesses have been territorial whereas Digital Capitalism is de-territorialized.
The Transformation Triad8
Any digital transformation exercise has three elements: a Digital Strategy that answers why we need the said transformation, a Digital Roadmap that details how we achieve the desired results, and a Business Case that explains what is the motivation for the transformation.
Digital Strategy
A digital strategy should ideally dovetail a mission/vision that defines digital transformation objectives. The said strategy should endeavor to achieve a set of goals that may include higher profits, higher growth, bigger market share, lower costs, better customer experience etc. Such a strategy should also identify a project team with requisite skillsets while making end users part of the team, get executive sponsorship and establish a PMO. A digital strategy should have actionables and should have a definite timeline.
Digital Roadmap
A digital roadmap should avoid a big bang approach and adopt an incremental approach with phases. The roadmap should go for low hanging fruits first to win customer confidence and emphasize business benefits over technology upgrades. The plan has to be agile and iterative, with mechanisms to address scope creep.
Business Case9
A disruptive transformation must be viewed as a strategic investment. A classic ROI calculation is neither always feasible nor desirable for digital investments and outcome and experience-based investments take budget away from point-solution capex.
Old Wine in New Bottle?
From the preceding discussion on Digital Transformation, it is apparent that many of its facets are similar to business transformation exercises we have witnessed over the years across various industries. In consulting speak, the methodology and prerequisites are almost identical to Enterprise
Resource Planning or Analytics projects that usually go along with large scale Business Process Reorganization initiatives. Over the past couple of decades, as technology has progressed, what has primarily changed is the ease of use by end users and the learning curve for the implementation consultants. There hasn’t been any fundamental breakthrough although monikers have changed from data warehousing to business intelligence, from data mining to business analytics whereas the underlying algorithms and techniques have largely remained unchanged. For extracting explicit relationship among data elements, we use SQL queries and for understanding implicit relationship among data elements, we use statistical or machine learning algorithms.
The ONLY noteworthy advancement in machine learning and related technologies has been in Deep Learning where neural networks have assumed multiple hidden layers that have resulted in appreciable performance gains in cognitive tasks.
So how is Digital Transformation different from what we have done so far? For starters, the challenges10 we face for implementing a successful digital transformation are different from traditional business transformation projects. Also, the way we measure11 the success of any such transformation is fundamentally different. We need Digital KPIs for measuring Digital businesses.
Digital KPIs should assess a company’s progress in digitizing its current business model by measuring goals in sales, marketing, operations, supply chain, products/services and customer service. Such KPIs should assess new revenue sources generated from new digital business models. These KPIs should represent growth, revenue, market share and margin metrics that are differentiated from physical assets.
About the author
Kaushik Bhattacharya is a management consultant with 20+ years of experience in Analytics, Digital Transformation and Artificial Intelligence. He has worked on projects at industries like Insurance, Banking, Telecom, Manufacturing, Retail, Consumer Goods, Media, Life Sciences, Healthcare, Oil & Gas, Government and Utilities. Mr. Bhattacharya has an MBA from Cornell University and is a graduate of the Harvard Business Analytics Program. He is a Chartered Engineer and fellow of the British Computer Society as well as a fellow of the Institution of Engineering and Technology. He can be contacted at kb498@cornell.edu
Sources:
- http://www.mckinsey.com/industries/high-tech/our-insights/what-digital-really-means
- http://sloanreview.mit.edu/projects/strategy-drives-digital-transformation/
- https://www.forbes.com/sites/joemckendrick/2016/12/12/why-digital-transformation-is-an-empty-catch-phrase/#e40c96d45c6c
- https://www.cio.com/article/3211428/digital-transformation/what-is-digital-transformation-a-necessary-disruption.html
- The Rise of the Network Society, Castells, 1996
- What is Digital Labour? Fuchs, Christian, 2013
- Precarious Playbour, Kücklich, 2005
- https://www.accenture.com/us-en/blogs/blogs-roadmap-business-case-not-enough-digital-transformation
- https://go.forrester.com/blogs/17-02-07-the_business_case_for_digital_transformation/
- https://www.cio.com/article/3237066/digital-transformation/5-things-that-are-dragging-down-your-digital-transformation.html?upd=1510857382444
- https://www-cio-com.cdn.ampproject.org/c/s/www.cio.com/article/3236446/digital-transformation/digital-kpis-your-keys-to-measuring-digital-transformation-success.amp.html
