Digital Transformation, what is it about? As supposed to what most people think, digital transformation is not a technology issue. It’s not about cleaning up IT legacy; this transformation is necessary to reshape every aspect of a business so it can deal with the volatile digital developments. Digital is deeply rooted; in culture, governance, operations, workforce skills, product usage, distribution and so on. Most of all, the customer experience is at the heart of digital transformation. How do you keep up with changing business environments brought about by the changing customer demand and the accelerating technology developments?
Customers become more demanding, due to information that is up for grabs. They know what is possible and will go to the next competitor if they don’t get what they want. The unprecedented economic and social change, that is caused by the disruptive character of digital technology and market pioneers leveraging these new technologies, requires organisations to become more agile and resilient to disruption in this ever-changing business environment. Digital transformation is not solely about embracing digital technologies, but primary about being able to change at the speed of business. It enables organisations to grasp possibilities and prevent them from getting demolished by disruption. The keywords that can be defined here are adaptability, scalability, ecosystem, platforms and customer experience.
New technologies are a threat and an opportunity. They probably interfere with your current business model and operating model, but they also give you the opportunity to re-evaluate your products and services in terms of customer expectations, target group definition and efficient distribution.
Adaptability and scalability
Today’s organisations need the ability to cope with unexpected disturbances in the industry and marketplace. An organisation’s digital transformation should therefore define a digital strategy that covers the all aspects involved, from workforce skills, operating model to infrastructure. So again, it’s bigger than IT requirements.
Therefore, digital transformation has an important impact on your business. How big the impact is, depends on how your organisation has been evolving these last few years. Did your organisation spot opportunities and did it change gradually as they happen? Or has it practically ignored the developments in digital technologies? Because if you don’t recognise tipping points, you will miss opportunities. That’s why many organisations are in crucial need of a transformation that answers to digital challenges.
As I wrote earlier, true digital transformation will not only protect your business from disruption, it will also address opportunities. Whether that might be to cause disruption yourself or simply to enable growth. Of course, to accommodate that growth your organisation needs to be capable of either handling a growing amount of work or have the potential to quickly enlarge capabilities. Thus, scalability is also an important issue here.
Digital technologies make us better understand customers through the smart processing of data. Technologies like big data analytics and machine learning will become leading in the decision making of the C-suite. Therefore digital transformation is also a necessity in relation to competition. If you are able to better listen to your customers’ expectations, you can align your IT infrastructure, operational model and workforce accordingly. Take for instance software. Future software will not be created for business support purposes, but it will drive businesses. This affects your operational model. How do you expect your employees to deal with that and how does that effect your customers?
In the end, the focus needs to be on the customer journey in everything you do. Thinking in personas is history. Businesses should think in mass customisation:
“The use of flexible computer-aided manufacturing systems to produce custom output. Those systems combine the low unit costs of mass production processes with the flexibility of individual customization.”
How did society get to mass customisation ? Customers have evolved, and the demands started to vary significantly from customer to customer. Mass customisation brings along a tremendous increase in variety without a significant increase in costs compared to standard products. Looking at the last decennia, Millennials have had a great influence on this change. They have been brought up with the internet and are used to its on-demand information handling. They have different skills and a different mindset which created a strong craving for personalised products. It has accelerated the need for a move towards a mass customisation; in this regard it has set in a shift from specialty goods to shopping goods.
Transformation is about skills and mindset
Although the investments in technological solutions are increasing, only about one-fifth of companies report that digital technologies are playing a strong role in their ability to compete, according to a Harvard Business Review Analytic Services global survey. In this survey, they interviewed 680 executives across functions and industries. The top five barriers to digital transformation that they pointed out were: the inability to experiment quickly, change management capabilities, the inability to work across resulted silos, a risk-averse culture and legacy systems.
Every business should be about processing data in order to improve and keep up with the customer demands. That’s why digital transformation is so important, with connectivity and on-demand data delivery as key pillars. To embrace disruptive innovation, organisations need not only to have a connected, and secure, infrastructure. Skillset and mindset also play a huge role.
In my next blogpost I will elaborate further on digital transformation and the influence of the industrial internet of things.