Digital Transformation, what is it?

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Digital in and of itself is not a destructive force, although it has and will, see the end of many businesses and whole industries. Rather, digital transformation is an emancipating force, emancipating people, companies and movements.

Introduction

The chances are you’ve probably heard the latest buzz phrase “Digital Transformation”. Whether you’re a student, an employee, a customer, a business leader or a mere observer it seems that everyone is talking about ‘digital’, but what exactly is ‘digital’ and what does it mean for business?

‘Digital’ has been happening over the last 25 years. Business and populations think differently about the world around them. The days of business models based on scarcity dominated market positioning are over. Barriers to entry into previously high capital cost markets have been shattered. The ability to scale and access huge markets is a given, there are now many more providers of similar products and services and customers have much more choice –  this is as closest we’ve been to truly liberal markets as we’ve ever been.

Digital Transformation, i.e. the reaction that businesses have to accelerating technology advancements, along with the march of regulation and the impending workforce crisis, will all combine to bring about massive change.

What is Digital Transformation?

Digital transformation refers to the efforts that individuals and organisations must make to address the profound changes in the business landscape brought about by the accelerating progress of digital technologies.

Businesses must transform to survive. Digital transformation impacts on all business activities, their processes, how they deal with customers and their competencies. In short their whole business model.  The challenge for companies right now is working out how to fully leverage the changes and opportunities of digital technologies and their impact across society in a strategic and prioritised way. They need to do it quickly because the pace of ‘digital’ is accelerating.

There are some obvious examples of how new business have leveraged digital to disrupt existing markets and businesses. The most obvious in online shopping, with Amazon leading the pack with revenues over $100Bn. A business that is only 22 years old. Another example is Uber, which has a completely different business model than the traditional taxi companies. Their model is based on the use of digital technology, which by the way is not local. Drivers use mobile phones to access digital technology in Uber’s HQ in San Francisco.  Uber is also a multi-billion-dollar company and it’s is only 7 years old.

According to Accenture the digital economy with be worth $24.6Bn by 2020. Much of that isn’t new markets, it’s existing one. That fact begs the question, “what will happen to the traditional players in the existing markets?”. There is an obvious answer which is best given by the names of dead or dying businesses like BHS, Blockbuster and Kodak. They wont be the last.

How did we get here?

‘Digital’ appeals to millennials and to Generation Z, Why? Because they’ve grown up with the Internet, with the freedom to access information anywhere and at any time. Something that those born before the mid-90s had to learn. The new workforce and customers are ‘digital natives’.

There are 4 well defined waves in the progress of Digital

In the days before the penetration of computers into homes and businesses if you wanted to compete you had to invest heavily in the physical world, i.e. bricks, mortar and stock. The barriers to entry into many industries were just too high for new players.

The '4 Waves' of Digital

The ‘4 Waves’ of Digital

The first wave of digital arrived when many organisations invested in computers. In the early days (late 80s and early 90s) many organisations kept these as standalone machines for administrative purposes. i.e. writing up memos and meeting minutes, record keeping, etc. The clever organisations realised that this first wave made it much easier to create (mainly digital) product a much reduced cost.

In the mid-90s the advent of the Internet led to the elimination of the physical barriers across countries and time zones. This essentially enabled clever(ish) products to attain global reach from inception. Although as we saw (refer to the ‘ish’ above) global reach didn’t guarantee success. Many existing businesses focused their transformation efforts at this point on ‘eBusiness’, i.e. business to business and internal workings of the organisation but not the customer, notwithstanding the possibility of a website, which at that point had a telephone number and an address if you wanted to interact.

So with physical barriers removed and the ability to make and distribute product and content along came Social Media.  Now anyone can distribute opinion, sentiment and have ‘influence’. This third wave has democratised the web and forced organisations into major channel shifts.

The fourth wave, which has seen huge penetration of mobile devices has sped things up even more. The time between thinking about buying a new pair of shoes, and committing to the purchase in now measured in minutes. Good news and bad spreads globally in minutes and seconds. It is at this point in the evolution of digital, that ‘disruption’ became ‘destruction’ for many businesses.

Why does it matter?

Clearly as customers are changing the way they buy and interact with organisations, those same organisations must adapt. If you have bought from Amazon recently then you’re part of this change.  New ‘digital converts’ and emerging ‘digital natives’ want what I call the 4S experience, as both customers and employees.  So organisations need to think about their existence in terms of their customers and as employers.

4s-experience

  • People want a ‘Speedy’ experience from browsing through products to the product arriving at the door customers will baulk at delays caused by human/manual interventions. In the world of finance and capital markets this is known as Straight Through Processing (STP). There is an emphasis within digital transformation to remove unnecessary human interventions so that processes are speeded up.
  • Ensuring a ‘speedy’ experience doesn’t just mean a joined up ‘customer’ journey, it also means using digital to remove barriers within the organisation so that internal interactions are ‘Seamless’. There shouldn’t be artificial ‘walls’ between marketing and finance for example. Digital allows for those walls to removed, gone are the days where staff wait for days on an item of data, it’s available in real time.
  • Digital technologies must be reliable, robust and create a ‘Sin’ free experience, i.e. one without error.
  • Customers and employee’s want information, data, access everywhere, and anytime i.e. on the ‘Spot’. Organisations must make their services available 24/7 and on all devices.

This ‘digital revolution’, i.e. the coming together of a plethora of access devices, web technologies and the ‘socialisation’ of the web is forcing many organisations to challenge the way they operate. This challenge to transform is not only in the customer facing space, but also how that connects back all the way through the business and supply chain.

So what?

“The Only Thing That Is Constant Is Change” ― Heraclitus

We’ve all heard the words of Heraclitus before, we may even have heard or read the words in the context of business change, but not really understood the gravity of them. Given that technology, customer expectations, markets and whole nations are in a state of flux – how do businesses adapt. Today’s new and emerging businesses are building lean right from start-up. Given that technology can do much of the heavy lifting, why do we need a marketing or a finance department? They are building muti-functional teams who are more experimental in their approach to launching products, rather than a huge up front design effort, they are adopting sound practices from the tech space, such as Minimal Viable Product (MVP), ‘pivoting’ and DevOps to embed real agility in their businesses.

The challenge for existing businesses is how to re-engineer their organisations to be agile without losing traction.

I still see mature businesses that see technology as a supporting feature. That sentiment has had no grounding in reality for at least 20 years. Technology is right at the centre of enabling business to adapt to changing circumstances. New stuff is important. Today there is less ’blood’ in the ‘bleeding edge’ that there has ever been. So what? Well, as the saying goes….

“if you don’t understand digital, go fire yourself”

Post by Pete Wilson

Pete has worked in the technology and business change space for over 30 years. He's worked globally for large public sector and governmental bodies and for large private sector multinationals across numerous industry sectors.

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