Getting tired of hearing about “Digital Transformation”?
Digital Transformation is hot but it’s already starting to become an empty concept. It shows how fast things are evolving in different industries (just think of banking apps). The term is also difficult to define, carrying all kinds of labels that probably mean different things. And the main reason you may have heard it a little too often: digital transformation is as old as technology itself: the rise of the Internet led to digital transformation, for instance through new ways of communication between customers and suppliers, and more sales through the Internet. The introduction of ERP systems also resulted in a major transformation by offering extensive integration and automation of business processes. In many cases, organizations and employees had to adapt to pre-programmed processes. We’re not telling you anything new – you already knew that. But today there are other factors at work.
Five factors that are different today
What makes today’s digital transformation so different? We see five key points that are valid for all sectors:
1. Customer centricity: customers often rely on products and services that are tailored to their needs and are available immediately. Customers also expect companies to know about their individual preferences. It means the customer wants a more intelligent relationship with companies. This has profound implications for every organization. In the area of product development, people will have to be more creative, such as e.g. offering insurance premiums that are tailored to a person’s driving style. Above all, companies that are successful dare to phase out a part of their current product portfolio in exchange for new products or services. And this on a regular basis. For instance, recently I spoke to a company involved in organizing events and conferences. Their services used to be focused on perfect logistical organization. Now they are transforming themselves to develop online communities centred around the specific subject of their conferences and to tap into the participants’ areas of interest by using them, for example, to organize new conferences, publish papers and e-books, and so on.
2. Cultural change: Everything changes: products, organizational structure, required skills, etc. To combine this with a maximum focus on the end customer, most organisations will need to start operating with a new mindset. Peter Drucker’s quote “culture eats strategy for breakfast” is more relevant than ever. The flexibility necessary to deal with rapid change requires a different culture and attitude from the whole organization.
3. Opportunities through technology: many new technologies are forcing companies to continually assess whether or not to embrace them, before somebody else will. Examples include software for big data and data analytics. These are needed to learn more about the end customer and adapt products accordingly. Consider also developments in the area of IoT with smart sensors, geospatial location-based data, robotics and artificial intelligence, which are creating new business opportunities and new business models.
4. Innovation: every company will have to invest in innovation. Every organization will need to make it a core process to be able to cope, on the one hand, with the existing legacy environment in a highly efficient way and, on the other hand, with an extremely agile environment where the priority criterion is time to market. In addition, every industry has numerous companies and start-ups working on valuable new niche solutions. It is also essential, as part of the innovation process, that they are discovered, scanned, evaluated and if necessary teamed up with for a collaboration. For example, banks don’t just innovate on their own, instead almost all of them have teams that closely monitor developments by start-ups and, if appropriate, test and integrate them.
There is also business model innovation. Undoubtedly, it is even more challenging for organizations to reinvent their products and services, as well as make them digital. Organizations need to have the courage and creative intelligence to rethink their current way of doing business. It requires asking questions such as “Can we do this with the competencies that we have today?”, “Will our customers still be interested in our products 12 months from now?”, “Do we have the change capacity and proper mindset?”, “Who will be our competitor in 12 months?”.
5. Super-fast: the most striking thing about today’s transformation is the incredible speed with which all of this is taking place. It is unprecedented. The combination of the choices you have to make and the tremendous changes in technology, customer needs and entire markets is putting huge pressure on companies. That’s why at inno.com we talk about “Accelerated Transformation”. It is probably here to stay, which means that transformation might be the new “business as usual”.
Three fundamental pillars
The five points outlined above present a challenge to any organization trying to steer their Accelerated Transformation in the right direction and make a success of it. That’s because in parallel, they have to efficiently manage their existing environment, their legacy systems, and of course keep focused on their core products and services. How can you continue making the right decisions in this context? We see that successful companies invest in three core areas.
1. Enterprise Architecture blueprint: the first essential component for enabling Accelerated Transformation is a blueprint for Enterprise Architecture. It leads to a master plan that maps out the organization, processes and systems. Based on this plan, an organization can always make the right decisions about how best to use processes, systems and people. This avoids the problem of not seeing the wood for the trees and becoming entangled in the huge choice of strategic, tactical and technological options. An Enterprise Architecture blueprint brings clarity to all the changes that an organization needs to make in terms of corporate culture, organizational model, business processes and IT.
2. Integrated Governance and Programme Management: staying on track to achieve the desired objectives requires paying just as much attention to the day-to-day Programme Management. Programme Management ensures that every day you steer teams in the right way, set the right priorities each time, get everyone moving in the same direction, and make sure that people are involved in the change management. A frequently recurring element is more team based decision-making autonomy for employees, which requires a cultural change for many companies. Organizations will also have to decide whether to tackle Accelerated Transformation using their current organization or to set up a new, dedicated organization for it. The maturity of an organization in dealing with strategic programmes and the existing corporate culture are decisive in this process.
3. Strategic partnerships (eco-system): companies used to have time to build up new skills or new solutions partly or fully in-house and control the planning for that process. The speed of change means that this approach is no longer the only truth, far from it. People now opt for a solid collaboration with external partners, each of whom contributes an essential component of the product and service offering. More than ever, large organizations are obliged to closely monitor all new initiatives in their industry to assess their strategic importance and whether or not to form exclusive partnerships. The most visible development in this area is the fintech revolution taking place today. It is forcing every financial institution to strategically organize itself to be able to carefully determine if and how it will work with fintech companies, whether to invest, partner, buy or integrate.
At inno.com we drink our own champagne, also experiencing Accelerated Transformation. Our consultancy market and the needs of our customers are also changing equally fast. We are actively exploring how we can use our university, the inno.com Institute, to forge partnerships that bring together the academic world, our clients and ourselves. This will help all of us to manage Accelerated Transformation in the most effective way and take fully advantage of all opportunities it can offer.