Are you really transforming for digital?

yes, no, maybeIn a previous post, Any business can be a digital business, I discussed how a launderette had added digital services to its core product to enhance the customer experience and how this innovation could be extended to reward regular customers and provide other (online) services. The main point of the post was to demonstrate how digital innovation could be applied to even the most traditional bricks and mortar business that have little or no online presence.

Numerous studies have found that just about every organisation believes they will face disruption and challenges as a result of the digital revolution. For example, a Forrester survey found that 93% of business executives believe digital will disrupt their industry in the next 12 months.

So whilst it is certainly true to say that any business can be a digital business, we can also say that every business must become a digital business to ensure its continued existence.

Yet despite the acknowledgement that digital disruption is virtually inevitable many companies seem to be dragging their feet when it comes to actually doing anything to prepare for, or better still pre-empt, this disruption. Take for instance the finding from Gartner’s annual CEO and Senior Executive Survey that only 22% of CEOs put technology in their top three priorities. Now, whilst becoming a digital business requires more than IT, without technology digital transformation is impossible so it is surprising not to see more CEOs focusing on IT. Growth, profit and cost control are certainly key issues for the CEO of every business but successfully applying technology to drive the organisation’s digital transformation will not only make a significant a contribution to all three of these areas, it also will ensure that business continues to exist in the future.

It is difficult to see how the 78% of CEOs that do not see technology as a top three priority can be serious about becoming a digital business. Are they simply ignoring digital or just paying lip service to the need to transform their company?

Further evidence of the difference between talking about digital and actually doing something to become a digital business comes from a recent survey by research and consulting firm Altimeter. The study found that many organisations say they are undergoing a digital transformation but when asked about what that actually involved the responses cast significant doubt as to whether their claims about transforming their business are true.

For example, a key element of a successful digital transformation is in understanding the customer journey, touch points and outcomes, and the impact these have on the overall customer experience. These are then used to define a new business model, products and services and to drive the resulting people, process and technology changes required to become a digital business. Traditionally business model reviews, and product and service development have been the result of an inside-out exercise – looking at the current activities and capabilities and using these to define a future state – whereas in the digital world it needs to be the product of an outside-in approach driven by the customer experience.

So, whilst 88% of organisations covered by the Altimeter research said they were undergoing a digital transformation, only 25% had mapped the complete customer journey in the last 12 months. So how can they be transforming the business when one of the key requirements for a successful digital transformation is absent? As the Altimeter report notes, organisations often confuse digital transformation with a shift in technology investment. In other words, by deciding to invest in technologies such as mobile and social, many executives believe they are transforming their company into a digital business. The reality, however, is very different. Becoming a digital business involves a lot more than just investing in technology; it requires a new perspective on the organisation. It is about looking at the business from the customer’s viewpoint. It is about understanding what outcomes or benefits the business provides for the customer, and then redesigning the entire business model to meet these needs. A true digital transformation therefore involves changing the culture, leadership, governance, processes, roles, etc. of the business.

In a recent post on digital transformation, Paul Hoskins, Executive Chairman of Precedent, defined three stages of the journey to true digital transformation:

  • Digitally reactive is about the tactical delivery of digital and the model that has formed the backbone of online business for many years.
  • Digitally strategic involves incorporating digital at the very beginning and normally involves things like big data or a “mobile-first” approach. The products or services sold remain the same, but changes are significant and longer lasting.
  • Digitally transformational is the innovation of business, allowing you to understand what technology can allow you to do what you might not have been able to do before. It’s a board-level programme, which if invested in properly, will create a sustainable digital business.

Hoskins states that the reactive and strategic areas are where organisations should allocate most of their resources but that they should at the same time be working on the transformational elements – those innovations that truly transform the organisation’s business model and create new products and services.

However, the Gartner and Altimeter studies indicate that most businesses are not addressing the transformational element. Instead they appear to be either ignoring digital (despite acknowledging that digital disruption is inevitable) or assuming that their reactive and strategic activity will lead to the transformation of their organisation.

And, with so many businesses operating exclusively in the reactive and strategic areas, it is not surprising that technology sits outside the top priorities for so many CEOs. These CEOs do not need to engage with, understand or drive technology-led innovation and business models in the same way as CEOs of truly digital business do.

Being digitally reactive and digitally strategic will enable an organisation to survive in the short-term and may well be enough for the medium-term. But to ensure their company can compete over the long-term, CEOs need to revise their priorities and lead a digital transformation that spans all areas of their organisation.

If your organisation wants to develop a vision and strategy for its digital transformation, or if it wants to generate a pipeline of ideas for digital innovation within its products and services then please contact me or visit my website, axin.co.uk.

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  1. […] a previous article, Are you really transforming for digital?, I talked about the stages of digital maturity. These are summarised in the diagram below. To […]

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