The Adoption of the Digital Transformation
Today the digital transformation is an imperative, the "zero" priority for the success of companies.
Today the digital transformation is an imperative, the “zero” priority for the success of companies. Whole sectors have been overwhelmed by new digital competitors (such as Uber for the transport sector) or by new digital business-enabled business models (such as Airbnb for Tourism).
Companies that undertake a digital transformation path typically increase the likelihood of success in the short and medium term and identify more business opportunities. For example, if a company operating in the manufacturing sector develops a new application for predictive maintenance, today it would have the opportunity to sell it with a twofold advantage: internal improvement and business outbound development.
All this is absolutely positive in evolutionary optics, although more and more companies are at risk of extinction. World-wide entertainment, communications and retail sectors are the most advanced in the process of transformation. Even if similar models are observed in more traditional sectors such as energy, industrial goods and production.
Obviously, each of these sectors lives and interprets digital with different declinations: for example, there are those who see it as enablers of a new way of producing (e.g. industry in Industry 4.0 optics) and who, instead, as a tool for the customer journey (e.g. utilities). Digital transformation requires an innovative approach, ready to accept the mistake. It’s not just a topic of new technology. The most valuable asset in many companies is not necessarily the know-how of business and technology, but rather of proper leadership. Leaders must have the capability to understand the impact of digital initiatives, manage speedy innovation cycles, and redefine the organization also based on new ways of working (such as the Agile methodology).
Obtaining results also depends on how you try to transform your business. For example, Agile, as a development methodology, also poses a positive impact on the work environment, the level of people’s engagement, and the results achieved in the short term.
From direct experience in the energy industry, considered very traditional, I can say that the results obtained through the application of Agile are simply astonishing.
Usually companies follow four “styles” in the digital transformation approach:
- Natural evolution: The company experiences many projects, such as process changes or pilot initiatives with investments in innovative technologies. It puts them to the test of daily life and the market, monitoring their level of survival. This is the attitude of those who know that you have to move, but you do not know exactly where to start and where to go.
- “Structural Platforms”: Senior Management strategically decides to resort to specific business platforms as trainees of transformation, investing significantly in achieving tangible and long-term results. These companies defended their position and chaired it competently before someone else attacked them disruptively (see WhatsApp’s Impact on Telecom).
- “Disruptive” approach, which is subdivided either internally or externally:
- The first involves the launch of completely new business models next to traditional ones. A typical example is that of airlines that create low-cost airlines alongside the already-established brand and model, or that of web-based banks in conventional casemates
- The second is based on the acquisition of start-ups with disruptive business models by consolidated companies. In the automotive industry for example, Daimler invested heavily in mobility startups, such as MyTaxi. Several profoundly innovative trends, from autonomous driving to car sharing, are totally changing the concept of mobility, so if you do not invest in them, presiding, you are cut off from the development of the industry.
- “Smokingscreen”: Huge investments in communication to the media and markets, without indicating scope, approach and objectives pursued in their workshops and pilot projects. It is a strategy to calm the stakeholders, but it is not supported by a real strategic plan and an operational roadmap.
BMG identifies 5 main actions to improve the digital transformation:
Prototype Your Strategy
Consumer needs and competitive environments evolve quickly, it is no longer possible to develop a long-term strategy, assign responsibilities and performance goals, and run a three-or five-year plan.
“Agile” methods, successfully used in software development in companies such as Google, Amazon, Facebook and Twitter, have demonstrated real benefits through learning by doing quickly, often providing functional products inspired by real consumer needs, developing innovative methods and value propositions, adapting to changing needs that are continually changing.
Major digital companies try and perfect products and strategies, in close collaboration with customers and at a leisurely pace. For example, Amazon has introduced e-readers, tablets, smartphones, cloud services, distribution services and online markets in just ten years.
They have discovered and verified that this “test-and-refine” approach can dramatically accelerate business transformations. Obviously, the organization and the culture of a business must support digital evolution, with structures, governance and incentives that promote speed, risk and experimentation, rather than stopping the projects before they give their fruits.
Disrupt Your Business (Before Others Do)
Dominant companies are increasingly attacked by a number of digital start-ups, reinventing business models addressing consumers’ needs in completely new ways.
In this context, “incumbents” must be more disruptive towards themselves and not leave their own open field to others. Large companies have resources, relationships, and data that smaller competitors often do not have. This is a huge competitive advantage.
Managing Directors must think holistically about how to innovate around customer needs and strengths. Digital transformation is not just about a website and a fascinating marketing campaign …
Digitize the Core Business
Top management needs to take advantage of digital capabilities to turn the business into action. It’s not just about launching new IT projects, but also to fundamentally transform the company’s business to ensure the achievement of targets, running speed and the lowest possible cost.
Last-generation companies think in end-to-end mode over processes, even to understand where digital initiatives can lead to a change in performance and value for their customers. They also face many initiatives in parallel, using standardized and Agile processes to speed up execution and inject more flexibility into strategy.
Create Value from Data
Agile leaders try to find ways to better use internal and external data. BCG research shows that leading companies using Big Data generate 12% higher revenues than companies that do not use them. These companies are three times more successful than their competitors in exploiting data to generate new business ideas and to drive innovation through digital design, mobile products and capabilities, increasing the speed of adopting new technologies.
Digital transformation offers companies new opportunities to gain a sustainable competitive edge from data and to generate revenue streams, business units, and autonomous businesses by capitalizing on the data they own.
Position Your Business in the Broader Ecosystem
Companies need to secure their place within a wider ecosystem than their traditional network, through the ever-expanding involvement of companies, collaborators, institutions, and customers interacting to create mutual value. Digital ecosystems are claiming in almost all consumer-centric areas through close collaboration between partners, institutions and customers.
Collaboration in a wider ecosystem creates new opportunities to meet consumer needs, including platforms that enable devices, applications, data, products, and services to work more and more in real-time.