Digital Transformation is the mantra of today’s business. The advancement of new technology is leaving companies with 2 choices: disrupting or being disrupted. With this 7-step road map to Digital Transformation, you should be able to start the digitalisation journey right away.
Digital Transformation should be driven by an organisation-wide effort, and therefore the buck stops with the CEO.
In a 2017 survey of 1,500 senior executives by the advisory firm Russell Reynolds Associates, most (40 per cent) of respondents said the CEO is the one driving the digital strategy at their organisation. This is followed by Head of Marketing (14 per cent), Head of Digital (10 per cent), or Head of IT (8 per cent).
The CEO alone, however, cannot lead the charge. The execution of Digital Transformation needs buy-in and commitment from other members of the C-suite. This is a chance for senior executives to re-examine their changing roles in the digital era. To stir up the conversation, the CEO can ask the senior leaders to answer relevant questions such as:
- For the CFO: How can digitalisation create new revenue streams for the company? How can new technologies help improve the company’s financial performance?
- For the CIO: How can the IT function play a more proactive role and become a business enabler? How can technology facilitate new business models? To which areas the investment should be directed?
- For the CMO: How can I deliver a seamless customer experience across all touch points – website, mobile app, in-store interactions? How can digital technologies help me understand customers better? How can I provide better services to customers through digital?
- For the COO: How I can increase the efficiency of business processes? How can digital help make the supply chain more transparent? How can I reduce the time to market?
The answers to these questions will help set the digital vision and strategy in the next step.
Read more: How Chemistry Enhances C-Suite Communication
“Bold, tightly integrated digital strategies will be the biggest differentiator between companies that win and companies that don’t,” according to the consulting firm McKinsey. As technology is increasingly commoditised, it’s the strategy, not technology, that will determine whether your Digital Transformation is a success.
Before a digital strategy is set, it is crucial to conduct a strategic review of the industry. The review is to identify the opportunities and challenges brought by digital technology. It should be able to spot new business models that are potentially disruptive.
Most strategies will aim at improving customer experience or operational efficiency, or both. The most ambitious digital strategies will even redefine your business model by either extending the current model or completely replacing it.
Regardless of the scope of your digital strategy, don’t forget to look beyond your industry for breakthrough ideas. Disruptions can come from unexpected directions, just like how many brick-and-mortar retail chains did not see Amazon coming or ride-sharing businesses like Uber and Grab caught the taxi industry around the world by surprise.
The strategy should also be able to position your company in the new digital ecosystems in order to best utilise new opportunities and technologies, and to minimise the impact of disruptions. You need to identify the gaps between the current digital capabilities, expertise, and skills and where you want your business to be, and, more important, how to fill those gaps.
This ultimately leads to the next critical strategic decision of Build or Buy - whether the company will build their digital capabilities and expertise or bring them in from outside.
A typical example of building digital capabilities in-house is General Electric. Over the last decade, the 120-year-old corporation has invested heavily in digital projects in order to become a digital powerhouse. One prominent project is a 1 billion US$ software centre in California, where GE has hired more than 400 software engineers.
Infographic: GE vs Siemens for the Industrial Internet of Things
On the other end of the spectrum, Koch Industries paid US$2.5bn to buy a major stake in Infor, one of the world’s biggest business software vendor. The partnership is expected to help Koch Industries transform itself from a traditional manufacturing conglomerate into a technology giant similar to GE.
Building your own digital capabilities does not have to be prohibitively expensive, especially for small and midsized enterprises. Digital disruptions are levelling the playing field. Companies, regardless of their sizes, now belong to interconnected ecosystems, and can access the same on-demand, inexpensive capabilities and resources. And when your business can find its place in these ecosystems, the possibilities are endless.
For instance, if you need a lot of computing power for data analytics, you can have access to an on-demand, elastic super computer using AWS EC2 service at a tiny fraction of the cost of purchasing and maintaining the computer in-house. The service can be billed on a per-minute or even per-second basis, providing an unprecedented level of cost savings and operational flexibility.
Also, at this stage, you may want to appoint a CDO (Chief Digital Officer) and assemble dedicated digital launch teams. These teams consist of domain experts as well as digital experts. Depending on your strategy, the team will focus on incremental innovations – improving existing processes – or transformational innovations – new business models.
In many cases though, the “Buy” option is preferred, especially if your company is taking a more gradual approach to Digital Transformation, and does not want to cause a sudden disruption to your traditional business model, such as the case of G+T.
G+T, an Australian prestigious law firm, after a strategic review, concluded that significant disruptions to the legal industry are imminent. So they decided to acquire a 20 per cent stake at a start-up called LegalVision to gain access to digital automation capabilities which currently are more geared towards lower-value, higher-volume transactional activities like preparing wills, or reviewing loans. By contrast, G+T focuses on bespoke, premium legal services, and so prefers not to change their current business model right away.
By partnering with LegalVision, G+T is able to extend its service offerings to existing clients and approach new clients, especially small and medium businesses. With this strategy, G+T has effectively brought in a dedicated digital launch team and achieved 3 goals:
- The firm is now in a better position to minimise the impact of future disruption because they are working with one of the disruptors and have access to the right technology.
- The customer experience has been improved because the firm now can provide additional services in a more economical way that they would not be able to do on their own.
- The firm’s operations are also more efficient because G+T is able to share some parts of the firm’s work with LegalVision.
Discover the next 2 steps in our next post or subscribe to our Newsletters for the latest content about Digital Transformation.