Digital transformation has changed the underlying economics of markets and also how we all go about our day. Businessmen are acknowledging this and are adapting accordingly quickly. It is again a revision of the concept of demand and supply. A huge chunk of buying and selling, customer service, and education is being done online. Although the fear of digital disruption is an impending danger, most executives are adapting to changing trends to avoid missing out on new technologies.
Every bout of technology change comes with pros and cons. On the one hand, new technologies threaten already established businesses, they also bring a plethora of new unprecedented opportunities. Real winners are those who modify themselves to adapt to the new ways. Some executives cite the risk of disruption as the impetus for transformation; that risk is certainly real. But the matter of fact is that more businessmen are varied about missing out on opportunities to make big, rather than being forced into oblivion. It is not a digital disruption that impels companies to change, it is digital “FOMO” (Fear Of Missing Out).
Having said that, still, most corporations do not comprehend the vastness of digital transformation. First of all, digital transformation is not a standalone vertical. Broadly classified, there are four types of digital transformation:
- Business Process
- Business Model
It is very common among corporations to be focused solely on the process or organizational transformation. Owing to this approach they are not able to scoop up the benefits of digitalization entirely. Again, it has to be a team effort for the complete digital transformation of the business. Everyone should be on board with its execution mainly being chaperoned by the CEO, with the Chief Information Officer (CIO) or Chief Digital Officer (CDO) and Strategy and Business Unit Executive leading the way. It is vastly erroneous of many corporations to believe that digital transformation must begin with cultural/organizational transformation. But it has proved to have a greater success rate if corporations first pursue business transformation initiatives. This can then be followed by teaching the organization to be more innovative, agile, and digital.
Continue to read up to know all about the four types of transformations in more detail and get the most out of it:
Process Transformation: Corporates are focusing significantly on business processes for revamping using data analytics, APIs, machine learning, and other technologies. Digitalization provides valuable new ways for lowering production and maintenance costs, reducing cycle times, better-integrating core systems, or increasing quality. British Airways relied on process transformation to drive more customers by shifting their booking process to a digital base. They were able to beat even the competitors offering lower airfare by providing ease-of-use. Everyone is aware of the hugely successful process transformation in customer experience by Domino’s Pizza. They completely re-imagined the food ordering process; allowing customers to order from any device, live tracking, and even voice command. This innovation increased customer convenience so much that it pushed them way ahead of the competition. Although they are led to success by a CIO or CDO as these transformations tend to be focused efforts around specific areas of the business, required adjustments are to be made in every department for a seamless transition.
Business Model Transformation: Traditional business models are making way to new unprecedented business methods through digital transformation. Business model transformations are aimed at the fundamental building blocks of finding a new purpose in the industry. We are well aware of groundbreaking business ideas like Netflix’s reinvention of video distribution, Apple’s reinvention of music delivery (I-Tunes), to Uber’s reinvention of the taxi industry. This kind of transformation is occurring all around. China’s AIA Group has moved beyond insurance to become a wellness company, whereas Dutch electronics giant Philips has largely divested its legacy lighting business to focus on healthcare technology. They have been hugely successful.
Strategy and/or Business Units play an important role in business model transformation. Such opportunities are quite complex and require out of the box strategies. By changing the fundamental building blocks of value, corporations that achieve business model transformation open significant new opportunities for growth. More and more companies are investing to pursue this path.
Domain Transformation: Stating in simple terms, domain transformation is inventing a new field of business that has never existed before. It may seem like an impossible task as generally, one can find retailers in every imaginable domain. But new technologies are redefining products and services, blurring industry boundaries, and creating entirely new sets of non-traditional competitors. These new technologies have unlocked wholly new businesses for their companies beyond currently served markets.
The best example of domain transformation is demonstrated by the online retailer, Amazon. Amazon used its existing resources to launch Amazon Web Services (AWS), now the largest cloud computing/infrastructure service. What Amazon really did was tap into its strong digital capabilities like built-in storage, computing databases to support its core retail business coupled with its robust base of thousands of relationships with young, growing companies that progressively demanded computing services to grow. Once again, AWS is not just a business extension for Amazon, but a completely distinct business in a fundamentally new market space. It has met with so much success that AWS alone now contributes to nearly 60% of Amazon’s annual profit.
An executive of a non-tech business may view this story skeptically as these tech giants have more ability to acquire and leverage technology than other companies. But truth be told, it is as easy for any other company too to access and acquire the new technologies demanded to unhinge new growth; that too quite cheaply and efficiently. Technology gaps are no longer a barrier. All you need is a vision. We see marvelous innovations taking place in the growing startup ecosystem. Companies that understand the need of the hour and can smartly leverage this innovation efficiently, showing faith in new sources, are making the most of new bounds.
Entering domain transformation involves re-defining business boundaries. The strategy department and CEO mainly are the brains behind pursuing these opportunities.
Cultural/Organizational Transformation: To have a complete and long-term digital transformation, it is essential to redefine organizational mindsets, processes, and sourcing new talent & upgrading capabilities for the digital world. All the top-drawer corporations have recognized the important parameters to bring out this change; they include agile workflows, a bias toward testing and learning, decentralized decision-making, and a greater reliance on business ecosystems. Home Depot invested a significant amount to digitally update its infrastructure and this decision led to significant revenue increases. Similarly, a century-old postage equipment company, Pitney Bowes, embraced the technological transition. Led by its CIO, the company promoted a “culture of innovation,” and shifted company values to focus on customer-centricity.
All these companies focused initially on building digital mindsets and agility into the organization, backed by concrete initiatives to drive innovation and growth. Both Home Depot and Pitney Bowes began their transformation with a primary focus on enhancing customer-facing offerings and matching pace with the fast-changing technologies. It in exchange guided the teams to adopt digital workflow practices but in doing so demonstrated the power of digital to change old organizational norms. Pitney Bowes CEO Mark Lautenbach shared with Fortune that, “As you’re thinking about transforming a company… try to realize those cores, those gems that you have that you can pivot off of to create that next chapter”. Progress on business initiatives dragged organizational change like agile development and innovation along. Cultural/organizational change plays a huge hand in the long-term requirement of success, but it is merely a product of, rather than a prerequisite for, business transformation initiatives.
To reiterate, advancements in technology will continue to force industries to change. Corporations that understand and pursue digital transformation in a multi-dimensional way will find greater success than those that don’t.
We are here to help you embrace digital transformation for your business.