The AndPlus Guide to Digital Transformation
The world of business is rife with new terminology.Among the latest in the long parade of business buzzwords is “digital transformation.
"While the origin of the term is obscure, digital transformation initiatives are increasing in companies around the world, from 100-year-old international conglomeratesto “born digital” startups that have, and presently are, transforming industries and markets.
This movement and adoption of the term may rise from the constant and increasing pressures that businesses face every day:
- Changing customer expectations for seamless, personalized, and highly agile interactions with your business
- Increased competitive pressures created by new business models, and technology applications
- The use of diverse customer interactions channels that include, voice, chat bots, augmented reality, intelligent AI driven interfaces and more
- The need to provide faster and easier solution acquisition and delivery to your customers through multiple, secure, anytime, anywhere channels
- Effective use of customer information from both internal and external sources to more effectively service and support customers
In response to these pressures, organizations are increasingly focusing their attention on digital transformation. Given this trend and the significant impact organizations can experience through digital transformation, this document will explore key aspects, important considerations, and additional resources regarding digital transformation and its business application.
Defining Digital Transformation
As traditionally understood, the notion of “digital transformation” means taking business processes (or entire business models) and reinventing them from the ground up on a foundation of digital technology—that is, technology driven by computers, networks, and data.
As a textbook definition, that’s pretty abstract, and necessarily so, because what it means for a business model or process to be “digitally transformed” has changed over the years as new technologies have left the drawing board and presented a reasonable return for the businesses who invest in them. Fifteen years ago, for instance, “mobility” wasn’t a part of any company’s digital transformation, but since that time, mobility has radically altered nearly every industry, from transportation and manufacturing to healthcare, leisure, and entertainment.
So, in the interest of putting a stake in the ground, AndPlus defines “digital transformation” as organizational change through the use of digital technologies and business models to improve business performance and deliver new levels of customer value.
Given this definition, digital transformation can take many forms. Here are just a few examples to illustrate:
- Brick-and-mortar to online storefronts: One of the most obvious applications of digital transformation is adding an online storefront to supplement (or replace) a retailer’s physical presence.
- Traditional to digital marketing campaigns: Among the oldest notions of digital transformation involves extending marketing campaigns from traditional media (print and broadcast) to websites and social media.
- Paper-based to digital processes: Business records, memos, and other documents that once existed solely on paper are now going electronic, and not just by using email in place of paper memos. Documents are routinely created, modified (with full version control and change tracking), and routed for approval with electronic signatures using online collaboration tools.
- Manual to automatic processes: Robots, artificial intelligence, and more are automating dirty, dangerous, and tedious tasks in manufacturing, security, healthcare, and other industries.
- Physical to virtual teams: The internet enables the use of low-cost communications and the previously mentioned collaboration tools for far-flung team members, who now are often scattered across time zones and international boundaries, to work as effectively as they would in the same office.
- Business intelligence: Corporate decision making is increasingly informed by leveraging the mountains of business data that is collected every day enabling measurable, data driven changes.
In addition, digital transformation spans all industries. Two relevant and well-known examples include:
Transportation - For decades, taxis were dispatched by humans. They took phone calls and radioed the requests to taxi drivers, hoping one would be available in the area. Uber and Lyft eliminated both the phone call and the uncertainty of service delivery with a system that directly matched ride requests with available drivers, relying heavily on the geolocation data provided by both riders’ and drivers’ mobile devices. The increased quality of service and reduced costs afforded by this digital transformation have changed the customer’s expectations and shaken the traditional taxi industry.
Food Services - Food delivery has also been digitally transformed. By enabling online food ordering, order accuracy has increased, and third-party delivery services such as Doordash® and Postmate™ have eliminated the need for restaurants to employ on-staff drivers. (The related costs for vehicles, insurance, and maintenance are also lowered or eliminated.). This digital transformation has been a huge win for all stakeholders.
(You can read about other impacts and examples of digital transformation here.)
Digital Transformation vs. Digital Strategy
To gain a clearer understanding of digital transformation we can compare it to digital strategy – something we are more likely to be familiar with. While these terms may appear to synonymous, they are not. Their comparison will not only help to clarify what digital transformation is, but also shed light on why some digital transformation efforts have historically fallen far short of their expected results.
- Digital strategy – Digital strategy is about supporting current products and services with technologies to make them more efficient and provide better experience to customers and users. In the end though, digital strategies get the same things done faster cheaper and better. Digital strategy attacks focused problems within the organization, often creating siloed solutions that may require connection through web services.
While digital strategies are a component within a digital transformation process, they are also usually deployed at the local level within the organization - where decisions are made by departmental or divisional teams. These decisions are also usually short- to medium-term in their decision and implementation timeframes.
- Digital transformation – In contrast, digital transformation is about much more than digital strategy. It consists of taking a clean slate perspective and reinventing the business by leveraging the latest (and sometimes entirely new) technologies, methods, tools, and talents. Digital transformation requires thinking like a “digital native” company using an entrepreneurial approach to answer questions such as, “If we were starting the business today, what would I do to differently to fundamentally disrupt the market to deliver a better customer experience.” While that thinking may not allow companies to immediately change their business, it enables the organization to identify longer-term objectives with potentially profound impacts.
Unlike digital strategy, digital transformation involves a complete top-down approach - from senior management to the hands-on employee. Unlike digital strategy, transformation is a long-term iterative process. Think of digital transformation as more of a journey than destination.
Using theses comparisons, we see that many companies use digital technology to improve business processes and capabilities. Leveraging hardware, software, algorithms, and the internet, it's 10 times cheaper and faster to engage customers, create offerings, harness partners, and operate your business. Those are good things for digital strategies to accomplish.
However, digital “natives” like Amazon and Tesla and innovative giants like Disney and Siemens have embraced a much larger digital transformation approach to business. They have created or embraced new business processes, ways to communicate, new business offerings using a holistic new approach to their business – effectively deploying digital's new rules of business.
While these comparisons help to illustrate what digital transformation is, the definition is open for some discussion, even among the “expert” technology analyst groups such as IDC, Forrester, and Gartner. Despite their subtle differences, one thing that even the experts can agree on is that digital transformation can have profound and positive impacts on businesses and even entire industries.
Why Digital Transformation Is So Important
One of the biggest mistakes a business can make is to assume today’s success will be there tomorrow. A company can thrive for generations, relying on a tried-and-true formula for success but it’s easy to fall into the trap of believing that what has always worked in the past will always continue to work in the future. Unfortunately, nothing can be farther from the truth.
In fact, the rate of change and business evolution is illustrated in a quote from John Marchante, Global Chief Information Officer for Vanguard Investment Management company, “Just look at the S&P 500. In 1958, U.S. corporations remained on that index for an average of 61 years, according to the American Enterprise Foundation. By 2011, it was 18 years. Today, companies are being replaced on the S&P approximately every two weeks. Technology has driven this shift, and companies that want to succeed must understand how to merge technology with strategy.”
All it takes is one disruptive technology, one upstart company that comes out of nowhere with a better, faster, cheaper, more convenient way to deliver the same products and services, to completely upend an established company’s entire business model.
So why do businesses want to undertake digital transformations? The answer is different for each business, but the most common motivations fall into several categories:
- Cost savings: Done correctly, process automation can reduce labor, material, and overhead costs. Other digital transformations, such as virtual teams, can reduce travel and facilities costs. In any case, cost savings is a significant motivation in nearly every transformation process.
- Increasing productivity and efficiency: Transforming processes to the digital realm can increase the efficiency, accuracy, and productivity of those processes. For example, digitizing paper processes can increase their effectiveness by reducing the time wasted by printing, transporting, losing, searching for, and retrieving (or recreating) paper documents. Digital document repositories can also eliminate the confusion and waste of having multiple versions of the same document existing in multiple places within the enterprise.
- Responding to changing customer demands: Increasingly, connected and mobile customers (in both B2B and B2C contexts) are driving many transformations in the way businesses engage, communicate with, and serve these customers.
- Speed and Agility: In today’s rapidly changing business environment, fast is almost always first: first to identify and serve new markets, first to market with a new products or services, first to respond to changing market dynamics. As a result, digital transformation addresses the speed and responsiveness of business.
- Responding to changing competitive landscapes: If your competitors are undergoing digital transformations, you may need to do so as well or get left behind by their more efficient, connected, automated, data-driven processes.
- Survival: While every organization has a unique combination of motivations for adopting a digital transformation mindset, the most compelling motivation comes down to one word: survival. More and more, business who do not anticipate and embrace digital transformation take up permanent residence in the “digital graveyard.”
Measuring Digital Transformation's ROI
The concept of digital transformation and has certainly gained momentum as evidenced by the IDC Worldwide Semiannual Digital Transformation Spending Guide forecast that estimates worldwide technology and services spend that enables digital transformation will reach $1.97 trillion in 2022. IDC predicts that digital transformation spending will grow steadily, achieving a five-year compound annual growth rate of 16.7 percent between 2017 and 2022.
As with any investment, the question of measuring ROI and quantifying success is a requirement, but in the case of digital transformation, that quantification may be more difficult than first expected.
Regardless of digital transformation’s ROI measurement challenges, it is important to establish the metrics of success. These should not only include traditional financial and business metrics but also should include the measurement of business outcomes including:
- Operational impacts such as process efficiencies, employee productivity, and process scalability
- Strategic impacts that might include client satisfaction and retention and competitive agility
- Innovation that delivers new value to clients and users alike
Because digital transformation crosses multiple organizational boundaries and its timeframe extends beyond short-term digital projects, traditional business value calculations may be less effective than expected and a longer-term portfolio view is likely to be more realistic approach to establishing value. However, the success of multiple shorter-term digital projects that comprise the portfolio of digital transformation can be measured as indicators of the longer-term digital transformation process.
Digital Transformation Is About More Than Just Technology
Achieving meaningful success in the digital transformation journey is dependent on more than just tools, technology, and infrastructure. Digital transformation is a process that challenges every employee to think differently about their job, their relationship with their “customer”, and the processes and tools they use.
“Culture” is how people and groups within the organization think about themselves and each other. For a digital transformation initiative to succeed, an organization needs a conducive culture, with multiple characteristics:
- One team – A culture rife with territorialism and pettiness for personal gain is poisonous to any type of business transformation. Everyone needs to be moving in the same direction toward the same goals because the business will not succeed unless everyone succeeds.
- No fear – A successful digital transformation depends on a culture in which everyone, from top to bottom, can speak without fear of being ridiculed. At the same time, employees need to understand that not every idea is a good one, and that some ideas, not individuals, will be rejected. Nothing personal.
- Visionary leadership – An organization that already has the cultural elements needed for successful digital transformation is way ahead of the game. Organizational cultures are notoriously difficult to change; it takes a long time for visionary, courageous leadership to pull it off. Sometimes it means getting rid of “toxic” team members or reorganizing. As a result, organizational leadership professionals must often make hard choices to ensure objective become reality.
- Willingness to change – Organizations with a vested interest in maintaining the status quo and protecting “turf” are going to have a tough time implementing business processes with value-enhancing digital improvements. Organizations must be willing to look critically and fearlessly at existing organizational structures, processes, and interactions among teams.
“Organizational qualities” relates to how the company, as a whole, studies a problem and reaches a solution.
With the optimal culture in place, organizational qualities that are essential to the success of a digital transformation can be fostered. Two of the most important organizational qualities for a successful digital transformation are creative-thinking and design-thinking.
Tools and Technologies
Digital transformation, by definition, involves the application of digital technologies to enable business transformation. Therefore, tools and technologies are important to the success of a digital transformation initiative, and should have certain critical characteristics:
- Quality – Quality doesn’t mean the absence of bugs. Sometimes a bug-free solution is never used because it fails to appropriately address the needs of the business. A solution’s quality is also measured by how reliable it is, how usable it is, how well it satisfies business requirements, and yes…how many bugs it has. With the right design thinking, and the right development and testing processes, quality can, and must, be built into the solution.
- Scalability – One goal of every business is to grow; to increase revenues, increase customers, and increase product and service offerings. Any digital solution must be designed with future growth in mind. Its capabilities and capacities to scale must be anticipated and constructed to grow with the company.
- Security – In a digital solution to any business problem, security must be considered every step of the way. Having a security mindset when designing the system will reduce vulnerabilities and operational risks, and make the system more robust.
- Supportability – A digital solution is not an end-state. It will constantly evolve as business needs change and grow. The solution must be designed so developers 2-10 years later can easily modify the system without breaking it.
In addition, digital infrastructure can be highly important to digital transformation’s results. Does the organization have the computing resources on-site to implement a digital solution? If the design involves offloading the computational heavy-lifting to cloud-based services, is there sufficient network bandwidth to support the communication with the cloud services across the internet? Would it be advantageous to implement edge computing resources to reduce bandwidth requirements? Answers to these questions, among many others, are important to making digital transformation a success. It’s not just about the software.
Don’t Forget the People
While the opportunities for success are great, the challenges of successful digital transformation extend beyond just technology. An effective approach to digital transformation must start with the mindset of every employee and include the need to optimize their productivity. Peter Drucker addressed this fact when he said: “The most important, and indeed the truly unique, contribution of management in the 20th century was the fifty-fold increase in the productivity of the manual worker in manufacturing. The most important contribution management needs to make in the 21st century is similarly to increase the productivity of knowledge work and knowledge workers.”
To meet this challenge, we also need to address how digital transformation enables teams to work together throughout the enterprise using new technologies, processes and tools. Only then can we expect to receive a return on our digital transformation investments and enable our employees to focus on what we actually hired them to do: dream, create, and innovate.
AndPlus And Digital Transformation
Increasingly, companies realize that their existing business models and processes are holding them back and causing them to fall behind in the competitive race. For these companies, digital transformation offers the possibility of creating top-down, organizational change that leverages digital technologies and business models to improve business performance and deliver new levels of customer value.
At AndPlus, that’s what we do. We’re a digital product development agency that applies technologies to create or improve experiences, processes, and products.
For more than a decade, our teams of builders, innovators, engineers, and designers have delivered business transforming digital products that work the boundaries of mobile, web, IoT, firmware, and advanced technologies including data warehousing, machine learning, AI, and big data.
Driven by a passion for excellence, AndPlus creates digital transformation strategies and reliable digital products that also deliver exceptional user experiences. Our deep expertise and custom Agile process enable AndPlus to iterate quickly, provide transparency, and deliver on time and on budget — helping our partners get to market faster with less risk.
Put simply, we’re here to guide and assist your organization in its digital transformation journey by delivering the best strategies, expertise, processes, and technology.
Give us a call and let’s get started.