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Why Transformation?

For the last 10 years, we all have been hearing a lot about digital transformation, but in reality, the transformation was enforced upon us by COVID-19. Here we are in 2022 and we expect the pandemic to be over this year. But one thing is for sure, in these last 2 years, we accepted the disruption, transformed ourselves, and then adapted to the changing environment.

Almost every organization, irrespective of its size, revenue, business model, and geographical location realized the importance of transforming its business in this digital age.

There are still many organizations and the leadership team who does not recognize that their business model has been disrupted, their product & services are outdated, and their customer is expecting a better engagement + experience.

Most organizations are adopting digital transformation to modernize business operations and increase operational efficiencies. If we look at these transformational metrics these are simply the result of the myopic view of leadership. Additionally, with these myopic views, the organization will always play the catch-up game.

According to the Altimeter – State of Digital Transformation Report  2021, [1]39% of high-performing organizations measure their digital transformation success in terms of business growth, while average performers focus on achieving operational efficiencies. This means that organizations that are in the matured stage of digital transformation focus on forward-thinking measures like growth, product innovations, and customer experience as the key objectives.

I have rarely heard any business leader saying that their business model is not relevant to the customer anymore. Even with decreasing revenue numbers, failing customer satisfaction scores, and low business volume, we hardly see the acknowledgment of the business disruption. Most would rather look at their existing competitors and compare the failing revenue numbers against their peers.

In early 2009-2010, most leading banks did not fear any disruption from FinTech. Most financial institutions in early 2010 had said that the product/service offered by the FinTech startup was different from their line of business and thus do not consider them as competitions. Fast forward now, according to the PwC Insight on FinTech report, 80%[2] of financial institutions believe their business is at risk to innovators.

As per the Altimeter State of Digital Transformation Report 2021[3], most organizations focus on modernizing IT infrastructure (48%) and operational process efficiency (35%) as the primary objective.  But digitally leading organizations would invest their digital transformation journey in optimizing the digital channels, building a new business model, enhancing customer experience, and utilizing data for decision making.

Thus, it is not right to adopt digital transformation just to modernize the infrastructure or increase operational efficiencies. Instead, it should be an effort by the leadership with a forward-thinking mindset of growth, innovation, and better customer experience. Focusing on these parameters will help the organization to be relevant to its customers. Additionally, this forwarding thinking mindset will enable the CEO to lead the transformation effort and get buy-in from all the departments

Key Drivers of Digital Transformation

Based on the various analysis, studies, and my experience in executing transformation initiatives, here are the 7 key drivers of digital transformation:

New Business Model Building new products, services, or delivery channels that are in line with the digital trends is one of the primary drivers of every organization. Additionally,  this strategy is also key to cannibalizing the existing products and service offerings.

Some of the examples of the new business model are:

·       IoT based products

·       eCommerce Delivery Channel

·       Subscription Business Model
Enhance Customer Experience Most customers and employees engage with friends on social media, purchase via an eCommerce platform,  watch videos and movies on various devices, and perform banking on mobile. Naturally, they subconsciously expect a similar experience with the product, service, and platform they use in the office. Enhancing the customer experience of the customer and employee continues to be the key priority for every organization as it will directly impact their productivity.

·       Personalized user experience

·       Customer support – self-service platform

·       Omnichannel Experience

·       User Customer Journey mapping

·       Real-time information update
Modernizing IT Infrastructure Most organizations still carry the technical debt of legacy IT infrastructure, outdated technology applications, and systems reaching end-of-life. Over the years, this infrastructure setup and applications have become a core part of business operations but are considered a hindrance for scalability, support, interoperability, and growth. Upgrading these legacy systems to advanced technology will continue to be one of the primary drivers of digital transformation.

·       Cloud Computing

·       Software-as-a-Service

·       Cloud-native application development

·       Responsive Web and Mobile applications

·       Business Intelligence (BI) for analytical reporting
Operational Efficiency Every department within the organization develops its customary business process for internal and external interaction. Over the period these business operations generally have manual interaction, bureaucratic approval processes, and are prone to manual errors. Digitization of the business process via new applications, automated systems, batch operations, integration of applications/systems, API services, etc helps in increasing the overall operations of the organization.

·       Automation using Robotic Process Automation (RPA)

·       Eliminating manual business process for approval and review

·       Developing analytic platform for data-driven business decision

·       Digitally transforming operation of customer service, customer onboarding, finance, logistics, inventory, etc.
Upgrade Employee Skillset Many organizations have employees working on the same job profile for decades and more. These employees lack the knowledge and expertise related to a new system, technology, and digital ecosystem.  Thus, any organization that is embarking on the journey of digital transformation would need to upgrade the skillsets of the existing employees via training, seminars, certification, etc. Additionally, they would also need to hire new and young talent to fill the gap.

Upgrading the skillset of the existing employees and hiring skillset resources to build the digital workflow will be part of the digital transformation initiatives.
External Partners Collaboration The digital business model requires strong integration with your business partners, vendors, suppliers, marketing, and delivery channels.

Most technology leaders like Amazon, Facebook, Uber, Netflix, etc has deployed an API platform that allows their external developers, 3rd party vendors, customer, and other entities to easily integrate with them.  But many companies are still not comfortable exchanging data with an external party. To build a new business model, an organization can collaborate with its external business partners to provide better products/services and build new delivery channels.
Data Driving Decision A bi-product of all the digital systems is the data. This data not only stores information but also has the potential to depict the trial of business operations, historical reporting, perform what-if analysis, and predict the outcome. Digital-oriented business leadership leverages this data for better decision-making.  Data-driven decision-making will continue to be the key initiative of Digital Transformation.

Conclusion:

When we talk of adopting Digital Transformation, most organizations focus on IT modernization and operational efficiencies. Organizations that focus on these objectives have a myopic view on the transformation. Instead, both these parameters should be part of the organization's culture and not part of the digital transformation initiative.

According to the Visual Capital article on How Digital Transformation is shaping Industry’s Future, more than 40%[4] of the organizations consider the following key drivers are digital transformation :

  • New Market Growth opportunities
  • Evolving customer behavior + preference
  • Increase competitive pressure

If one observes these key drivers, it represents a more forward-thinking mindset of growth, innovation, and better customer experience. In turn, it would help the organization to remain relevant to its customers.

Do you agree?

[1] The 2021 State of Digital Transformation | Altimeter (prophet.com)

[2] FinTech Report: PwC

[3] The 2021 State of Digital Transformation | Altimeter (prophet.com)

[4] Connected Workers: Digital Transformation and the Future of Industry (visualcapitalist.com)