Success in digital transformation depends on embracing change
For most companies ‘Digital Transformation’ is not optional. Almost every business sector is being transformed by the application of new technologies, including Artificial Intelligence, the Internet of Things, Distributed Ledger, and Robotic Process Automation. Almost every company needs to be a technology company and failing to embrace new technologies will put it at a competitive disadvantage. However, implementing new technology alone is only a small part of Digital Transformation. Much more important are the commercial and operational changes that are necessary in order to realise the benefit of using the technologies.
As they develop their Digital Transformation plan, enterprises need to carefully consider the impact of these commercial and operational changes affected by introducing new disruptive technologies such as AI and IoT and the numerous use cases that they enable. Transforma Insights identifies seven areas within the enterprise where Digital Transformation initiatives are likely to trigger significant changes: process, systems, partners, people, culture, business model, and finance.
Inevitably, Digital Transformation creates new processes or changes existing processes. If it didn’t there wouldn’t be much point doing it. It might involve using self-optimising marketing campaigns, using machine learning for more effective employee recruitment, or automating an existing manual business process such as invoicing or record keeping. For example, Italian gift card retailer Epipoli implemented a system from software vendor SAS for individualised marketing and performance incentive programmes resulting in a 34% reduction in customer acquisition costs, 29% increase in average transaction value and 23% increase in conversion rate. At the most extreme these process changes necessitate a complete overhaul of how an organisation operates. Don’t underestimate the effort required to change processes that might be decades old.
Hand-in-hand with this process change is the implementation of new (usually software) systems. Marc Andreesen, co-founder of Netscape, famously said: “software is eating the world”. In almost every business sector, be it agriculture, manufacturing, retail, hospitality, or professional services, IT systems are, more than ever, a strategic asset and significant differentiator. These new systems need to be implemented, run and integrated with legacy systems such as enterprise resource planning (ERP) and customer relationship management (CRM). For instance, Ford Motor Company implemented a Self-Optimizing Campaigns AI system from Pegasystems allowing it to optimise how it was engaging with its sales prospects.
Adopting new technology is easy. The hard part of digital transformation is changing internal processes, business models, finance, people, partners, systems and culture
With organisations in every business sector going through this process of becoming more IT-centric, most will need to work with a wide range of partners, entrusting them with a mission-critical set of capabilities. For instance, in the marketing world, many agencies are using predictive solution such as those from Peak AI or RapidMiner to segment and target specific customer groups. Selecting and managing those partners becomes a task in itself. Look for partners with experience in your field or some closely related adjacent field. As well as using external suppliers, enterprises also need the internal resources, the people, capable of managing them. While technology suppliers, systems integrators and consultants might help with the initial implementation, there is a continuing requirement for companies to have internal resources to understand and work with the new technology, such as data scientists. Any adopting company also needs a person or department responsible for co-ordinating its technology roadmap to ensure an efficient and consistent approach throughout the organisation.
In addition to the practical requirements for changes to systems and skills, it is also very likely that an organisation’s culture will need to change, for instance to be faster to react to change, more agile to adopt new practices and more focused on data. One of the key driving forces behind a Digital Transformation is to find new business opportunities. This might necessitate adopting completely new business models, for instance shifting to a success-based charging model. Or, as would be particularly relevant to marketing/communications companies, allowing for much more granular segmentation, more highly targeted campaigns and much more immediate feedback. These capabilities are valuable in themselves, but they also permit a qualitatively different approach to charging clients. Finally, new business models often mean changing mechanisms and conventions for payments and therefore for the finances of an organisation will also likely need some consideration.
To be successful, an enterprise needs to consider the organisation in its entirety and have a change management plan
We should also add in an eighth consideration: change management. In order to take advantage of the opportunities presented by Digital Transformation, most enterprises will need to make changes in some or all of the areas listed above. This will typically take a substantial effort is hopeful. The hardest part of Digital Transformation is the internal process and organisational changes. Any company serious about rolling out IoT needs a formal change management process in place with ample C-level leadership and consideration of the areas quoted above. Also, be aware that a Digital Transformation is never done, it is a constant process of harnessing new enabling technologies and adapting business processes to take advantage of them.