Is your Business Ready for Digital Transformation?

Is your Business Ready for Digital Transformation?

Businesses often misinterpret Digital Transformation as Digitalization.

Customer Experience | BPM (Business Process Management) | Data Governance | Employee Alignment | Change Management | Adoption Speed | RPA vs AI vs ML | Cloud Computing

Technology interventions are becoming increasingly important in almost all businesses. Till 2019 businesses were mostly in the planning stages of technology integration, and they might have taken a few more years to implement. But Covid has only fast-tracked this transition journey. Remote working models, digital processes, changed customer expectations and digital experiences, are fundamental shifts that are going to stay and only penetrate further reaches.

These shifts can no more be addressed by isolated technology interventions. Rather, there is a need for an orchestrated and well-coordinated approach in integrating new-age technologies like – AI, ML, RPA (Robotic Process Automation), intelligent Automation, Blockchain - across business processes, across products/services, across departments, and across geographies.

CXOs today understand the need for this Digital Transformation. The challenge is in envisaging this Digital Transformation holistically from the organization's perspective – i.e. identifying WHAT / WHY / WHERE / WHEN is it needed, and HOW to go about the digital deployments.

So, before getting into further details, we first need to understand what Digital Transformation is.

What is Digital Transformation?

This is an organization-level transformation that integrates technology through all aspects of the business including – the business strategy, the business model, its processes, its employees, and governance. All these aspects need to be in sync to orchestrate strategic digital transformation. The transformation journey cannot be limited to specific aspects or specific products / processes / departments. The equation provided in the graph below captures all elements for Digital Transformation.

Digital Transformation is effectively a culture shift in the organization, as it results in fundamental changes in the organization, reorienting its strategy, its business processes, and its way of working both internally (with its employees) and externally (with its customers and with its external partners).

The Objective of Digital Transformation

The primary objective is to add value to customers and stay competitive in this fast-changing market that experiences frequent disruptions.

Critical factors that drive organizations to go for Digital Transformation are –

• Customer Experience – the central idea is to cater to ever-increasing customer expectations.
• Productivity Optimisation – by ensuring successful implementation of processes and proper training to the employees as the organization journeys through Change Management.
• Cost Efficiency – through improved resource management.
• Operational Efficiency & Agility – through technological innovations and processes.
• Competitive Edge – by adding more value to customers, by reducing costs, by increasing scale.
• Rich Customer Data and Insights – courtesy predictive analytics, sentiment analytics, and real-time analytics.
• New Revenue Streams – by leveraging opportunities in related business fields that become possible as the organization becomes more flexible.

How does it differ from Digitalization?

Digital technology interventions, small or big, attempt to reduce cost and increase productivity. However, these are mostly limited to specific departments, processes, or products. Function heads use it for the benefit of their department. And it may not impact other departments. For Example – Sales process automation enables an organization to reduce the cost of Sales by optimizing their time spent on sales administration and reporting. However, this activity involves the Sales vertical only and may not impact Customer Service or Production. It does not change the way the organization works as a whole. These interventions are called Digitalization and not Digital Transformation.

Such Digitalization alone cannot transform a business. To transform, we need organization-wide changes in - culture, strategy, mindset, processes, way of working, innovation, and much more. Let's refer to the table below to understand the difference –

Examples of How Companies Create Value through Transformation

While the central idea is adding value for the customers, the business restructuring process also aims at value creation for the organization. And this value creation comes mostly from external partners than internal employees. Partner product management, partner relationship management, partner data management. And the governance of all of these becomes critical.

Tata Sky is in the process of transforming from a DTH company to a content-distribution company. Along with the change in business strategy, services, processes, they are also re-branding. Their brand will now be 'Tata Play'. The DTH Company will now go beyond DTH to include fiber-to-home Broadband and Binge, which has 14 OTT services.

Domino's pizza transformed its organization into a tech-first restaurant when it enabled its customers to track their pizza way back in 2008. The customer experience was a differentiator. The new business strategy was then further extended to work on wearable devices.

External Partners create value for an organization, but McDonald's went one step further by buying a tech startup – Dynamic Yield – to ensure real-time personalization in the drive-thrus. They also acquired another startup – Apprente – to integrate voice recognition.

Top Trends in Shaping Digital Transformation

1. Pandemic-induced WFH (remote working culture) has resulted in CONNECTED EXPERIENCES and HYBRID WORK MODELS in organizations. These are location-flexible models. They provide employees choices between different combinations of on-site (WFO) and off-site (WFH) work options. Such models help in – increasing productivity, getting access to human resources across the globe, reducing real estate costs. The models ensure performance mapping, make data accessible across departments, manage CRM.
2. The role of BUSINESS TECHNOLOGISTS has now started featuring in job descriptions. This role will continue evolving as digital imperatives grow in importance. Business Technologists are essentially tech specialists, but they feature in non-IT departments. For example – web developers are tech specialists in Marketing; data scientists are tech specialists in Finance.
3. In today's times of disruption, businesses need to be prepared for multiple opportunities in the future instead of the previous practice of one type of future. Today's businesses would need resilience, agility, flexibility. Hence, the need of the hour is COMPOSABLE BUSINESSES. That is, creating an organization with systems and components that can be assembled in various combinations as interchangeable building blocks. Composability in business context implies architecting businesses to enable real-time adaptability.
4. DISTRIBUTED CLOUD TECHNOLOGY helps to collaborate, communicate across geographies through Multiple Clouds. Besides Cloud computing benefits, it also provides location-dependent used cases. Thus, customers can store data in specific locations enabling specific performance targets for latency or throughput. The other advantages are – performance, governance, regulatory, scalability, flexibility, increased uptime. The distributed clouds are centrally managed by a single control plane that manages all inconsistencies and differences.
5. There is a need to automate the legacy business processes. Organizations are opting for HYPERAUTOMATION where automation goes beyond the confines of individual processes. It is an orchestrated use of multiple technologies like – AI, ML, RPA, BPM, Low-code to no-code, and many more. It even goes into the realms of automating the automation thus making the evolution of processes more dynamic.

Several other trends in the Digital Transformation journey are – data privacy, Blockchain technology, Security-by-default, hybrid and distributed ecosystems

Challenges & Barriers to Digital Transformation

As in any Change Management exercise, the transformation process has several challenges. As it questions the status quo and re-orients the entire organization, it faces - technology barriers, organizational/structural barriers, people-centric issues. Critical challenges are -

1. Incomplete buy-in of Employees
2. Lack of Resources – IT / Finance / Human / Budgetary
3. Absence of a Change Management Strategy
4. Organization Silos and Siloed Implementation of Technologies
5. Continuous Evolution of Consumer need
6. Security Concerns

A McKinsey survey report in 2018 states that more than 50% of Digital Transformation efforts fizzled.

However, in the post-Covid times, Digital Transformation has gained more acceptance and it is now a necessity for survival, for staying competitive, and for meeting customer expectations.