Over the past year I have had numerous conversations with colleagues and customers discussing the meaning of Digital Transformation. Is it a strategy? Is it only relevant to startups? Does it apply to my industry? Is it a new name for enterprise improvement? Is it about enabling innovation? Is it adopting new technology? While you could answer all the above or throw in the classic consulting response of “it depends” – I have found that this exercise isn’t very meaningful. This is because these conversations don’t address the more important question. Instead of seeking to answer, “What is or isn’t Digital Transformation”, we must dig deeper to answer, “Is Digital Transformation Real?”
While this may seem like a semantic reshaping of the same question, the important distinction I am attempting to draw out is that for something to be real, it must have an impact which then requires a response. If something isn’t real, it requires no change to decisions or behaviors and everyone can just move on with getting things done.
To start, I wanted to establish a baseline perspective of how companies should function, independent of any digital side effects, based on the latest material available on management and strategy from established thought leaders such as Geoffrey A. Moore and Roger L. Martin. Across many current publications, you will find references to the importance of simultaneously sustaining value while enabling innovation. An organization must continue to drive revenue through their established value streams when investing in any new potential business model. A company also can’t successfully execute their strategy without making choices about what they will and will not invest in. Of course, this is much easier said than done. Moore outlines the importance of segregating offense from defense to properly equip your organization to perform both activities in his book “Zone to Win”. I would also recommend Martin’s “Playing to Win” if your organization struggles to make the choices necessary to define a strategy and/or a deliberate plan for success. While neglecting the ability to sustain value results in a quick death, either neglecting or diluting investments in innovation often leads to a slow death. You simply pick your poison when you can’t effectively manage a healthy balance across these areas.
With this perspective as our foundation, we can acknowledge that the rapid advancement of technology is adding another layer of complexity to this reality which is directly impacting companies that are either too slow to move or too slow to recognize the pace and type of change. Make no mistake, despite all the advancements of technology and commerce seen over the past century, we are experiencing something today that none of us have ever seen.
The first time I saw the word ‘digital’ used in the current context was in the groundbreaking book “Being Digital” by Nicholas Negroponte back in 1995. While his book was focused on the impact of technology and information on society, he established the concept of digital we are all referencing today as the intersection of people and bits. His book predates the age of smart phones, DVD players, and Google but even back then, he recognized that a rapid transformation was coming to society through the adoption of technology and the accessibility of information. It would then make sense that Digital Transformation is an extension of this impact to companies recognizing and reacting to employees, customers, partners, society, and governments ‘being digital’. How these constituents consume information, make decisions, and conduct business will continue to change and there is a growing focus within each industry to understand the complex side effects on existing business models and strategies.
So, what should companies do about this impact? The trap that many fall into is believing that this is a strategy or adopting some amount or type of technology will allow them to participate in the Digital Transformation wave. This is usually driven by a ‘me too’ strategy of following the latest trend or advice working through their industry. This is a critical set of decisions and activities to manage because companies can’t always invest in the latest and greatest technology and certainly good enough is often good enough for many situations. That said, there are clear tipping points where working harder won’t keep you competitive enough to sustain value. Technology often plays a key role in working smarter. The reality is that 15-year-old technology is ill-equipped to deal with the scale and efficiencies now available. This is a key advantage startups have when they attempt to disrupt an existing industry. However, they still must go capture the current customer and there is no reason an established company can’t get in front of the disruption with the right investments.
The key to helping your company survive and even thrive through this digital age is recognizing where you have capability gaps that are risks, where you have inefficiencies that can compromise your productivity and efficiency, and where you have advantages you aren’t utilizing. This analysis should not own, but influence, your business strategy and/or its execution depending on the status of your business, industry, and prior investments. This could result in the need for significant organizational changes, major technical initiatives, or minor process tweaks. It is typically some combination across the people-process-technology spectrum, which dispels any notion that Digital Transformation is just about technology adoption or enablement.
This is where a broad, experienced perspective across business and technology becomes paramount in making decisions about priorities and initiatives that will allow your company to maintain value with minimal disruption and maximum returns. You must have the ability to identify and prioritize the value of upgrading your ERP vs. migrating your data center vs. implementing a new e-Commerce system vs. enabling advanced analysis of your customer activity. While these decisions already occur today, you must now do so with the lens of how they impact or influence your ability to both sustain value AND enable innovation. As I stated earlier, you can’t do it all and you must understand the tradeoffs involved to make difficult choices around what is strategic to your organization. If you don’t have that level of perspective or experience within your organization, you should actively seek it out because missteps can be very costly in time and money.
The consistent impact across these scenarios is intentional change, which brings this back to the question I was attempting to answer, “Is Digital Transformation Real?” Yes, Digital Transformation is a real phenomenon that requires you to identify and prioritize the changes your company must make to sustain value and enable innovation in a world where ‘being digital’ is the new status quo. This answer is just scratching the surface on the impact to your company but this should encourage you to proceed in the right direction with confidence. Acting on these changes will be a journey and any company that ignores this reality or somehow believes they won’t be impacted simply won’t thrive or potentially even survive.