So What Does “Digital Transformation” Really Mean?
Digital Transformation appears to have morphed into a bit of a beast. A “catch all” banner for marketing IT related products and services. If you type “Digital Transformation” into your favorite search engine, you will see what I mean.
Its definition includes:
- Strategic Consulting
- Software as a Service implementation
- Data Center Virtualization
- Business Process Automation and the elimination of paper
- Agile and DevOps transformation and coaching
- Big Data and Analytics
- Updating Websites and Mobile Apps
- Talking new technologies and envisioning newer ones
I am not surprised that people are confused. It is now clear that the term has been molded to fit all types of offerings. This has created a huge amount of complexity around what was a relatively simple concept.
It has become this huge bucket for anything that involves “Business and IT”. I have no interest in making things more complicated than they really are, so let’s get back to basics and a simple definition.
Let’s start by breaking down the three words we see all the time when we talk about this area – Digital, Strategy, and Transformation. As these words are not very well defined to start with, this causes in a lot of the confusion.
Digital is really about communication between electronic devices. The reason it is called Digital is because the devices talk to each other using binary code, and binary means ones and zeros. And that’s what Digital is of course. So Digital is another way of talking about Information and Communications Technology, phones, computers, printers, tablets….you get the picture.
Strategy can mean anything from a plan of action to a mission statement to a set of actions to a set of objectives, depending on who you are talking to. It means different things to different people, but need it be that complicated?
After reading Good Strategy, Bad Strategy by Richard Rumelt, I tend to stick to the following definition:
Strategy is basically the accumulation of three things:
1) Taking a stance, a market-view,
2) Backing up it up with some objectives
3) Taking action.
And you need all three, otherwise it’s not a strategy.
Transformation is not just a change, it exists on a much bigger scale. It is a much more profound and radical process, which orients an organization in a new direction and takes it to an entirely different level of effectiveness. It is a complete makeover where the end result bears no resemblance to the starting point. It will touch all parts of your organization encompassing a business model shift and changes to people, process, and the technology.
Defining Digital Transformation
OK. So now we have unpacked the 3 terms, let’s put them back together again.
I have always started my change initiatives by agreeing a shared vision with my stakeholders, in words that they can understand.
My layman’s definition is as follows:
“Using the latest technology to create differentiating ways of doing business with the aim of driving growth in new and existing markets”
I think Brian Solis’s definition is also very good:
“The realignment of, or new investment in, technology, business models, and processes to drive new value for customers and employees and more effectively compete in an ever-changing digital economy.”
Sounds simple enough. It’s about updating the business models. This of course, is a CEO-level responsibility.
So where is the confusion?
It is all about perspective. Not all Digital Transformation initiatives are run by the CEO, although they should be. Execution requires organization-level behavioral changes, like eliminating silos, creating data-driven decision making, and fostering greater agility, flatter management, and a work culture based on ownership and accountability.
I tend to put them into 5 big buckets for ease of understanding:
Version 1 – Customer Experience (CX) led Digital Transformation (CMO perspective)
CX-led digital transformation is about “digitalizing the shop window” and how companies reach customers.
Due to the ubiquity of mobile devices, customers are shifting preferences from physical (retail stores) to digital channels. This is leading to a lot of work on websites, mobile applications, social media and the intersection between Customer Relationship Management Systems, Content Management Systems, Digital Asset Management Systems and the proliferation of MarTech tools (Marketing Technologies).
It is also leading to opportunities to leverage data to find new customers and retain existing ones. This has led to initiatives such as Big Data, Analytics, AI, Machine Learning and building APIs to enable customers and partners to access data easily.
Version 2 – Operational Digital Transformation (COO/CIO perspective)
This level of transformation is about using technological advancements to drive operational efficiency. Using the latest technologies to break down departmental siloes, enabling cross-functional, process based ways of working, and promoting better communications and a stronger culture using the latest tools.
Technologies that fall under this umbrella include Agile, DevOps, Collaborative platforms like SharePoint, Business Process Management Suites, Service Management Suites.
Version 3 – Cost-centric Digital Transformation (CFO perspective)
Some organizations see Digital Transformation as a vehicle for stripping out cost and reducing overheads such as buildings, headcount and on-premise IT equipment, hardware and software.
In this realm, you will hear about ideas such as the virtualization of data centers, cloud computing, remote working tools and methods, Software as a Service (SaaS), Platform as a Service (PaaS) and Infrastructure as a Service (IaaS), and even Artificial Intelligence.
Version 4: Concluding
– Business Model Digital Transformation (CEO perspective)
This is what I would call the REAL DEAL. This is my understanding of Digital Transformation. This version is a profound business model shift which permeates every living cell of the company, resulting in changes to structure, capabilities, policies, processes, people and technologies.
This approach encompasses versions 1, 2, and 3, but uses a creative element to blend them all together into a coherent vision and business strategy, which allows the company to take market share from competitors, enter new markets and open up a range of new possibilities, providing a firm foundation for differentiation and growth.
Most importantly, this is driven by the CEO with the backing of the board.
Version 5 – Digital Transformation as a World View (Everyone)
There is also what I call the macro view of Digital Transformation as opposed to the micro (the firm view). When looked at from the lens of the average person, Digital Transformation refers to the change associated with the application of digital technologies in all aspects of human society.
In this sense, it is about much more than just business, it is about change and how technology will change habits, behavior, simplifying lives. It transcends all boundaries, political, economic, social, technological, theological, psychological, legal, environment to name a few. Its affect will be profound for the coming futuristic generations.
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Disclaimer: Any views and/or opinions expressed in this post by individual authors or contributors are their personal views and/or opinions and do not necessarily reflect the views and/or opinions of Huawei Technologies.