What is digital transformation? It’s the emergence of new products and services made possible by digital technology. As the new prospers the old fades away.
Google’s advertising business prospers while legacy print advertising struggles. Uber and Lyft have prospered while traditional taxis services wither. Digital music streaming soars while traditional album sales sink.
According to Wikipedia, digital transformation is defined as:
The novel use of digital technology to solve traditional problems. These digital solutions enable – other than efficiency via automation – new types of innovation and creativity, rather than simply enhance and support traditional methods.
In this post, I will unpack the concept of a digital transformation framework and explain what it means for organizations looking to keep up with rapid advances in digital technology.
Digital transformation has come to represent the efforts of established organizations, be they in the private or public sector, to modernize their operations to remain relevant as digital innovation is picking up pace. Meanwhile, people around the world are connecting to the internet at an ever-increasing pace.
One could argue that the world at large has been on a digital transformation journey for decades. Since the dawn of the microprocessor, we started to represent the world digitally as 1s and 0s. However, in our current context, an important inflection point came in 2007. Broadband was emerging, consumption of online content was on the rise, and the iPhone was launched. The human-computer interface was improving, driven by a mobile-first philosophy. This all resulted in computers becoming easier to use by ordinary people. At the same time, internet services were springing up to deliver rich content and services.
Software Is Eating the World
The developments I just discussed created opportunities for innovative approaches to better serve customers, leveraging the best aspects of the digital world.
Specifically, with digital products and services you can:
- Adapt content quickly to seize market opportunities.
- Personalize user experiences to customer preferences.
- Reuse content on a global scale.
- Track customer engagement in fine detail.
In the digital world, an upstart can create a web or mobile experience on a shoestring budget. Then, in a matter of weeks, they can outdo the digital presence of a well-established company. And by taking advantage of the benefits of digital products and services mentioned above, they can shave off market share from the established incumbents.
A healthy venture capital industry partners with startups that show the most potential. They help startups establish and scale their back-end operations. As co-founder of the world’s first widely used web browser, “Software is eating the world,” Marc Andreessen expressed:
If software is indeed eating the world, then how do established organizations remain relevant?
One approach is to spot young, innovative upstarts and acquire them for a lot of money. For example, in 2016 Unilever paid one billion dollars for Dollar Shave Club, a five-year-old social media driven company that successfully gained 10 percent of the razor blade market in the US.
Another approach is for established organizations to spawn startups themselves. They shouldn’t worry if the offshoot startups end up cannibalizing the parent company’s business.
The second approach is certainly cheaper, but the first is sometimes necessary. But to be successful with either, businesses must transform into platforms for innovation and disruption. This needs to be the underlying principle of any digital transformation.
There have been many successful digital transformations you can learn from. Below, I outline five essential steps to frame a digital transformation.
1. Embrace Agile
Agile is an incremental approach to delivering products and services that emphasizes feedback, continuous improvement, and customer happiness. As an approach to building high performing and adaptable teams, Agile has proven to be a success. It began as a way to manage small individual software development teams, but is now being scaled to organizations of any size. Agile lays the foundation for the creativity and feedback loops required to discover new opportunities.
Agile is particularly useful when used in the context of fast-changing requirements.
Digital transformation leaders need to apply Agile to every process and procedure in their organizations. Anything that can change can be handled using an Agile approach.
Once you have made a commitment to embrace Agile, some practical issues need to be addressed. Foremost of these is how to adapt your technical infrastructure to accept frequent product enhancements.
Typically, organizations cope with slow and tedious approaches to deploying product changes to production. But this runs counter to Agile principles. The solution to this problem is DevOps.
DevOps helps organizations sustain fast-changing and fast-scaling digital products. It removes friction from the process of getting updates to production systems. And it applies automation to ensure services stay running with minimal downtime.
This is important because development teams need to respond rapidly to changing needs and get products to market fast.
As you can see, the adoption of Agile principles has a significant human resource requirement. As such, leverage all human capability and talent management resources at your disposal to ensure that your organization is acquiring the skills it needs to be successful while embracing Agile.
2. Be Masters of Content and Data
We are generating and consuming data in phenomenal volumes. User-generated content and data from IoT devices are flooding data networks. Legacy organizations need to make a change in data management capabilities.
Not having a good handle on content and data operations can stop a digital transformation in its tracks.
Take the time to understand, structure, and store your digital assets in a format for easy access and reuse across your enterprise. While doing this, make the best use of modern cloud technologies to cost-effectively store and secure your data.
Once you master your content and data, you will unlock a world of opportunities. You will be able to do deep analytics on your operations to pinpoint problems and opportunities. And you will know what content is most engaging and drive personalized content to your customers.
3. Get a 360° View of Customers
Understand the end-to-end journey of your customers. Do this by bringing together data from multiple sources.
A 360° view of your customers will help break down the silos in your organization and put customers at the center of your mission.
In doing so, you will uncover pain points in your customer experience once your organization is aligned on a customer-centric mission. Also, you will be able to segment your customer base and uncover underserved segments.
Finally, test different combinations of content and user experiences to understand the unique needs and preferences of customers. This will help you find opportunities to improve the experience for underserved segments.
4. Create Your Platform
To truly digitally transform, organizations must become platforms and launchpads for highly targeted and specialized products.
From a technological perspective, organizations need to create an application programming interface (API) layer that provides a gateway to the organization’s digital assets.
This API layer will become a central hub for accessing the organization’s shared digital resources.
The API layer, when combined with platform as a service (PaaS) technologies, will provide a fertile ground for spawning innovation. At the same time, any startups that the organization acquires can be grafted into this platform layer. And in some cases, it can be strategically advantageous to open up your platform to the public on a commercial basis.
5. Iterate, Innovate, and Integrate
The final step is to accelerate down the path of innovation by having shorter feedback cycles and taking more calculated risks.
The four steps above lay a foundation to make all this possible. Meanwhile, as new opportunities emerge, be open to spinning off companies, acquiring new companies or integrating third parties into your digital value chain. The important thing is to remain agile, continue to master your content and data, do deep analytics on your customers (and your customers’ customers), and maintain a platform for innovation.
In all this, seek guidance from experienced professionals who have walked the digital transformation path. In so doing, you can avoid common pitfalls. At the same time, experienced professionals can help to identify and seize opportunities that emerge along the way.
Your Digital Future Awaits
By applying the five steps outlined in this article, organizations will be able to adapt and remain relevant as digital products and services continue to transform our world.
Advances in machine learning are building even greater bridges between humans and computers, cryptocurrency is going mainstream, and very soon every corner of the earth will be connected to the internet. This will foster even more disruption.
Will your organization seize the opportunities that await?