It is an undeniable fact that digital transformation carries with it many positive outcomes. Simply digitizing a process can cut down on costs in ways that were previously thought unimaginable. Better software and connectivity save time to say the least. And when employees are not spending their time being frustrated on working with unsupportive tech, they can focus more on the real tasks at hand, such as generating new product ideas or deriving ways for revenue growth and profit maximization. People’s output at work increases and so does their efficiency as an employee. In other words, digital transformation is a way to sharpen the saw. And it could not have come sooner.
Resisting digital transformation today is akin to going around in circles when the solution stands right in front of you.
To someone not yet familiar with it, digital transformation is a phrase which has been constantly circulating around in the market; especially, ever since the pandemic surfaced in 2019 and all operations began moving online. Suddenly, it seemed as though businesses were left with no other option. But while it may have seemed like there was no other way at the time, in actuality, digital transformation is more than just a business continuity plan which is to be invoked only in times of emergency. Instead, it is the key to ensuring that your business thrives in the year 2021 and all years henceforth.
According to Gartner, a global research and advisory firm, by the year 2025, more than 55% of large organizations are expected to move onto a cloud-only strategy. A pattern can thus be observed in the way business is being carried out in today’s world. Needless to point out, the alarm bells have also started to go off for those who continually resist the process of digital transformation.
The meaning of Digital Transformation
But what exactly does a fancy term like ‘digital transformation’ even mean? To put it in the words of George Westerman, a principal research scientist at MIT and the author of Leading Digital: Turning Technology Into Business Transformation, “Digital transformation marks a radical rethinking of how an organization uses technology, people and processes to fundamentally change business performance” In other words, it is the necessary disruption that businesses must undergo if they want to aim for longevity- and we’re not talking about planning for the next thirty or forty years. If left undigitized, businesses run the risk of potentially losing their market significantly within just the next five years or so. Take what happened with Amazon and local suppliers for instance. A lot of vendors began facing serious struggles as the market giant came in and began wiping them out. Amazon’s competitors were forced into a vigorous innovation race just to keep pace and maintain at least a little bit of their own portion in the economic pie.
As a result of these unprecedented shifts in market power, it is now being suggested more and more that for businesses which aim to grow- or even keep their place, a constant critical analysis of the company and all its processes is vital. Taking preemptive measures is not even an option anymore; though to the unsuccessful business, it may seem like one. One of these preemptive measures thus, is knowing how to disrupt yourself, before others disrupt you. But how does a business disrupt itself? The answer? You guessed it, digital transformation.
The Four Types of Digital Transformation
But while this is definitely a sure way for any business to reinvigorate itself, going into it blindly often leads to failure like the ones experienced by Forde and P&G; leaving a damaging effect on the business rather than causing a successful disruption. It is for this reason that it helps to keep in mind the four segments over which this otherwise bulky process can be divided into for better management.
- Business Model Transformation
- A transformation of Business Processes
- Organizational Change
- Domain Transformation
Business Model Transformation
Before going into the detailed aspect of things, take a moment and consider the overall model your business is currently running on. Ask yourself, what parts of it have become so traditional that they are now in desperate need of innovation?
Companies such as Uber and Airbnb are examples where a complete digital transformation of pre-existing models has taken place and the entire way a service was being used has been reimagined from bottom up. In other words, a business model which had been around for decades and remained unchallenged by many, has been completely revamped with the help of digital transformation tools.
A Transformation of Business Processes
While a restructuring of the business model leads to the disruption that is visible even to a layman who has no idea of fancy business terminologies, it is the digital transformation of the processes a business carries out that is key to actual disruption. Sure, the idea of converting an old taxi system into one that is driven by mobile apps might sound like a new and potentially transformative idea but what about the backend processes which need to be dealt with prior to carrying such a dream to fruition?
Often, this is also where the need for talent comes in- not that other areas of digital transformation can do without it. But here, it is of the utmost importance. Take data analytics for instance and how it is a company can deal with humungous amounts of data if it lacks sufficient resources to do so. Simply put, it can’t. Usually, this is also where third party service providers come in. According to the Harvard Business Review, research shows that partnering with an engaged and experienced information technology (IT) vendor, can help midsize businesses clear these hurdles to digital transformation and growth.
Unfortunately, however, many companies do not carry it out to term properly. Most successful transformation stories have people at their core who highlight that technology cannot simply be used because it’s technology. Instead, a process needs to be designed with end users in mind. A user centric approach to things is of paramount importance but is often neglected. In addition to that, the way a process is transformed needs to lead to maximum levels of efficiency, and this why this is the segment where consultation cannot be taken lightly.
For any transformative process to occur, it is important that the people involved in it believe that the change being brought in will lead to something of value. Technology cannot just be bundled up and thrown at random processes; that would not make a business more effective unless the organizational mindset is redefined first.
Taking stock of how reluctant employees may be to a given change and addressing their concerns is one of the many ways in which organizational change can be ensured.
Last, although arguably the most important, is domain transformation. While incremental changes definitely tend to improve the manner in which a company is run, it in no way leads to radical growth- at least not the kind businesses expect when they think of digital transformation. The truth is, actual growth requires exploration into new, unchartered territories. But that being said, one needs to be equipped with the right supplies when trying to dive into newer business opportunities. Take for instance, the huge amounts of data that will suddenly need to be dealt with once a business expands. To do so efficiently, it once again needs to ensure process optimization.
Amazon Web Services is frequently cited as an example of domain transformation. But Amazon was not able to enter the new domain of web service provision and claim its place in the market, with huge competitors like IBM and Microsoft already there, without first handling the essentials. It already possessed strong digital capabilities, computing databases and test worthy storage capacities.
The Digital Overwhelm
The truth is, for companies that have only just started to look into digitally transforming their business, the task can seem daunting and almost unsurmountable at times. Tackling all the different segments of this task sounds great, but the real question is: how exactly does one go about it?
Like any tremendous task, the digital overwhelm only exists if the problem is seen as too huge to be countered. Breaking it down, however, could potentially lead to solutions in an easier manner. This is how we break this problem down into simpler, easy to follow steps.
- Emphasize on Cloud First Strategies
- Challenge Legacy Systems
- Maximize Efficiency
Formulating a Cloud First Strategy
A cloud first strategy, as the name suggests, refers to tapping into cloud-based solutions to a problem before looking at alternatives. As a rule of thumb, it is often observed that Corporations which have Enterprise Applications that rely on the cloud and third-party servers, instead of on individual servers, tend to find it easier to focus on the actual tasks at hand rather than wasting precious energy and human capital into server maintenance.
At its core, the cloud offers a third-party solution to data management and storage problems. Companies such as Azure for instance, offer all the main types of cloud solutions from Software as a Service (SaaS) to Platform as a Service (PaaS) down to Infrastructure as a Service (Iaas), and individual businesses can pick whichever solution fits them best.
In addition to taking the burden off your shoulders, cloud-based solutions offer greater accessibility and allow for business continuity. As an example, take the current pandemic where remote work is in far greater demand than was previously imagined. Corporations which had already invested in cloud first strategies fared far better in carrying out operations remotely compared to those who had not.
One of the biggest roadblocks to successful digital transformation lies in the existence of legacy systems and any corporation which aims to transform its ways needs to challenge these head on.
Briefly put, a legacy system is an outdated software or hardware that makes it difficult to build onto or even interact with newer technology. Most companies that insist on keeping their legacy systems intact, tend to hold onto the myth that replacing these would cost a lot more than running older systems would. One example of these would be the pagers that are still widely used at hospitals today.
In reality, however, even a surface level examination of the situation often reveals that whilst the initial costs may seem high, replacing older technology with a newer one can actually lead to a reduction in overhead costs.
Besides, maintenance is a tedious process and weighs heavily on what are already scarce resources. The source code for instance is usually old and long and updating it can be nothing short of a nightmare. To top it off, storage points are often divided and need to be tackled manually, which only adds to the cumulative burden of maintenance. And even if a company was too attached to its old systems and did not care about costs, the truth is that legacy software simply does not integrate well with modern day, third party API solutions due to an intolerable lack of compatibility.
It is as the saying goes, ‘Don’t lose the forest for the trees.’ The fact of the matter is that enormous tasks such as the digital transformation of an entire corporation can sometimes seem like there are just too many tasks to focus on. Instead of hyper focusing on tackling one problem such as legacy systems or UI design, try to keep the overall picture in mind while going through with the process and formulate and end-to-end approach to things instead. If something does not lead to efficiency, then perhaps focus on something which you think does bring in a greater amount of it. The core idea here is to maximize output.
The fact of the matter is, with the increased penetration of technology in recent decades, the job of the CMO and CEO have already become exhausting. It is understandable thus if such a task can sometimes feel like too big of a monster to deal with. It is also the reason why maximizing efficiency must be kept in mind as the central goal of digital transformation so that one does not lose sight of it at any point.
Wrapping It Up
One size hardly ever fits all. Some companies may find it easier to opt for hybrid cloud solutions and some may reap greater benefits from carrying out a complete shift to the cloud. Alternatively, some companies may need to focus a bit longer on the optimization of their individual business processes, before delving into other domains. Whatever path you choose for your company, the core idea that must be kept in mind is that digital transformation is no longer an option, although it appeared to be one several years ago. In the times that we live in today, rejecting to transform and update your corporation is an invitation for corporate stagnation.