The ultimate guide of digital transformation
What is digital transformation? How to initiate a digital project? What different transformation frameworks are there for different industries and organizations? Are there actual case studies ? In this insight, we will provide answers to all these questions and help you gain more insight into your unique transformation journey.
For organizations in the 21st centuries, whether or not to go through a digital transformation is not an option anymore. More and more customers are going online, competitors are constantly innovating, and we are on an even more rapid path to globalization.
Those that have not yet discover ways to integrate digital technologies to better solve their business problems like optimize existing processes, increase customer satisfaction, better deliver value proposition and more will lose their competitiveness in the world of digital.
What exactly is digital transformation?
Digital transformation is the process of integrating digital technologies to existing models – from processes, value proposition, customer experience, digital culture, to an end-to-end transformation. The ultimate goal is to be constantly improving status quo and become this so-called evolved enterprise.
While every industry has a different focus when it comes to transformation, there are generally two routes to take. Those that focuses on processes and less on interactions with customers, like a mining company, might put more focuses on processes, They often seek ways to integrate digital technologies to optimize processes or simplify layers of management. Breaking down silos and promote more collaboration between agencies and partners is also widely adapted.
On the other hand, companies that are more customer-facing like finance, media or hospitality will put more emphasis on value proposition. Redefine the very core of how they will do business going forward. For example, a media company might ask “Are we a company that sells magazines? Or are we a company that provide customers with relevant information so they can gain better insight into the market dynamic and make better decisions?” If they answer is the second one then this media firm might put more focus on how they can deliver the information and provide services to enable them to make better decisions.
In more digitally matured enterprise, organizations not only transform their processes and value proposition, they even go one step further to build a digital ecosystem that integrate functions across organization and constantly testing, optimizing and innovating.
As to Digital reinvention which are often used by IBM and McKinsey people is the same as transforming the core by redefining value proposition.
At OOSGA, we define reinvention as just a part of the transformation journey. Similar to “Winning in the medium term” as proposed by BCG, we believe at this stage, companies have to have a thorough understanding as to how customers are interacting with the brands in order to discover and optimize existing touch points.
What's the difference between digitization, digitalization, and digital transformation?
How to deploy digital transformation strategy?
At OOSGA, reinvention is just a part of the transformation journey. Through transformation, organization can define new opportunities and unlock growth.
Simply purchasing software to optimize existing processes is not transformation. Start selling products on online platforms is not transformation. Start seeking ways or digital tools to better target customers is not transformation. Analyzing data or bringing in analytics talents is not transformation. Even bringing CDO is not transformation.
However, when everything combined and strategically coordinated each part of the execution steps. It will move the needle and start making transformational impact.
So, how can we achieve that?
In our research on enterprise transformation journey, we discover a common patterns among winners who successfully unlock tremendous value with their digital strategies. This pattern also closely tied up with our framework and experience in helping clients.
Of course, every industry is different in some ways but from a macro perspective, there is a general direction for companies to take and adjust strategies along the way.
Discover value and define strategic steps
We’ve seen multiple cases where companies trying to follow exact steps company who are successful in their transformation took. At first it might sound reasonable. After all others have already tested that a certain model will gain positive feedback in the market.
However, there is an underlying assumption that most companies missed when it comes to following steps taken by others. That is, in order to successfully copy other company’s strategy and get into market in time. Organization has to be extremely agile and adaptive and their digital capabilities and culture will also need to be very matured.
Not only that, the strategy taken by counterpart that organization is copying from may not be really suitable for their business model. Back in 2011, we see countless media company changing their model to subscription based right after New York Times started to move to subscription base. In the end, most of them failed because they have not yet established as strong the relationship as New York Times with their readers.
That is why at the very first step organization has to look really deep in to the potential value uncovered from customer journey.
1. Secure senior management commitment
In any projects, digital or not, without the senior management commitment it’s very hard to succeed unless the management style is very flat. So at the very first stage, not only CEO, it is advised to get support from most stakeholders.
It is also very important for stakeholders to know exactly why there is a need for a digital transformation and how we are going to achieve a certain objective. We often see management took on different path because they have very different vision in the very beginning.
2. Horizontally form a digital transformation team
The point of setting up a digital transformation team is to increase collaboration among departments and make sure objectives of each departments are aligned.
While most digitization starts with sales and marketing like digitizing selling channels or adapting digital marketing, it not suitable for end-to-end transformation. We often see the sales and marketing department is going full speed while other departments like HR, which are critical to a successful digital transformation, are lacking behind.
Enabling every unit within the organization with clear objective and sufficient information will drastically increase the efficiency and effectiveness in a transformation project. We already discussed how important it is for strategies to be aligned with both culture and capabilities. This is the same in digital transformation. Setting up a digital transformation team will increase collaboration and in the process train the people within the organization capabilities and cultivate digital culture.
3. Discover value from customer journey and set clear objective and result
Examining customer journey is the best way to gain better insight into consumer. Not only you can understand what customer don’t want better, more importantly, it will give you a clear understanding as to why customer want something. This insight could just be the value proposition.
For the past few years, We’ve seen many retail companies move their battle to online trying to provide these e-commerce experience similar to Amazon. However trying to do this might just be a really bad decision for these firms. After all that kind of experience might not even be relevant to their customers and there is probably no retail firm in this world can compete with Amazon in e-commerce. What’s most likely going to happen is that the retailer lose all resources in an unfamiliar battle.
Yet, speaking of retailer, there is one company that truly understand their customer, leverage their own advantages and provide experience that further extend what they can do in a brick-and-mortar store. That is Walmart. We cover Walmart in a deeper breathe in the insight – Walmart – Transformation of the retail giant.
Building digital factory
After the direction is all set. There is one concept leaders can bring in: digital factory. The purpose of digital factory is to test digital strategy on a smaller scale. It is also a very effective way to cultivate digital culture within the organization.
The very nature of a digital factory is key performance indicator. But it should not just focus on return on investment as we see a lot of companies do. This KPI should be strategically set to further support the transformation journey like App downloads, subscription numbers or level of engagement.
When designing a digital factory, companies should adapt the thinking of a venture capitalist. It put more emphasis on market share and growth instead of profit. When certain projects can’t reach the set objective, leaders should also allocate resources to more promising projects.
Integrate and scale
As the projects are taking off, management should already see positive outcome brought by digital factory. Now it’s the perfect time to seek ways to scale. At this point, leaders should focus more on profitability and start implementing strategies that will bring in cash flow can further invest in ongoing journey and expand upon the core capability