Rossum Digital Transformation Series, Part 1: What is Digital Transformation?
What is digital transformation, and what does it mean to you and your company? You can spend hours or even days falling down a multi-tunneled rabbit hole of various definitions and guides. We spent some time in that hole to put together a 3-part series summarizing the What, Why, and How of digital transformation. To kick things off, this post examines what digital transformation is at a high level.
First thing’s first: digital transformation means different things to different people. In her insightful and amusing look at our relationship with the term, Korn Ferry Digital Advisory leader Melissa Swift says it best:
“Digital” is a hot mess of a word. And this causes a lot of grief in organizations.”
Let’s Clean Up the Hot Mess of “Digital”
So what exactly creates this grief? The biggest problem lies in how we perceive the word. In the context of business transformation, there’s no clear-cut definition of “digital”. Think for a moment what the word means to you.
Now consider that other people and organizations have different definitions for it, and therefore apply it differently to roles, functions, processes, and/or operations across their companies. For example, “digital” could mean:
- Paperless processes
- Moving data and processes to the cloud
- Artificial intelligence (AI) solutions
- Data analytics
- Agile development
- Remote working
- All of the above
Regardless of how you define “digital”, digital transformation is about more than incorporating new technology into your business processes. Tech solutions are tools that facilitate digital transformation, enabling you to make fundamental changes to your company’s culture and operations. This means replacing established, often obsolete, tasks with more efficient and cost-efficient applications – our obvious example here is the replacement of manual data entry with automated data capture.
Digital transformation requires a corporate culture that is willing to try out disruptive technologies, abandon outdated practices, and, most importantly, accept failure as part of the journey to improvement.
Digital Transformation Comes in 4 Flavors
To paraphrase TechNex Managing Partner Andrew Annacone, the ultimate goal of any business transformation is to deliver long-term value growth. To maximize the success of your digital transformation initiative, Annacone states you need to address not one but four types of digital transformation:
- Business process transformation
- Business model transformation
- Domain transformation
- Cultural/organizational transformation
Failure to take this multi-faceted approach to digital transformation could result in missed opportunities to create greater value for your company and its customers. To help you capture those opportunities, let’s take a closer look at each type of transformation.
Business Process Transformation
AI applications, data analytics tools, and other advanced technologies can help you update or replace slow, error-prone, and expensive processes across your company. For instance, as a replacement for manual invoice processing, an automated end-to-end document data capture solution can transform your accounts payable team from a cost center to a profit generator whose activities have cross-organizational benefits.
Business Model Transformation
The objective of business model transformation is to innovate the way value is delivered across an industry. Successes in this category include Apple (music distribution), Netflix (video distribution), Uber (taxis). This is a more strategic form of transformation that requires cross-functional input and coordination.
By changing the fundamental building blocks of value, corporations that achieve business model transformation open significant new opportunities for growth. More companies should pursue this path.
– Andrew Annacone, The 4 Types of Digital Transformation
Often overlooked by organizations, domain transformation offers a wealth of opportunity to create more value. Continuing advances in technology are, in Annacone’s words, “redefining products and services, blurring industry boundaries, and creating entirely new sets of non-traditional competitors.” He points to Amazon as an example: with Amazon Web Services (AWS), the online retailer branched out into the cloud computing / IaaS industry – a domain previously dominated by IT goliaths like IBM and Microsoft.
Your company doesn’t need to be Google or Apple to capitalize on opportunities in different market spaces. The tech it requires to do so is accessible and affordable. Like business model transformation, this is a company-wide effort that demands a considerable amount of strategic planning and C-suite support.
Finally, you may need to evaluate the digital capabilities in terms of your company’s culture. Agile processes, willingness to test and learn from failure, distributed decision-making, and increased reliance on business ecosystems are all vital to cultural transformation. The development of these capabilities isn’t a prerequisite but more a result of successful digital transformation projects.
Digital Transformation in the Time of COVID-19
For many companies, the coronavirus pandemic has made it painfully obvious that digital transformation is essential to their survival. As we’ve seen so far, this involves far more than chucking a bunch of apps into various processes. Digital transformation initiatives require strategic planning, C-suite buy-in, and cross-organizational coordination for starters. At the same time, the need for speed is greater than it was during The Before Time.
The first steps of digital transformation don’t have to be as time-consuming as they sound, depending on your company’s culture. Start with an agile approach to implementing your digital initiatives and be prepared to experiment and learn from failure.
“[Digital transformation] is not about having the old swept away by the new. It is about empowerment and an exercise where everyone in the organization plays a part in developing better ways to deliver the company’s core value propositions.“
– Dr. Yenni Tim, Senior Lecturer in the School of Information Systems and Technology Management at UNSW Business School
Next Time In Rossum’s Digital Transformation Series…
Read the next installment of our three-part digital transformation series: Why is Digital Transformation Important for Your Company?