Over the last few years, digital transformation has been one of the hottest topics at just about every business conference and event. It’s a subject which keeps the CEO awake at night yet is not always clearly defined or understood. While I think the term can be somewhat divisive, it is good that it exists and is being taken so seriously.
The process of modernising a business to use new tools and technology is one thing, but completely adapting to the digital world means more careful customer and employee relationship. Worryingly a recent study found that one-third of UK businesses had no digital strategy or plans to transform. It is time for those companies to urgently re-think because failing to act could be disastrous.
Take the humble London black taxi driver for example. In the past learning the streets (a rigorous test known as “the knowledge”) was vital to navigation, but for today’s Uber and minicab drivers there are a plethora of GPS-enabled smartphone apps which find the best route. Not only that, the community and social features even provide up to the minute alerts of jams and incidents. Using technology to deliver a small advantage is fine, but when you do it across every business process, the efficiency gains really start to add up.
It seems the disruptive start-ups are everywhere these days, across every sector; and it is true. Just look at the winners for confirmation, the unicorns. The business unicorn is a privately-owned company which reaches a $1billion valuation. So-called originally for their rarity. Before the emergence of cloud computing, on average four were born each year. In the last five years, over 200 have reached the milestone. Even more significantly, in the past, it would take 20 years for a company to reach this valuation. Today from start-up to unicorn takes a median of just six years. To combat this threat incumbent or established organisations should follow their lead and learn from these new stars.
The big problem is that change brings with it uncertainty and for a large organisation that can be terrifying. Not only does redefining business models mean high-risk, the time and effort to implement them are significant. For senior executives, the time has come to start taking chances because doing nothing is no longer an option. From a position of dominance to complete irrelevance can come in the blink of an eye. The lessons of Blockbuster and Kodak are all too apparent for anyone who thinks a majority customer share will keep them safe.
So, where do you start? What does digital transformation consist of? It is widely recognised that there are four pillars of change to focus on, two of them visible and two more less obvious. The first is customer experience (not to be confused with service which is wholly reactive). Delivering that “wow moment” or a seamless interaction which Amazon and Apple both put above everything else. It is easy to say you put the customer first, but much harder to deliver. Take Virgin Media for example, they are in an intensely competitive market, one in which it is hard to delight. They have put NPS (net promoter score) at the top of all their scoreboards to ensure that every employee knows the customer comes first. Customer first has become something of a cliché, but it is now more important than ever. With even more choice and an easy way to compare (Google or smartphone), never before has the consumer had such power.
Product digitisation is the second visible pillar of change, using technology to enhance your offer or service. Nike does this well with their connected shoes. Allowing runners to measure (via smartphone or watch), share (using social media), and track improvements (on the cloud platform) when competing or working out. Their product has now become a sports or exercise experience, and their popularity proves it is working.
The less-visible pillars of transformation are much harder to spot but are equally important. Employee engagement is not just about improved collaboration or messaging tools, but it involves a more fulfilling experience for arguably your most important customers, the staff. Cultural change dictates remote working and time off to do community projects are all high on the want list. Work is no longer a 9 to 5 pursuit, in the connected world we are always available to reply to urgent emails, and as such, your employees expect more for their loyalty and time.
Process optimisation completes the pillars of transformation, and it is the one which requires the most invasive changes. Over time problems are solved in an ad-hoc manner, and these solutions need to be updated, documented and improved. How many people need to sign off on an order? How much duplication is there to agree new branding templates? Start by getting teams to map out a typical day and you’ll quickly start to uncover inefficiency and duplication.
Underpinning the whole thing is, of course, IT. Using the latest tools and making the best use of data mean that this must evolve significantly too. Fixing printers and workstations is a job of the past. Automation means these tasks have become the role of software and robots. The modern IT department is the facilitator for change. Advising other business units on how to be more efficient and solving critical problems. They are the grease which makes the wheels turn in a mature business. Providing governance, a model for rapid cloud adoption and data visualisation are key to becoming a digital powerhouse.
I know what you’re thinking. Digital transformation is just a fancy way of describing modernisation. Keeping up to date and speeding up to match the pace of change. Well, you’re right. It’s a never-ending program of improvement. Any consultant who tells you they will deliver a digital transformation ‘project’ is peddling snake oil. The best advice will be that which helps your teams change, reskill where necessary and learn to accept evolution. For many leaders, the first steps are the hardest but once you’ve got your head around the factory-like conveyor belt of continuous improvement things start to make more sense.