Enabling Value-driven Business Transformation
Digital transformation is mandatory to enable traditional businesses to compete with digital natives that are reshaping the business world and industry lines. Most companies, however, struggle to drive this transformation—or even launch it effectively—for a variety of reasons. These may include: products and value propositions not always aligned with expectations of digitally savvy consumers or competitive with offerings from new players; cumbersome historic or legacy processes, systems, and data environments; lack of clarity around the true definition of digital transformation; and gaps in executives’ understanding of the capabilities (and limits) of digital and data technologies. With these complexities, it’s easy to see how the inability to imagine the traditional business—and thus its market approach—leads a company to focusing on automating or digitizing its current processes rather than harnessing tools to develop new, more efficient ones. When this happens, companies can’t realize the full opportunity offered by digital transformation.
In this context, many companies make the mistake of defining digital transformation in one of two ways: setting up websites and apps for customers and hoping that they will adopt them, or simply focusing on improving customer experience with some digital capabilities woven in. By taking one of these approaches, companies get stuck with process and system complexities, manual processes and poor insights due to data complexities—all of which prevent total digital completion of internal or external transactions. Most companies also lead with technology (for example, launching an app for customer service) that fails to drive value and abandon efforts once they see costs mounting with little or no value realized.
The proper way to drive digital transformation requires rethinking priorities and business models. Ultimately, companies need to realize that digital transformation is really not about digital technology but instead about changing business models and propositions to be able to better leverage digital capabilities and data insights. In order to drive sustainable transformation that captures value, companies need to first rethink their business models and value propositions to customers. For a new definition of digital transformation, consider it as business transformation leveraging digital and data technology—and starting with business simplification.
The strategy and transformation plan should start with understanding the changing shape of the customer landscape and customer needs. Questions need to be asked and answered: How meaningful are our products and propositions now or in the future? How are our competitors reshaping or fulfilling their needs? What is the pace of change when it comes to customer needs and preferences? Are we equipped to meet these needs? And how quickly do we need to change our offering to stay relevant?
Once these are addressed, a second set of questions emerges: How complex is our current environment—our product set, our processes and systems? Which processes and systems complexities cost us the most today (both in terms of revenue loss and cost of execution) and will prevent us from being agile tomorrow? Which of these are the most immediately important to resolve for us to stay relevant?
The area that most companies ignore in this process is the data capabilities. Companies are submerged in data but are asphyxiated by the lack of quality and the abundance of garbage in the data. Lack of or unclean data will lead to ineffective decisions and prioritization—and needs to be addressed as a critical part of transformation.
So, how should companies start and drive this transformation?
