What we talk about when we talk about "digital transformation"
I often have conversations with companies that are looking for help with their “digital transformation”. This is now compounded with the rise of data science and AI as levers to drive value creation.
But what does "digital transformation" really mean? One way of demystifying the term is to acknowledge that it all really boils down to the ability to run a business more effectively, using technology to unlock new revenue opportunities and/or reduce costs.
"Digital Transformation is not necessarily about digital technology, but about the fact that technology, which is digital, allows people to solve their traditional problems." - the brilliantly simple definition of Digital Transformation in Wikipedia
One approach I use with clients is to walk them through a list of their key company departments and explore how each of them can be improved through the use of technology.
Using this approach, we are able to move away from the rather abstract “digital transformation” term and anchor the discussion on business improvements using technology to areas such as Sales & Marketing, Product, Operations & Technology and Organisational Design:
Sales & Marketing:
Why it matters: Digital transformation unlocks highly effective ways of finding customers and engaging with them across channels. Success is often measured by improvements in Customer Acquisition Costs (CAC) and their Long Term Value (LTV)
Where to start:
Improving the cost of customer acquisition by using digital channels and best practices in SEM/SEO, newsletters, social media and data profiling
Improving customer service and responding more rapidly to Ratings/NPS feedback in ways that increase overall satisfaction and inform product development
Improving the way the Sales teams operate through more actionable metrics in CRM systems and increased transparency of digital pipeline dashboards
Product:
Why it matters: Digital transformation can unlock a new portfolio of products and services. Success is often measured by the % of revenues that come from new vs. legacy products.
Where to start:
Improving the options for customers to buy your products, particularly through the use of multichannel e-commerce
Improving the overall end to end user experience of engaging with your company and not just the purchase of individual products and services
Improving the speed with which products are updated and improved, based on constant feedback, testing and more agile ways of working
Operations & Technology
Why it matters: Digital transformation unlocks cost savings, better analytics and more transparent ways of working by modernising the technology stack.
Where to start:
Improving the transparency of internal business intelligence and production tools, with a focus on a) making key business performance metrics and reporting instantly updated and accessible to staff; b) making production tools easy to use for rapid prototyping
Improving the flexibility and cost effectiveness of the back-end stack through open source tools, migration to cloud modular architectures
Improving the capture and analysis of key data as a foundation for Data Science that helps your business make better business decisions that based on the capture and analysis of data to test hypothesis rather than relying solely on intuition
Organisational Design
Why it matters: For any transformation (not just digital) to succeed over the long term it needs an organisational design that creates the right focus, resource alignment and speed of decision making.
Where to start:
Improving the overall organisation design to ensure full alignment with priorities and decision making. In simpler words: put your budget money and decision making authority where your PR mouth is
Improving the approach to sensible risk taking by behaving more like a VC and less like a stale annual budget approval process when discussing innovation initiatives
Improving training and recruiting to re-energise the company culture and embrace values such as speed, transparency and shared learning
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The approach above often helps turn the rather abstract “digital transformation” discussion into a practical and actionable plan on how to improve your business. The suggested starting points are just representative examples, as the needs of each business and their starting point will be different.
Is there a silver bullet for "digital transformation"? I don’t think so. I believe true change requires a portfolio of of interlocking initiatives that build on each other. And, by the way, you are never "done" improving your company as you can always do better. It is an iterative improvement process.
Hope you find this approach useful to have have a more practical and less ethereal discussion the next time your team mentions "digital transformation”. As always, would love to hear your thoughts and experiences in dealing with this topic!