Digital Transformation – what does it really mean

The term ‘digital transformation’ often means very different things to different people – as countries, companies and individuals redefine the notion of becoming digitally enabled to meet the challenges and opportunities offered up by the Fourth Industrial Revolution. All countries and companies occupy different starting points in the evolution and development of their technological capabilities and take a wide array of paths to find the ‘next’ step. But every digital transformation has a unique context and so, whilst leading practice may offer up guidance, it may never simply be copied.

“Digital transformation is the evolving pursuit of innovative and agile business and operational models — fuelled by evolving technologies, processes, analytics, and talent capabilities — to create new value and experiences for customers, employees, and stakeholders.”

At a macro level, the digital transformation of economies and society continues apace and promises a range of benefits, from better health outcomes and reduced inequality to greater access to information, the World Economic Forum said in a new report. But as the digital era takes hold, policymakers, businesses and citizens are facing some profound and difficult-to-solve problems.

The starting point in digital transformation is to assess a businesses’ state of digital preparedness based not just on technology, but on a comprehensive picture of its business context, strategic differentiation, competitive capabilities, digital integration and Customer engagement – as seen throughout the organization.

The top challenges faced by digital transformers include:

  • Lacking clear information on desired ROI, Digital Transformation is perceived as a cost centre, not as an investment
  • Resistance to change and prevailing organizational culture continue to pose significant barriers to implementation of digital transformation
  • Companies prioritize updating Customer ‘touchpoints’, but a large percentage of companies still haven’t studied or understood the changing dynamics of the modern Customer journey

The reality is simple – companies cannot afford to throw money and resources at the ‘digital’ in digital transformation without understanding and appreciating the evolution, impact, and potential of digital Customers and employees.

Seven priorities are recommended to accelerate the journey to digital transformation maturity and ultimate success:

  1. Audit the state of digital transformation – understand its business case, challenges and opportunities from a business not just a technology perspective
  2. Study the digital Customer journey and organise efforts around unique insights and opportunities
  3. Study the digital Employee journey to ensure needs are met – happy employee, happy customer
  4. Make data and intelligence the centre of decision-making
  5. Align digital transformation investments with business objectives
  6. Consider carefully how technology trends factor into future state digital transformation roadmaps
  7. Prioritise a culture of transformation and innovation

During his State of the Nation Address (SONA), President Cyril Ramaphosa said, “Unless we adapt, unless we understand the nature of the profound change that is reshaping our world and unless we readily embrace the opportunities it presents, the promise of our nation’s birth will forever remain unfulfilled. Today, we choose to be a nation that is reaching into the future. In doing so, we are building on a platform of extraordinary scientific achievement.”

Digital transformation is not just an evolutionary process. Transformation needs to evolve to ‘digital reinvention’ – this demands a complete change in mindset and the development of a deep enough understanding to establish a comprehensive digital blueprint according to Raghav Sahgal, senior vice president, Global Sales and Market Services at Nokia Software

The term ‘digital reinvention’ encapsulates the seismic shifts that are rippling across industries, and technologies as 5G digs in and starts to deliver. It asks that business relook what it means by digital transformation as well as the journey to be undertaken to ensure success. Steven Blank, writing in the HBR blog argues that the McKinsey Three Horizons Model of Innovation is still a useful guide for understanding the time-based requirements for innovation. Horizon 1 ideas still drive decisions about continuous improvement to existing business models and capabilities. Horizon 2 ideas still drive decisions about the extension of business models or core capabilities to new Customers, markets or targets. Horizon 3 ideas still drive decisions regarding the creation of totally new capabilities and businesses to take advantage of, or respond, to disruptive opportunities.

He maintains however that the critical difference is that we can no longer assign relative delivery times to each horizon. Horizon 1 was typically defined by new features that could be delivered in 3 to 12 months. Horizon 2 encapsulated business model extensions ready 24 – 36 months out. Horizon 3 created new disruptive products or business models 36 – 72 months out.

Time-based definitions made sense in the 20th Century when new disruptive ideas took years to research, engineer and deliver. In a digitally enabled world, transformation enables organisations to conceptualise and deploy Horizon 3 products, strategies and capabilities as fast as ideas for Horizon 1. It is the speed of deployment of Horizon 3 products, strategies and capabilities that deliver devastating upsets to the status quo. Uber, Airbnb and Tesla are all examples of Horizon 3 disruptions deployed in extremely short periods of time. Digital transformation should be geared to out-innovate the disrupters. If this does not happen, attackers will always have the advantage, as incumbents remained burdened with legacy.

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