Digital transformation is where an organisation seeks to profoundly transform its business activities, competencies and operating model to fully leverage the opportunities made available by digital technology.
Digital transformation is a complex process requiring careful management and which has significant implications upon an organisation’s strategy. A view of these implications has been expressed by David Rogers, a member of Columbia Business School’s Faculty of Executive Education and author of the The Digital Transformation Playbook.
Rogers highlights five areas where digital technology has changed the “constraints under which practically every domain of business strategy operates”, domains decision makers should consider when grappling with their place in today’s marketplace.
Customers
Customers have moved from being receptacles of mass messaging to participants in customer-driven networks. Previously, customers formed part of what Rogers describes as the prevailing model of mass markets which were focused on finding efficiencies of scale through large scale production and consistent, blanket communication to reach as many customers as possible.
Today, these customer-driven networks are “dynamically connected”, with customers interacting with each other and businesses in new ways. Customers are connecting with and influencing one another – the rise of peer-review networks is one such example – and as a result, shaping business reputations and brands. As has become common practice, customers do research ahead of time prior to making a purchase in store or online. This single behavioural change is forcing businesses and brands to rethink how they reach customers, the types of marketing they engage in and the customer’s path to purchase.
Customers are moving between networks, devices and mediums. Instead of seeing customers as targets for selling, businesses should recognise customers as a group of potential brand champions or partners. The liberalisation of information and choice has seen customers become as influential on businesses as businesses are on their customers, with social media symptomatic of this relationship.
Competition
The nature of competition has changed. Previously, business competed with rivals that looked like them. They competed for the same customers while using similar supply chain partners or needing similar production inputs.
Rogers says no longer do such static industry boundaries hold. The nature of competition has become increasingly fluid. Organisations that 20 years ago would not have been seen to be competing in the same industry are no doing so. Asymmetric competition – where firms compete with one another in some markets but not in others – and “digital disintermediation” is leading to former long-time partners becoming competitors.
Further, instead of competition being a zero-sum game, companies are now cooperating with one another due to interdependence or mutual threats brought by outside platform businesses. These are businesses that have identified opportunities in particular sectors and capture market share by being a facilitator between businesses, sector actors and customers. As a result of digital transformation, the “locus of competition” has shifted where different types of firms seek to influence the same consumer in the most impactful way.
Data
Data is critical to the process of digital transformation. Organisations that can convert their data into actionable information or insights quickly, then implement quickly, are making the best use of this key resource. Data’s challenge, from being sourced via customer surveys and a business own processes, is it has now become a “deluge”.
As Rogers notes, data is now being produced every time there is an interaction between a customer and a business touchpoint, or two customers within the business ecosystem, or by those within the business itself.
This unstructured data is today being utilised by organisations and businesses through analytical tools to arrive at new insights and solutions regarding customer behaviour and needs. As a result, new value is being unlocked, with data becoming the oxygen of every business department and a strategic asset to be developed, deployed and protected over time.
Innovation
Innovation is, as described by Rogers, the process by which new ideas are developed, tested, and taken to market. Previously, innovation used to occur in waterfall fashion. There was a singular focus on a product till it was complete and ready for market. Product decisions were taken by managers and key executives on intuition and analysis, with the cost of failure high.
As start-ups have shown, digital technologies now allow for different approaches to be adopted in the search for innovation. Continuous learning and rapid experimentation are hallmarks of these digitally driven approaches. Digital technologies now make it easier than ever to test ideas, gain market feedback at the beginning of the innovation cycle, during development and right up to product launch.
Through creating minimum viable products, businesses are able to run experiments with end users that maximise learning, minimise cost and allow for assumptions to be tested. This saves time, money, and lowers the cost of failure and improves organisational learning.
Value
Value in Roger’s view relates to a business’s value proposition, the value it delivers to its target customers. Prior to the digital revolution, an organisation’s value proposition was relatively stable. Products were updated, marketing campaigns tinkered with and operations improved yet the value offered remained the same. Success was found through clear value propositions differentiated by price, quality and branding, year-on-year.
Today, value propositions that cannot change are vulnerable to disruption by fleet-footed competitors. The pace of digital change varies from industry, yet change will inevitably reach a sector’s shoreline. At that moment, those organisations which have not changed face the risk of being subsumed by disruption.
A business’s value proposition must be capable of evolving so technology can be harnessed to extend or improve its intrinsic value. Businesses must be alive to the opportunities presented to it, depart from weakening positions of advantage (and recognise that decline ahead of time), and adapt to the changes that will consistently wash over them.
If your business is facing challenges in strategically digitally transforming, contact Letsema at info@letsema.co.za to find out how our team of digital experts can help your organisation thrive.
