To gauge the state of digital transformation in business circles, consider one number from a recent Harvard Business Review/Genpact study of executives: 21%.
Across all industries, 21% of executives say they see “significant results from digital transformation in their enterprises today.”
That’s a meager sum for a phenomenon that promises profound business transformation. As it turns out, executives aren’t missing the mark due to lack of ambition. Most have digital transformation on their short list of priorities. But they may be taking the wrong approach.
In a separate HBR article, Dr. George Westerman, a research scientist with the MIT Sloan Initiative on the Digital Economy, said many of the companies he studies approach digital transformation as “just a technology question.” Those executives have fallen into the trap of thinking that digital transformation begins in the IT department, rather than in the boardroom.
Even Oracle, long a technology heavyweight, says tech isn’t the only answer. CEO Safra Catz, quoted in a February 2017 Diginomica blog post, noted this distinction: “Technology is simply valuable in letting you run your operations better. True digital transformation is about having better information so that the talent in your organizations can make better decisions…”
Those executives who have embraced the distinction see clear dividends, says MIT’s Westerman: “There was a certain class of people [in the study]—those we call the digital masters—they thought about it differently. They really thought about it not as a technology problem, but as an opportunity to transform. And they’re getting far better results.”
The Call of Digital Sirens
In the realm of buzzwords, “digital transformation” earns high marks for simultaneously conveying everything and nearly nothing at all. Beyond the buzz, what is digital transformation, also known as DX?
At its essence, digital transformation involves a company’s evolution from paper-based processes to electronic opportunities. It takes many forms, as a small survey of use cases attests:
- Executives seeking new customers and better connections with existing ones have discovered that social channels like Facebook, Snapchat, and Pinterest provide not just new communication vehicles, but also rich, textured insight into the habits of customers and prospects.
- Digital leaders are connecting their products to the Internet of Things to create a digital exchange of information—between a vehicle and its manufacturer, for instance, or an electric substation and a utility’s control center—and exploring new options for servicing those assets in the field. [Visit this WhereNext article for more on the IoT.]
- Through advanced analytics and the computing power of the cloud, some retailers are growing more accomplished at omnichannel operations, serving shoppers across traditional and digital storefronts.
The use cases are as varied as they are intriguing. But beware, experts advise: They are sirens, tempting executives toward the digital shoals. Beginning your digital transformation with a narrowly focused initiative will not bestow digital mastery. Many companies have tried the piecemeal approach, and only 21% are celebrating the full fruits of DX.
Digital Transformation: Strategy First
Executives seeking a game plan for DX will find no shortage of corporate advisors eager to help. Consultancies from McKinsey to Gartner to IDC regularly weigh in on digital transformation. Most agree on several core tenets that light the path toward a digital strategy:
- Approach digital transformation as a chance to rethink your business and customer relationships.
- Create an enterprise-wide strategy for transforming your business.
- Lend authority to the process by enlisting executive sponsors for DX projects and supporting their efforts noticeably and often.
- Digital transformation is a strategic endeavor with a long horizon. Reinforce the long-term by celebrating short-term wins.
(To learn more about the stages of digital transformation, listen to this podcast.)
A Recipe for Transformation
Once a company determines its digital strategy, the following activities present a reliable a path to digital transformation—formed by a combination of process change and technology support:
- Digitize location information
- Leverage the computing power of the cloud
- Perform advanced analytics
- Deploy mobile data collection
- Collaborate throughout and beyond the enterprise
Let’s use a story map—a visual form of storytelling—to illustrate each step of digital transformation through the work of five innovative companies in a variety of industries.