By Gautam Kasturi
What is digital?
Originally used to describe how data is represented in the form of binary digits, today the word digital has a different meaning. It’s now used as a generic term to characterize the use of information and technology to deliver value in an easy and frictionless manner.
Technology is the enabler for delivering this value — it isn’t the goal. However, when you use technology that’s customized for every function and every stakeholder in the value-delivery process, you deliver superior user experiences for each stakeholder and ultimately a clear business advantage for your organization.
Advances in the past decade have made it possible for technology to be a true enabler of frictionless experiences. Technologies like cloud computing, internet of things (IoT), smart devices, mobile phones, edge computing, analytics, artificial intelligence (AI) and so on can bring about a degree of sophistication in task execution that before only existed in our imaginations.
What does your value-delivery lifecycle look like?
Think of a value-delivery lifecycle for buying a cup of coffee. You would only consider the entire coffee-buying-to-delivery experience digital if, in all of the roles that play a part in delivering that cup of coffee, each participant is able to perform their tasks in as informed and effortless a manner as possible.
These participants include the customer, barista, store manager, franchise owner, operational staff, management, suppliers and shareholders. If each of these participants has the information that’s needed to do what they want to do, presented in the most accessible and intuitive manner, and the actual performance of their task was made as simple as possible using technology — then that business is truly digital.
Now, map out your own value-delivery lifecycle. Break down your end-to-end business process into all its constituent business functions and identify every sub-process, task, performer and objective.
For each step, visualize the most automated manner that the step can be performed in and the easiest way to interact with the next stakeholder in the process.
Once you have done this for the end-to-end process, validate that the resultant process actually delivers greater value and at a lower runtime cost.
Chances are that through this whiteboarding exercise, you will have identified new requirements and demands of your technology. Smartly delivering on these technology requirements is what it means to digitalize your business. But going digital has to make sense for the business.
Why invest time and money in digital? Very simply, it’s to be competitive in the long term.
In fact, it’s to be competitive to the point of being the leading customer choice. In this case, “customers” refers both to your actual customers and to your employees, since you want to retain employees and attract top talent.
The organizations that successfully go digital are most likely to be clear winners in their markets and have built enough of a barrier to make it difficult for competition to catch up.
We call such successfully digitalized organizations “digital masters.” Research by Capgemini and MIT revealed that digital masters realize up to 26% more profit than competitors. That is reason enough to invest in digitalization.
What is your “why”?
Given that the high-level reason for the digital initiative is to be competitive, your next step is to articulate the deeper and clearer reason why it makes sense to go digital.
One approach is to identify what specific area (from the three areas we talk about later on in this article) is the target for disruption and in what manner.
In some industries, the decision is already made for the organization because the leaders in their segment are doing it and are gaining from it. In these cases, it’s a business imperative.
Put on a transformation mindset, not a faster horse mindset
We recommend that you don’t approach this as an incremental improvement exercise or an efficiency exercise. That just shackles you to thinking only of tactical tweaks and point solutions rather than an end-to-end transformed way of doing business.
Try not to just produce a faster horse but rather rethink the end-to-end function of your business. This includes rethinking the business model that has been set with other stakeholders in the value chain.
Plan big, execute small
Although your grander vision can be large, the execution can be in increments.
One way of doing this is carefully selecting a small set of improvements to make (the increment). Then ensure that there is a clear “why” statement and a measurable goal of that improvement (hypothesis). And finally, after making the improvements, follow through to measure the impact and compare it with the planned goal (proof).
This approach is a sure-footed way of making meaningful progress in a fiscally responsible way.
Invest in the technology backbone
Regardless of the areas you select for advancement, chances are that your transformation relies highly on a strong technology backbone. It’s critical to recognize this early and make investments in a strong technology foundation that supports both functional and data needs.
A structured approach helps you to think through the digital process in a manner that is customized to your organization. All digital impact can be classified into three areas:
- Customer experience (internal and external customers)
- Operational excellence
- Business models
This refers to all the interactions that go into selling and making your product or selling your service. Customer experience has a high bar in today’s age. It should be assessed keeping in mind the highly sophisticated and easy ways that customers have come to expect interacting with businesses today (think Uber, Venmo and other digital native services that are setting the customer experience standards).
Additionally, customer experience should also include the methods in which you interact with employees. Employees will have a far greater sense of engagement in the workplace if that workplace offers the same level of sophistication in their technology as they use in their everyday life.
If you make products, digitalizing from the inside-out implies that the manufacturing process inherently provides a high degree of automation, visibility and alerting mechanisms.
But this does not imply a completely robotic process. A truly digital process has the right blend of mechanization that makes long-term economic sense. (The automation blend in Amazon distribution centers is a good example.)
This is an area that requires some good out-of-the-box thinking. Historically, organizations have taken up vertical integration in their supply chains to achieve economies of scale so that they have better control of their production processes.
Given technology advances, the interactions between two organizations can take place in a decoupled manner without compromising quality. This decoupling enables organizations stick to their core competency and focus on the highest value offering. Think Uber. They focused on the transportation problem without having to invest in automobile technology.
To address this area clearly, think of all the steps that go into delivering your firm’s ultimate value, encompassing the supply-chain steps that occur outside of your organization. Identify which of these truly are critical to control to enable customer delight and profitability. Evaluate options of leveraging third parties to “outsource” some of the steps that were traditionally fulfilled internally. Likewise, think of the “product as a service” model wherein you supply your product in a subscription model to your customer.
Planning your digital transformation strategy
One way to plan digital transformation would be to think through these three areas separately as they apply to your organization.
For each area, run through the following steps:
- Understand the classification and visualize the ideal innovation in each area.
- Identify the best-in-class company in your industry. Also consider parallel industry segments.
- Explore emerging technologies.
- Engage the end-customer (including employees).
- Explore business model ideas beyond current boundaries.
- Build the business case for each improvement (cost vs. impact vs. feasibility).
- Assign ownership.
- Experiment and measure.
Take the people-first approach
Finally, your collective, sustainable success is brought about by people, not technology.
Culture is at the very core of any transformation. Ensuring that there is a culture of improvement and collaboration, as well as celebrating collective wins is most likely to bring about a lasting transformation. From a leadership perspective, culture and alignment are the two most important areas to focus on.
Wipfli’s technology consulting professionals help organizations make progress on their digital journey through a variety of services. These include planning-stage offerings like the digital readiness assessment and design thinking workshops, as well as software development and change management. Contact firstname.lastname@example.org to learn more and begin planning out your organization’s digital roadmap.