The Four Characteristics of Digital Transformation that Deliver Spectacular Results

Digital Transformation is All Around You

Is digital transformation a fad?  Is it just something that big companies are doing?  Have you experienced digital transformation?

The fact is that digital transformation is all around you.  You’ve likely experienced it, but never gave another thought as to what happened.  In fact, your experience was likely so intuitive that you considered it a natural outcome.

For example, when is the last time you visited a physician and was provided with a paper copy of a prescription? It wasn’t so long ago that the prescribing of a medication was a paper-based, manual transaction.  The engine of the transaction was the patient – you.  You also owned all of the risk of the transaction, including misplacing the prescription between the physician’s office and the pharmacy. You also owned the integrity of the process by not altering the prescription or changing the dosage or strength of the drug.  Now, most physicians use a hand-held device while they are in the examination room with you to instantly prescribe medication and transmit that prescription to the pharmacy.  No chance of loss, no risk of alteration of the instructions, and likely your medication was ready and waiting when you arrived at your pharmacy.

The result of a digital transformation.

What Are Some of the Characteristics of Digital Transformation?

In reviewing the rapidly-changing world of digitalization, some defining characteristics of digital transformation have emerged.

• A hyper-focus on the customer experience. Companies usually begin digital transformation by developing a complete understanding of the customer.  Who are the customers? What are the demographics of the customers?  How do customers interact with the company?  Continually improving the customer experience is the “make or break” factor for digital transformation.
• Operational processes are well–defined, streamlined, and transparent.  Having clearly defined operational processes is critical for successful digital transformation. Having such processes not only produces data needed for decision making, but it also enables the organization to become nimbler and more responsive to ever-changing customer needs, as well as facilitates good knowledge flow within the organization.
• Clear integration between data and process.  While it should be the case in any organization (but often is not!), in the digitally-transformed organization, decisions are made based on facts – the data produced from processes.    In fact, data is used to change the way the company operates. And use resulting data to make course corrections or further strategic decisions.
• Think “value” not “activities”. Digital transformation is not just an e-commerce system on steroids, but is a completely new way of thinking about how an organization delivers value through an ecosystem of activities.   Digital transformation results in a culture that challenges the status quo and actively seeks out opportunities to deliver value in  new, innovative ways – perhaps even resulting in new business models.

Results of Digital Transformation

Some ‘early adopter’ companies are already seeing results from digital transformation.  The July 28, 2015 issue of Forbes ¹ featured digital transformation at Arrow, an electronic parts distribution business transforming into an end-to-end partner for companies that design products containing electronic components and companies that buy enterprise computing solutions.   Some of the results and benefits that digital transformation has brought to Arrow include:

• Ability to collaborate in real-time among application engineers to co-design and co-create solutions
• Ability to have engineers engage directly with customers
• Strong knowledge capital and knowledge work flow
• Growth in sales that touch digital things
• Software, media, or sales through Internet channels have gone up by orders of magnitude
• Traffic and Internet audience more than doubled

The Future of Digital Transformation

Another recent Forbes article, “6 Predictions About the Future of Digital Transformation” ², summarized leading predictions from industry analyst firms Gartner, Forrester, and IDC.

• Digital transformation will become the key strategic thrust for most CEOs – B2B  industries will begin to close the digital gap with their B2C peers, who are also facing rapidly rising consumer expectations.  Digital transformation will be at the center of corporate strategy of 67% of the Global 2000 enterprises by 2018.
•  Digital transformation initiatives will be consolidated into a single vision and function – By 2017, 60% of enterprises with a digital transformation strategy will create  an independent corporate executive to oversee implementation.
•  Digital transformation will require new skills and a shift in IT investments – By  2017, the typical IT organization will spend up to 30% of its budget on  risk, security and compliance.  By 2018, 35% of IT resources will be spent to support the creation of new  digital revenue streams.
• Big data analytics will serve as the foundation for digital transformation – Successful digital transformation  will be based on establishing data streams both in and out of the enterprise, and finding ways to monetize them.  There will be a specific focus on automating actions based on real-time data analysis.
•  The Internet of Things (IoT) will be a catalyst for the expansion of digital transformation to all corners of the economy – IoT will serve as the growth  engine for digital transformation.  By 2018, six billion connected things will be requesting support and responding to service  requests from things, resulting in new service business.  The IoT will fundamentally alter how  consumers interact with businesses, and how businesses interact with their  supply and distribution chains.
•  Artificial Intelligence (AI) will drive new digital transformation  revenue streams – Digital transformation initiatives will shift from gathering and mining data to creating new  models and algorithms that augment work activities and support customers as they shop, trade, and make decisions.

Are You Ready to Transform to the Digital Age?

Successful digital transformation does not happen overnight, but the results can be spectacular.  What should your company be doing now to prepare to  transform to the digital age?

• Identify and categorize your customers.  Who are your customers?  How do they currently do business with you?  How would you like for them to do business with you?  Why should they continue to do business with you?  Understanding your customer is the first step toward digital transformation.
• Identify and map the value streams from your business to the customer.  What are the steps and components of all of the processes that deliver value to your customers?   Do you have value streams that do not reach a customer?  Do you have value streams that need to be streamlined?  To drive a successful digital transformation, your value stream processes must be as streamlined and transparent as possible, and the “line of sight” between your business and the customer should be straight-forward.
• Define and collect value stream measures.  What are the measures that define success?  What measures to you need in order to understand the impact of changes to the value stream?   Having the right measures enables fact-based decision-making .  The old axiom, “you can’t manage what you don’t measure”, becomes even more critical; having the right measures enables the fact-based decision-making required in the digital age

Sources:

¹ “Arrow Is Seeing Results From Its Digital Transformation” Forbes/CMO Network, accessed March 2016, http://www.forbes.com/sites/johnellett/2015/07/28/arrow-is-seeing-results-from-its-digital-transformation/2/#fce09d628da7
² “6 Predictions About The Future of Digital Transformation” Forbes/Tech, accessed March 2016, http://www.forbes.com/sites/gilpress/2015/12/06/6-predictions-about-the-future-of-digital-transformation/#3834c24f25b4

About the Author:

Doug Tedder

Institute Fellow Alumni

Doug Tedder is the principal of Tedder Consulting LLC. Doug is an accomplished and recognized leader who is equally adept in interactions from senior leadership to day-to-day practitioners. His attention to detail, industry knowledge, emotional intelligence, and the ability to “see the big picture” and make it actionable has resulted in a track record of success in helping IT organizations transform into business partners in value delivery.
Doug holds numerous industry certifications in disciplines ranging from ITIL, COBIT, Lean IT, and Organizational Change Management. An active volunteer within the IT Service Management community, Doug is a frequent speaker and contributor at local industry user group meetings, webinars, and national conventions. Doug is a member, former president, and current board member for itSMF USA as well a member of HDI.