Digital transformation is changing the business world. Historically, businesses were “analogue” in that they had a bricks-and-mortar store where customers would interact with real people and things were dealt with on a personal level.
In today’s digital world, everything is automated and there is not as much personal interaction.
Now, there’s a battle going on between analogue businesses that are trying to establish a digital footprint and all-digital businesses that are trying to set up a bricks and mortar presence. While best practice might be a combination of the two to optimise profitability, at the heart of both of these models is the customer.
But there’s even more change happening in the customer space. We often speak about Millennials, but what about Generation Z, who start interacting with technology from birth? They are the future customers who will one day make up the bulk of the population, so businesses need to start thinking about how they will serve this generation of tech-savvy users, who are at the centre of the digital experience. This means businesses need a different model if they want to maintain relevance and increase profitability.
This has made digital THE competitive battleground. With digital transformation, the only constants in the future of business are change, agility and the ability to pivot in response to market shifts. In other words, digital transformation requires an entire rethink of the business, but many organisations fear change.
Change, by its nature, brings risk and could be a reason why so many businesses have not yet taken the digital transformation plunge. But when we consider that, since 2000, 52% of Fortune 500 companies no longer exist as a result of digital business models creating disruption in the market, can businesses really risk not taking the risk? If they want to protect their businesses, it seems CEOs have little choice.
But with estimates of digital transformation failure ranging from 66% to 84%, it’s no wonder that businesses are cautious. One of the reasons for failure could be that businesses approach digital transformation as a single problem that needs to be addressed, rather than a reinvention of the business through the use of digital technology such as social, mobile, analytics and cloud. Too often, businesses adopt just one of these technologies – applying a Band-Aid solution on top of existing infrastructure – and while this may result in a quick win, they’ll almost certainly lose the war.
The importance of enterprise architecture
When companies go all-in on digitisation, the number of point-to-point connections among systems rises by almost 50%, creating greater complexity in systems and processes. The enterprise architecture department therefore plays a key role in reducing the complexity associated with digital transformations.
Traditional companies approach this by trying to behave like a startup but they do not have the technology infrastructures or operating models to keep up with companies that have been digital from the start. They end up with ever more complicated IT systems, deploying new features or patches to meet immediate needs without any clear roadmap or consideration of future IT needs.
Successful digital transformation projects have the right mix of people and skills, tools, collaboration, experimentation, risk, agility and commitment. They adopt a two- to five-year vision and strategy and look for long-term solutions rather than quick wins that can actually sabotage future success. More importantly, successful digital transformation projects must have a successful deployment of big data and analytics to uncover new insights. Data is everything in digitisation. How companies use their data will be critical to their survival.
A successful project follows seven steps:
1. Assess whether or not your employees have the right skills sets to move forward with a digital transformation strategy
2. Have key employees attend formal digital transformation education – and then convert this into a continuous learning programme
3. Solicit input from customers, partners, advisors and employees at all levels
4. On an ongoing basis, conduct benchmarking and other market analysis with an emphasis on digital startups and direct competitors
5. Review and revise your organisation’s mission, vision and strategic goals
6. Review and revise business models and product/service offerings
7. Select technology to enhance operational practices, communication and collaboration. Take a holistic view of solutions. Consider a solution bundle
Forrester has predicted that, by 2020, every business will become a digital predator or digital prey. A key point to remember is that digital transformation is a marathon that will never end. Taking more risks is what defines successful digital transformation projects and will separate the winners from the losers.
Written By Tom Pegrume, Vice President EMEA Emerging Markets at Hitachi Data Systems