Traditional companies will need to undergo organization-wide transformation that goes beyond implementation of new technology solutions in order to thrive and remain relevant in the global digital business landscape. Instead of knee-jerk reactions that call for short-term solutions, digital business transformation centers on leveraging technology to understand the evolving needs of digitally connected consumers (i.e., their behaviors, preferences and motivations), and delivering customer experiences that exceed expectations.
In other words, organizations that are able to look deeper into critical business dimensions such as strategy, operations, people and technology will effectively succeed in the digital age. A transformation of this magnitude requires significant adjustments to traditional business models, operations, processes, as well as product and service offerings. This is basically the process of re-thinking the business, as well as re-aligning resources, physical assets, processes and investments based on new customer value propositions—a process that can be complex and challenging, with dramatic results for the long-term.
The global business landscape is unravelling, as new digitally enabled businesses stake a claim in the market and create competitive pressures for traditional organizations. These new entrants are focused on meeting the modern customers’ needs and utilize disruptive technologies to enable improved customer experiences and business solutions. Traditional players struggle to keep up with digital businesses that are designed to be more fluid and responsive (i.e., lean, dynamic operations, optimized processes, flat organization structures etc.).
In a typical business environment, daily operational challenges take precedence over new or innovative solutions. This is further reinforced by top level communication and organizational metrics. Traditional approaches, such as creating an app or using social media to communicate with customers, only scratch the surface of digital transformation. Companies need to look deeper into their operations, review the evolving needs of their customers, and determine how to apply digital technologies to improve the business operations and offerings. In traditional organizations, the typical strategic planning process entails an annual cycle of defining business goals, identifying a list of key initiatives and projects to achieve those goals, followed by a lengthy budgeting process. These initiatives and projects are then tracked against traditional success metrics through the course of the next year(s) to determine return on investments.
Conversely, digital business transformation requires a more dynamic approach to manage the rapid development of disruptive factors such as emerging technologies, competitive landscape and consumer behaviors. These factors notoriously have been known to shift within a narrow timeframe, sometimes even within months or weeks. An annual strategic planning cycle will fall short of such demands and delay appropriate responses from organizations. A digital business transformation framework closely aligned with corporate strategy will require dynamic planning frequencies to evaluate potential trends and disruptors, as well as incremental funding to achieve intended business outcomes.
The Digital Business Transformation Strategy© framework helps businesses think about how such an organization-wide change will impact their business strategy and goals, providing an essential blueprint to identify and develop the right transformation initiatives. This framework is also flexible, allowing for customized solutions that meet the specific needs of each organization. As a result, strategic outcomes and priorities may vary depending on the objectives of the organization.
Digital business transformation may be triggered at any level or function in the organization (e.g., digital marketing, product digitization, business model innovation, etc.). However, in order to achieve sustained impact, transformation has to gradually occur across each level and function of the organization. Making the leap from vision to action can be challenging, especially when it involves a complete rethinking of how your business operates in an increasingly digital business landscape. We have applied the Lardi & Partner Digital Business Transformation framework multiple times for numerous organizations across various industries, and it has proven successful in providing a structured approach for delivering desired outputs. It also offers flexibility to meet the specific needs of organizations, while accelerating our work through a logical and proven structure.
This framework separates the strategic process into four high-level activities: situational analysis, disruptive vision, strategic roadmap, and build and implement.
The first step is to conduct an organizational “health check” to assess your organization’s strengths, shortcomings, pain points and barriers. A review of the overall business ecosystem is necessary, and this is accomplished by conducting a Digital Transformation Health Check consisting of four assessments—the Outside-In and Inside-Out health checks focusing on assessing the trends, market, organization, as well as its operations, and the Top-Down and Bottom-Up health checks focus on assessing the leadership teams and employees for digital transformation readiness.
Innovating your current business model is next; in other words, disrupting your business from within, before it is externally disrupted by the digital economy. This involves envisioning the future for your business, reimagining your company’s value proposition in this changed landscape, redesigning your business model so that it thrives in the digital economy and testing your assumptions for validity. Our Vision Lab, a series of workshop sessions we developed, has worked with many leadership teams and senior management through this disruptive business model innovation process and helped them create effective solutions to thrive in the digital economy. Based on the needs of the organization, solutions may include product or service digitization, process and operations automation, digital and physical customer experience design, as well as business model innovation.
Navigating your company from its current business model to the future business model your team has defined can be complex so developing a strategic roadmap is necessary to guide you through the transformation process. This strategic roadmap should include an analysis of the gaps between business models (Current vs. Future) and the identification of transformation initiatives required to address these gaps, prioritized accordingly. At this stage, an investment plan should be defined and a Proof of Concept developed to support the transformation process. The organization’s KPIs and success measures should also be revised as it prepares to transition to the future business model.
Build and Implement
The final step is to explore, test or implement transformative initiatives necessary to actualize your future business model. Developing a business case would prove useful—it should include a detailed plan on commitment and sponsorship needed, the operationalization process, adapting the organization and its processes, planning resources and budget, identifying transition risks and pitfalls, and defining timing and milestones. Existing assets (e.g., people, processes, channels, operations, partners, organization, technology architecture, etc.) should be leveraged for digital transformation.
This piece has been excerpted from “The Human Side of Digital Business Transformation” by award-winning global tech leader Kamales Lardi.