What really is digital transformation?
Many mid-sized businesses simply see IT as a problem to be overcome or a beast that has to be fed. The Board meeting IT slot is often dominated by discussions about anti-virus software, operating system upgrades, contract negotiations and laptop replacement costs. The Board’s time, money and emotional energy are all used up just dealing with these operational details.
But IT genuinely has the ability to transform a business. There are radical and new ways to grow the business, to serve customers better, and to make more profit. Businesses that can connect with these benefits are, understandably, valued far higher than their low-tech competitors.
These opportunities should be the focus of the Board discussions about IT.
So what exactly is Digital Transformation?
For our clients, digital transformation simply means using IT to deliver dramatic improvement. That’s different to a simple upgrade, or fixing some niggling problems. It means: using IT to make a significant change for the better.
That may just mean simple IT done well. That’s surprisingly rare! Or it may mean genuine technology innovation, something that is breaking new (or new’ish) ground.
4 Kinds of Transformation
We simplify this issue by defining 4 different kinds of transformation:
- Market break-through. For example, some of our clients have used their expertise to create software that offers new kinds of specialist services. Some manufacturers or wholesalers have become retailers. Some have cut through supply chains, or they have positioned themselves as new kinds of intermediary, repackaging or combining products and services from other companies.
- Wow customers. Providing new ways of offering your products to new audiences, more specifically targeted or positioned. It often means allowing your customers to get the experience they want, how and when they want it, rather than imposing processes on them that happen to suit you. And potentially it gives you new ways to de-commoditise your offering by focussing on service rather than price.
- Internal redesign. Most companies’ internal business processes have evolved over years and have their roots in ancient history. New technology allows this to be completely rethought, and designed from scratch to suit your customers, your team and your profit objectives. AI or software robots allow you to do away with manual tasks and reduce errors.
- Tame the risks. Traditional ways of working often have inherent levels of risk which affect pricing and competitiveness or create ever-present worries which consume your energy and attention. New technology can give you better customer insight or profiles, allow better targeting, real-time risk assessment and automation of controls, or might allow you to offer higher guarantees to demanding (but high value!) clients.
In some cases transformations cross boundaries, for example, radical improvements to internal fulfilment can enable a significant improvement in customer service as well. And better internal processes can reduce risk as well as improve margins.
So there is considerable overlap between these 4 types of transformation, but the headings do help think about what Digital Transformation can mean.
Starting this journey is often the most difficult step. The following questions can be a useful kickstart for a Board workshop…
- What is it your market really needs? What do customers really care about and value?
- If you started with a blank sheet of paper, how would you do things differently?
- How can you remove the barriers to enable you to lead this transformation?
Imagine that, tomorrow morning, you read in your tradepress that one of your competitors has made a radical change that leaves you behind.
Be the one who does this first!