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The Digital Transformation Journey - Understanding the Basics (Part 1)

March 17, 2016

 “The best way to predict the future is to create it.”  - Peter Drucker

 

As a CEO you want to do the best for your company - see it grow and thrive.  When you began your career 25 or 30 years ago, fax machines were state-of-the art and a 'portable' computers was the size of a suitcase.  There was no such thing as email and computers were not networked. It doesn't seem that long ago;  yet so much has changed.  As CEO you are expected to lead the organization towards a successful and prosperous future and avoid all of the icebergs that are lurking beneath the surface of the water. You know that digitization can disrupt industries.  You don't want your industry to be one of the losers.  But what else do you need to know to truly get a handle on digitization. How should you lead your organization through these uncertain waters.  The purpose of this two part article is to provide you with a basic understanding of digital transformation and provide actionable tactics that will help you develop a digital transformation plan  

 

What is Digital Transformation?

Digital transformation is the use of digital technologies to create fundamental changes in the way a company does business.  Each digital transformation effort will look different.  This is true even if the businesses are similar - because they may deploy differently or use different tools. The overall goal is to meet the needs of clients, whether consumers or other businesses. Digital transformation is about business.

 

What is the impact of Digital Technologies on Business?

Digital technologies are revolutionizing the way we live and work.  From social media to mobile to IoT, the world is changing at a breathtaking pace.  Whether you like it or not, it can impact your business, too.  There is nowhere to hide.

 

What are the areas most cited for Digital Transformation?

Some of the areas that CEO’s are focusing their digital transformation, according to a 2015 PwC survey of 1,300 CEO’s in 77 countries, are mobile technologies (81%), data mining and analysis (80%, cyber security (78%), IoT (65%), socially enabled business processes (61%) and cloud computing (60%).[1]

 

If I just implement mobile, data mining, cyber security, IoT or social will this digitally transform my business? 

The answer to this question is 'no'.  Digital transformation is not about implementing technology for technology's sake.  It is about understanding your business today, trends in the market place and your customer.  It is about putting all of this together to come up with new and innovative ways of doing business and meeting customer needs.  

 

What are some examples of the impact of Digital Transformation? [2]

  • Snapchat got a jump on mainstream media by distributing content o a platform-as-a-service infrastructure

  • A DIY investment tool from Acorns shook up the financial –advisory business

  • Web and mobile-based map applications broke GPS companies’ hold on the personal navigation market

 

How big does the change have to be to qualify for Digital Transformation?

A true digital transformation  - one that provides a competitive edge and generates a positive return on investment (ROI) – will re-imagine the old way of doing things and lead to new business models.

 

What is the biggest benefit from Digital Transformation?

The biggest benefit CEOs see from digital transformation is operational efficiency which lead to cost savings.

 

What needs to be in place?

To have a successful digital transformation a company must have two things:  (1) a clear vision of how technology can give you competitive advantage and (2) a well-thought-out plan that includes defined measures of success. 

 

As a CEO/CIO where should you start?

You and your management team must understand the problem; you can’t appreciate its strategic implications if you don’t. Business decisions based on an incomplete understanding are likely to be shortsighted or worse.   You will need to invest in understanding digital transformation from both a strategic and tactical perspective.  As the leader you must understand, navigate and embrace the digital world and see the potential for new technologies when applied to solve a problem.  It is not something that can be delegated.

 

What Should I do if my Management Team doesn’t get it?

Your job as a leader is to educate them on both the value of digital transformation and the risk of doing nothing because if they don’t get with the program and recognize warning signs in your echo system – it may be too late. 

 

Do most companies have a digital strategy? [3]

According to a Wharton study firms that have not yet embraced a digital transformation fall into three categories:

  • They have formulated a digital strategy with the help of a major consulting firm, but are unsure about implementation.

  • They have the makings of a strategy, sketched out on their own and formed internal teams to implement digital work, but don’t have a clear vision of where they want digital to take them.

  • They have no formal strategy at all.

 

How much will it cost?

The answer is that it depends upon the scope of your transformation.  To begin with the budget normally comes from IT although if the initiative big enough it might need to go to the board for special approval.   One thing is for sure – it won’t happen if you don’t have a budget to support your work.

 

How long will it take?

To ensure goals are met the project should be broken into bit-size chunks with deliverables due every six to 12 months. Overall the initiatives normally last 18 months to 3 years.

 

How can you as CEO/CIO ensure success?

At a high level always keep the customer in focus, think of them as real human beings and keep asking yourself:  What would the customer want?  How would the customer use this? What would the customer say?

 

What are the Obstacles to Digital Transformation?

The number one obstacle to digital transformation is budget; the second-most cited obstacle to digital transformation was lack of manpower or technical skills. The third obstacle is the inability to take a holistic view around the opportunity and not just thinking about it as a website change.  

 

How can you best plan for the lack of manpower or technical skills?

At LegacyNEXT Strategies we specialize in helping companies address their technical skills needs so that they have a plan in place.  Our Technology Talent Skills Gap Master Plan is a good place to start to understand the size of any potential shortage and the options open to you.   

 

Watch for Part 2: Your Digital Transformation from a Tactical Perspective 

 

 

 

[1] PwC 2015 Global CEO Report http://www.pwc.com/gx/en/ceo-survey/2015/assets/pwc-18th-annual-global-ceo-survey-jan-2015.pdf

 

 

[2] McKinsey: http://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/the-economic-essentials-of-digital-strategy?cid=strategy-eml-alt-mkq-mck-oth-160

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[3] Knowledge @ Wharton | Mphasis, On Becoming Digital: http://d1c25a6gwz7q5e.cloudfront.net/reports/2016-03-12-Becoming-Digital-Web.pdf

 

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