Five key areas of digital change in the enterprise
Digital transformation has become a buzzword with more time and money being spent on teams to lead, support and sponsor digital transformation projects.
A simple Google search shows countless “how to” articles and guides on using technology to drive change (341.000.000 results to be exact). But there is still some confusion about what people actually mean when they speak of “digital transformation”. Organisations often find themselves stuck, wondering where or how to get started.
In this article, experts from challenger consulting firm Riverflex demystify “digital transformation” to help organisations not only tackle organisational change but become successful at it.
In its broadest definition, a digital transformation entails embedding digital technologies to help a business become more effective and efficient. However, organisations should do more than simply replicating processes and supporting them with technology. A successful transformation demands a complete redesign of processes, and a shift in organisational mindset.
Addressing what digital output is needed by the business, but also how digital ways of working will be incorporated to do that systematically and to the highest standards. From outputs like channels and new business models to new ways of working, here are five key components to successfully implement digital change in the enterprise.
1. Customer channels: enter the digital arena
Digitalisation has made it possible for customers to find and interact with businesses in a multitude of ways. New channels and technologies have completely changed customer behaviour and preferences. As a result, businesses can reach their customers via digital channels such as web, mobile, social, and email to market, sell and service them. As customer preference for digital channels continues to grow and digital innovation moves at a faster pace than ever, it is fundamental for your organisation to up its game and enter the digital competition by investing in digital capabilities.
Although the notion of digitisation has been around since the late 90’s, most digital transformations today still include efforts to drive improvements in customer channels. This is because on one side customer preferences to use digital channels is stilling growing and on the other side new digital innovation continues to shape customer preferences.
If you are leading or supporting a digital transformation where digital channels are a key focus, some successful examples to explore include John Lewis’ omnichannel transformation, or adidas’ digital strategy to grow. When adidas realised that their previous strategy was not going to meet their targets, the first thing they did was to ask “How does the lifestyle of our consumers work?”, and the answer was – “It's all digital”. Once they realised that the company had to meet their customers on digital platforms, they invested in open source and the opportunities digitisation provided.
It’s exciting to see how those incumbent organisations grappled with the additional complexity of combining old and new digital channels to reach customers.
Your customer channel strategy should consider:
- The customer. As the saying goes, “the customer is king”. Your organisation is embarking on this change to meet changing customer needs. As such, your focus should be on increasing your organisation’s capability to learn and optimise its approach towards the customer. In our experience, many businesses say they do this — but few really do in practice. This commitment to the customer is what separates average performers from industry leading growth. Invest in design thinking approaches, and building the capability to better capture, analyse, and utilise customer data/feedback. Less talking, more doing.
- Cross-channel collaboration. Stimulating collaboration across brand, marketing, sales, and service teams is essential to connect business thinking and action to deliver a superior customer experience.
2. New business models: go lean and data-driven
Digital transformation programmes often include the development of new business models into their scope. Not in the least to fund the investments needed for innovation and digitalisation in their core service offering. For example, in the financial services industry, innovations such as crypto-currencies, blockchain and artificial intelligence offer huge business growth potential. As a result, some financial institutions are able to launch new digital products and services which use these new innovations.
Another example of digital transformation used to develop new business is in retail. There’s been a rise of Digitally Native Vertical Brands (DNVBs), DNVBs combine the advantages afforded by digital across marketing, distribution and payments with vertically integrated business models. The result is a business growing ~3x faster than typical e-commerce businesses. Where it used to take many years of heavy investment to build a successful brand, online platforms have provided the perfect breeding ground for new brands such as Warby Parker, Harry’s and Bonobos.
Your business model development strategy should consider:
- Lean start-up methodology. In the development of new businesses, products or services, you should continuously balance the level of investment with the level of risk. This can be done by applying lean principles to the development of new products/services. Next to that, building a capability to quantify, measure and act upon data (reflecting true business performance) is critical to the success of new business models. You will need to be clear on your business objectives, identify the drivers behind those objectives and then define the appropriate metrics to ensure you are accurately measuring success.
- Resistance. It’s human nature to resist change. Innovation teams must consider the tools at their disposal to meet this challenge (including organisational design, incentivisation structures, and PR & communications).
3. Next Gen Operations: boost your internal business operations
We are increasingly seeing digital transformations focus on revamping operational and back-office tasks. Digital technology has the potential to drive the efficiency and effectiveness of your internal business operations and processes. Digital changes that you want to focus on in this space are “Digital Workplace”, “Digital HR”, “Digital Finance”, and “RPA – Robotics Process Automation” or “RCA – Robotic Cognitive Automation”. A few of these Next Gen Operations areas explained:
The digital workplace
Internal employees now have access to vast amounts of high-quality information through knowledge, learning, and collaboration platforms developed on the internet. Start-ups have found great success in using platforms such as Slack, Trello, Jira and Google docs which prove to effectively increase productivity and compliment digital and lean ways of working. Tools of this kind are now being adopted into the enterprise as a whole.
RPA and RCA
Using RPA and RCA technologies to optimise back-office functions offers significant advantages. Computers can now take over repetitive processes and tasks which improves speed and efficiency, especially within Finance and HR operations.
Your next gen operations strategy should consider:
- Use cases. Managing business change is the crux of internal digital transformation. Start with concrete and expandable use cases to quickly prove value, providing exponential benefit as you scale them.
- User-centric design. Just as the customer is king for customer & channel transformations, the user is king for internal business change.
- Business and IT collaboration. RPA is an initiative often driven by the business, using vendor technology. The temptation is for businesses to go at it alone. This mistake, however, can be fatal. As you attempt to scale, you will be hit with roadblocks, security issues and data silos. To prevent this, get IT involved and pay due respect to the importance of defining the right technology architecture and adhering to design principles. The additional time it takes in the short-term will be more than rewarded in the long-run.
4. Agile Transformation: embrace full speed
Speed is key to surviving and thriving in the digital age. Creating a business that is able to react to internal and external stimuli and to act quickly, gives enterprises a very strong competitive advantage. It’s important that toy focus on creating tight collaboration between both business and technology functions to avoid internal inefficiencies slowing you down.
Through agile transformation, you can transform the enterprise so it can effectively deliver business technology to achieve customer value at speed. Core to this is the agile method, an iterative approach to technology development where user feedback is sought at the earliest opportunity, the business is directly involved in the team as product owner, and the autonomy of development teams is increased.
Your agile transformation strategy should consider:
- Leadership. Enterprise agility is all about creating a new culture of collaboration, accountability, and value delivery. Good leadership and example setting are how an agile transformation will take hold. Leadership needs to stop reinforcing old behaviours and start modelling new ones.
- Teams and resources. Creating agile teams with members who are dedicated to delivering on goals set for that team is essential. Ring-fencing resources is important, as is ensures that cross functional teams are created with the right representation from the business, not just technology.
5. Technology transformation: drive innovation
Technology transformation sets up the IT function to become both an enabler of change and driver for innovation. Your technology transformation will entail three key areas of change:
- Modernising the technology landscape. This means replacing legacy systems burdened with tech debt with more contemporary technologies and architecture patterns. Not only increasing functional value to users, but also improving security, scalability, and agility.
- New ways of working. Automation, Test Driven Development (TDD), Behaviour Driven Development (BDD), Continuous Integration and Continuous Deployment (CI/CD) and DevOps practices are key to enable speed, agility and continuous improvement.
- Implementing a fit for purpose organisational model. The IT function of the future can no longer serve as a supplier function but must urgently become an effective partner — collaborating across business teams. In addition, your ability to source and partner with vendors should be reviewed to meet the needs of the digital age. Just deciding between SAP, Oracle & Microsoft is no longer enough. The future IT function must engage and utilise ecosystems of innovation external to the organisation. This means being able to discover, engage, on-board and switch between a wider variety of vendors and increasing diversity (size, culture, geography, purpose).
Your technology transformation strategy should consider:
- The basics. To become a strong partner for your business, your IT’s basic functions must be in top shape. Ensure that service delivery is strong, and that day to day operations run like clockwork, delivering well within SLAs. Earning a seat at the table to discuss strategic topics, and drive innovation and growth starts with being credible — reliably delivering on the fundamentals. Value is only created by technology when it solves a real customer or business problem.
- People. To deliver fantastic technology, you must always start from the people. Identify where the business is going, and what capabilities it will need in the future. Work this back to what the IT function must provide and assess the competencies and skills within your IT department. Make strategic decisions on what capabilities you need in-house for the future and get external support where you need it. Too many times we have seen teams get busy building stuff, only to find out that they cannot continue to execute or sustain solutions effectively over time.
Conclusion
Digital transformation can have hugely impactful results for your enterprise. Implementing foundational changes with new digital technologies will help you to remain competitive in the digital age. We’ve highlighted five of the common areas of digital transformation but it’s important to note that your transformation may not fall neatly into one box. The exact combination of ingredients you need will be driven by your unique set of objectives and context, which in turn will focus you on the digital capabilities you need to drive competitive advantage.
Authors of this article are: Riverflex co-founders Victor Hoong and Andre Azadehdel (both ex-Deloitte) and independent consultants Arjen de Ruiter (ex-CTO Coosto), Sohrab Hosseini (ex-CTO Transdev) and Kenny Cruden (ex-ThoughtWorks).
