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Digital transformation - Impact on Business - N# 2.1.

· digital transformati,Our projects

The most critical areas of impact of the digital transformation can be summarized as below:

  • Business
  • Organization, way of working and productivity
  • People

Let’s start with the first one, Business. From this stand point digitalization impact not just one (as we tend to think) but several aspects:

  • Channel:
    • Interaction with customer via digital channels (Example: I interact with my bank digitally, meaning, I use an app or a website). 
    • Marketing via digital media (Example: The company use digital marketing on facebook, google, pinterest etc)
    • Distribution (e-commerce)
  • Digitization of processes: Replacing labor with software or robots (Example: Legal information provided by machine learning or digitalized check in at the airport)
  • Digitization of ecosystems: aggregate many other businesses and create ecosystems.  (Example: Amazon and Alibaba http://www.alibabagroup.com/en/about/businesses; https://www.amazon.com/)
  • Uberisation of business model: digital platform facilitate peer to peer transactions between clients and providers of a service, often bypassing the role of centrally planned corporations. 

How digital penetrate the different industries?

As we can imagine not all industries have the same pace on digital transformation:

Key insights from a recent research conducted by McKinsey on digitalization are:

  • The winner takes all and the first-movers win; this happen across all different types of digital disruption; fast following may actually not be such a viable strategy
  • A lot of companies are really focused quite narrowly on just one of the digital elements ; there’s a huge opportunity for companies to broaden the lens; several areas of digitization are frequently under-focused on  (Example: Supply Chain)

What leaders could do?

  • Study the external landscape: many executives tend to wait too long before taking digital seriously
  • Strategize:   Run fast but in the right direction! And (I would add) use an agile strategy approach, meaning be ready to fast change direction if the reality change
  • Build agile execution and organization capabilities
  • Build the right Corporate Culture: culture can be one of the largest barriers to achieving impact from digital initiatives:
    • Less risk-averse
    • More customer-centric
    • More agile and innovation friendly
    • Build an ecosystem mindset, avoid the silos one. This because digital transformation happen cross-function

As for any change also the digital transformation goes trough phases:

  • Phase of denial:  there is a recognition that something is changing but a lack of willingness to really confront it and understand that perhaps some quite-challenging shifts in strategy or execution or organization may be required.
  • Phase of confusion:  where executives start to realize that there are many, many opportunities for digitization and that they could invest in many different ways. And that’s, we feel, the critical point at which winnowing down to a pointed strategy which really hits the value levers for your industry is important.
  • Phase of frustration:  “Why can’t we execute quicker?”  
  • Phase of building:  Start building the right capabilities and culture early on is a key success factor
  • Phase of agile execution

Reflection questions:

  • In which industry and phase of digital transformation is your company?
  • What your leaders are doing to approach it?

Micro-learning additional resources:

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