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Digital Transformation And Why We Need It

POSTED: 13th Apr

Digital transformation is a leading force in business today. In some cases this is driven by so-called digital native organizations wreaking havoc on older companies in an industry. In some cases those older companies are seizing the opportunity before the change is forced upon them. Whether it's based upon employing a shrewd offense or cautious defense, this change will impact all companies. 

But what is digital really? Who should own it within the enterprise? What processes and technologies are necessary to bring it to life? 

Let’s discuss the relevant definitions of digital, including the differences between digitization, digitalization, and digital transformation. Digital transformation may seem like a new buzzword for an old topic. 

1. THE DIGITAL OPPORTUNITY

The Digital Revolution

The average Fortune 500 business takes roughly 20 years to reach a billion dollar evaluation. Uber, WhatsApp, Snapchat, Oculus Rift, each took less than four. All of this means that digital immigrant organizations, those who were born prior to the digital age, need to think more like the digital native companies. Where the older companies go wrong is to be complacent in the face of this dramatic change. Digital transformation requires four things. 

First, it's necessary to digitize your culture. This requires hiring for and encouraging learning agility among your employees. New technologies and techniques emerge much faster than in the past. The technology that one is comfortable with today may be obsolete tomorrow. Will your employees be willing to retrain on the more modern technologies and techniques? 

Second, it's necessary to use modern solutions, such as #Cloud and mobile-enabled technology rather than mainframe technology of the past. This internal component of digital transformation is often an afterthought. But not taking these first steps can mean that you'll be a victim of your own success, unable to reap the rewards that higher demand might bring. 

Third, it's necessary to develop or hone an edge-based innovation function. This entails developing or recasting an existing research and development arm. Seeking new business opportunities that exploit digital technologies at the edge of current product or service offerings, or perhaps in adjacent spaces to the current offerings. 

Fourth, the rest of the business should think further about how digital opportunities can transform the core business. An eye toward better customer experience through digital channels should be paramount, as customers expect easier, intuitive, and compelling digital experiences when they become more sophisticated. They expect that you will have anticipated their desired journey through your offering. The digital revolution that's upon us is an enormous threat to a lot of businesses, but it also can be a tremendous opportunity for those who leverage the new ways of operating.

What is Digital?

The term digital is used in many ways these days, but what does it really mean? 

There are a variety of terms related to this that are noted, such as digitization, digitalization, digital transformation. 

Are these the same thing? Let me offer some definitions, as well as a couple of examples of each. 

Digitization is the conversion of analog or physical information to a digital format. Think of it as converting atoms to bits, creating digital opportunities in the process. Think of paper instruction manuals. Converting those from physical paper to a digital format represents digitization. 

Digitalization is the use of digital technologies and digitally enabled approaches to enable or improve business models and processes. For example, using smart glasses to provide mechanics with line of sight digital instructions can improve efficiency and reduce errors. 

Digital transformation is the coordinated digitalization change efforts at scale, diffused through the operating model and all aspects of the business, including people, processes, technologies, and metrics. The goal of this is to bring meaningful outcomes to the organization. Integration of various digitalization initiatives, such as #AugmentedReality #AR #VR guided instructions, #3D printed tools that have #InternetofThings #IoT enabled sensors connected with them can result in the fundamental transformation of the manufacturing process. This is an example of the digital transformation.

The Stages of Digital Maturity

Is your company able to interact with customers online through your company website? Do you have an active social media presence through Twitter, Facebook, LinkedIn, Instagram? Do you advertise through digital channels, you have sophisticated digital communications leveraging email and other collaborative technology? How advanced or mature is your digital offering? 

Digitally active companies take advantage of the transactional, digital or e-commerce solutions to increase revenue. Combined with a basic level of analytics and operational improvements such as the introduction of agile development methods, organizations in this tier are beginning to utilize the peripheral advantages of a digital organization. These organizations develop metrics or key performance indicators to gauge their progress or lack thereof as well and use that as the basis of further improvements. 

Digitally engaged organizations develop digital solutions and processes that can be found throughout the organization. 

As #Artificialintelligence or #AI becomes more prevalent in business applications, these organizations use rudimentary machine learning to improve decision making in big data analysis. Walmart is an example of a company that is now digitally competitive. Organizations on this tier have surpassed an #omnichannel experience and instead provide a channel agnostic customer journey through their products and services. This means that the experience in the store, on one's computer, or on one's phone would have many similarities. Greater levels of maturity are likely to translate to greater levels of value.

2. CRITICAL FACTORS TO CONSIDER

Who should lead the digital agenda?

It's an interesting question, as many leading thinkers believe that this is a transitory period where this is for example, digital marketing and traditional marketing, digital sales and traditional sales, or digital operations and traditional operations. As digital business and business become one in the same to a greater degree, will companies even need a single leader of the function?

At a recent gathering of CIOs, CISOs, BFSIs and other executives from across Africa, I asked the audience, how many of their companies had a Chief Digital Officer (CDO)? Amazingly, only about five raised their hands. Through an instant poll, I was able to determine that a little more than 50% of the Chief Information Officers either owned the digital agenda or co-led that agenda. This may seem surprising, but let's dig into how companies should think about the person who leads the function. 

Many CEOs and leadership teams of companies think of the true digital opportunity as one that is revenue-centric. That is to say, the biggest opportunity is to sell existing or new products and services through digital channels. If this is the case, it may seem logical to have a former marketing or sales leader as two of the customer-centric divisions of the company lead the function. But what about the operational aspects that are necessary to make that happen? In order to advance digital capabilities it requires organization and change management, which is the model and management practices in place to facilitate the speed and flexibility required in digital growth and development. 

Functional processes that drive and support day-to-day operations of the business and the generation of revenue. Architecture and tools which includes the governance infrastructure and applications responsible for the collection and maintenance of data used in digital initiatives. Leaders of customer-centric functions may not have experience or expertise in the areas necessary to influence each of these. Likewise, there are many technical changes necessary in order to transform a company to be digital ready. 

Employee Skills Needed for Digital Transformation

You have a solid core of technology team members. That's important of course! As you embark on the digital transformation ahead, what skills will be amplified, which new skills will need to be hired or trained for? 

These are important questions since the pace and ultimately the success of that transformation will only be as good as the team you assemble. The skills necessary will need to combine business disciplines and technical knowhow. 

Let's get into more specifics. There are several skills that become more important for digital transformation. First, it's necessary to hire skills associated with Agile development. Digital transformation requires Agile development which focuses on developing projects iteratively. This is in contrast to the traditional waterfall method which is serial in nature with handoffs along the way. Agile coaches are key new roles in this paradigm. They're part change manager, consultant and trainer. 

Let me give you an example. To ensure the organization has the right skills associated with Agile development, developed an Agile maturity assessment to train teams to understand where they are in their journey. Once a quarter, individuals across the company are asked to react anonymously to neutral statements across five areas, sustainability, value delivery, Scaled Agile, Culture and Technical Health. Areas with low scores are flagged and individuals at the team and program levels identify areas to improve for the next six development cycles or sprints. Agile coaches then formulate an Agile transformation path for each value stream. 

The second skill necessary related to Agile development is the scrum master. Scrum is a framework associated with Agile development which stresses frequent meetings of the entire team to chart the next phase of development, chart progress, course correct and test results. 

The third skill necessary to incorporate into your teams is the product owner. In the digital age, to a greater degree, one must think of traditional projects or services of the company as products. The product owner is ultimately accountable for the product that is in development. They set the vision for the product, chart the development path, track progress and ensure that the value is ultimately delivered. 

The fourth skill that's required for digital transformation is the user experience designer. User experience encompasses both customer experience and employee experience depending on who a given product or project is directed toward. User experience designers, sometimes referred to as UX designers, are both technical experts but also able to work with customers individually and through group research as well. 

3. CREATE YOUR DIGITAL TRANSFORMATION PLAN 

 

Strategic planning at the Speed of Digital

You've probably gotten the sense that the pace of change in the new digital world is faster than ever. That's true, and it will only get faster. 

Does a three or ten year plan that some companies prefer still apply? Does it mean the plans should be investigated more frequently? The answer is both!

It's true that shorter strategic planning cycles are necessary. For instance, the plan you set a year ago might be partially moot if, for example, the technology or processes that are being implemented as a result of the strategy are rendered obsolete by new technologies or processes. 

There are four steps that I would advise undertaking. 1) Investigate the art of the possible regarding innovative new technologies. 2) Work with customers to develop new plans on how digital technology will enhance customer experience. 3) Identify outgrowths of the current strategic plan. 4) And finally, refresh your plans frequently. 

One of my favorite quotes comes from the management guru and author, Gary Hamel, who said, "Companies fail to create the future not because they fail to predict it, but because they fail to imagine it. It is creativity and curiosity they lack, not perspicuity. Experimentation, together with solid strategic planning is the winning recipe”.

Experience is the New Currency

How do you differentiate your products and services in the digital economy? The first and best way to do is through better customer experience, and there's a pot of gold at the end of this rainbow. 

Customers are more demanding and are more likely to switch brands/services due to poor customer experience. In order to master user experience, bear in mind these lessons. First, eradicate friction from the user experience. In the digital word, frictionless experiences are crucial. Second, go to where your customers are. Don't make them come to you (Branchless). Let me give you an example from Dominos Pizza. Would you guess that this 57-year-old company is becoming a digital leader through superior customer experience through digital channels? 

Third, use artificial intelligence to enhance the user experience. At the most basic level, data analytics and machine learning enable more personalized experiences. Consider the workplace messenger platform Slack. With everyone from Microsoft to Facebook offering a workplace collaboration tool, not to mention email, customers have a ton of options. 

Conclusion – Next Steps

I hope you feel better prepared to seize the opportunities while staving off some of the threats associated with digital transformation. 

In a nutshell, we’ve talked about the relevant definitions of digital including the differences between digitization, digitalization, and digital transformation. We defined the stages of digital maturity so that you can identify where you stand today. Lastly, we talked about how to develop strategic plans and rethink user experience in such an environment, given both the pace of change and fickle customers. 

If you'd like to read more about digital transformation, I'm a fan of the book, Leading Digital, Turning Technology into Business Transformation by George Westerman, Andrew McAfee, and Didier Bonnet. It's also important to follow digital leaders. The journey ahead is not going to be easy, but it will be exciting and fulfilling, and it could lead your company to new heights. 

For more details, you can contact Faheem: faheem.khowaja@gmail.com

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