The Case for Digital Transformation

Lately, digital transformation has emerged more of a buzz word, often marketed by digital companies; but the case has not emerged as strongly from an organization’s perspective.

The way digital transformation is being marketed, post-corona, does not help establish a case for it. It has somewhere to do with businesses not understanding the value it holds for them. Some see it as an unnecessary expense, others see it as an unclear path where there is no clarity on what lies beyond this journey.

This initiative is more like a hiking expedition, where there will be an uphill climb, sometimes plateaus and at times a renavigation of how to reach the top and once you are there, the view is worth it. Similarly, once you complete this transformation, the new “order” is worth it. Here I will try and evaluate what is wrong with how it is being pitched and how to go about it.

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COVID-19 – A CONTRIBUTORY REASON

Because of the emergence of COVID-19 and the lockdowns being implemented in most countries, the conversation about digitalization being the need of the hour has been taking place. What people fail to understand is that COVID-19 in itself is not sufficient as a convincing reason for holistic digitalization, more of a contributory reason.

Most businesses would read this as a need to have sufficient contingency or business continuity plan to allow businesses to run remotely, but that is not what this is all about.

It is about restructuring of organizations, exploring and developing new business models, changes in decisions making process, creation of digital products. It is about a digital diffusion into how your organization operates and mutating itself into a digital DNA that continuously innovates and increases the digital quotient of your organization.

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THE SWAMP

Organizations are resistant to change and have a tough time in adopting new practices and incorporating change initiatives. They are used to a business as usual culture, since that gives them clarity, predictability and any change brings about some level of unpredictability and blurriness regarding the paradigm shift.

When any organization opts for any new initiative, it looks for what comes out of it (monetary benefit), and whether it is worth the investment and the risk. For this organizations need to understand if they do not have a digitalization strategy in place, they are effectively in a swamp and will lose their edge and competitiveness if they did not adapt or reinvent themselves in time.

Businesses that will reap the most out of it would be those who moved first, navigated best, had tenacity and quickly adapted their approach.

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GETTING OUT OF THE SWAMP

To devise an effective digital strategy, the first step would be an honest assessment of where organization is in terms of their digital quotient. Using the assessment results, a sound digital strategy can be crafted which needs to answer the following:

Leadership Buy-In

Is the business leadership, agreed on seeing this initiative through and understands this to be a steep curve? Also, they need to understand that the end objective is to have:

i. Digitization in all facets of operation that are not storing and processing data digitally, e.g. for manufacturing this is leveraging IOT to analyze and drive decisions on the shop floor. This is where Industrial Revolution 4.0 kicks in. Skills needed and refined in this stage range from connectivity of industrial machines or assets, advanced data processing and monitoring with diagnostic, prescriptive and predictive models.

Also, the 1% improvement effect and its effect on the financial costs for each operational or process unit(s) needs to be studied to better prioritize these initiatives as they are cost intensive.

ii. Digitalization, where a set of digital products that are developed and sold to or subscribed by other players in the value chain. These products should solve industry specific problems, not tackled before. The potential users or customers could be your competition, partners who pay to use or develop these digital products, because they offer great value and insights and combine the cutting edge of technology like, Robotic Process Automation (RPA), Cognitive, Cloud, Blockchain, Analytics, IOT connectivity, etc.

It is in these areas that new business models would emerge, thereby opening new areas of revenue, this could mean being able to:

1. Monetize your existing data,
2. Sharing your predictive or diagnostic models for similar assets across industry,
3. Developing and selling hardware / software designed in house or with partners to other players in the market, etc.

Digital Talent and Empowered Teams

Does the organization have employees they can engage in integrator roles, i.e. translate business processes and integrate new digital technologies into existing ways of working? This can lead to opening your organization to digital talent from technology industry and forming cross-teams, where these different skills add up to accelerate digitization and digitalization.

There are two ways to go about this:

i. Hire from technology sector – Hire talented resources who are good at understanding the cutting edge of technology and those who can understand the business dimension as well

ii. Partner with technology sector and collaborate – This approach can help organizations free up from going after suitable resources and leverage the technology sector’s skilled workforce.

Whichever way organizations adopt, these cross-teams need to be empowered enough to see initiatives through and they must be offered leadership support that removes bottlenecks for them.

Tools – Digitization and Digitalization

i. Identify digitization tools that are already available in the market. Examples can be Brilliant Manufacturing from GE Digital, Watson IoT Platform by IBM (critical to accelerating to Industrial Revolution 4.0), Watson Assistant for Chatbots, etc. These products or services will accelerate your progress in this digital journey and save your resources. This needs to be viewed as investment by organizations, since the gains made here would free up the hassle of developing mature products and dedicating resources to upkeep them. Also, with transparency enabled in operations, critical areas of improvements can be identified, and savings made here would help pay the cost of adopting these products or services.

ii. Make available tools that allow your digitalization teams to experiment and develop POCs (Proof of Concepts) for showcasing the digital way of work for one target area of operation. These in future will help develop your own line of products. Opening access to cloud services such as Google Cloud, IBM Bluemix or Microsoft Azure might help enable a wide toolchain for your teams to explore and adopt when innovating in digital products.

Partnerships

At some point organizations would need partners in their transformation initiatives and these can be categorized into two:

i. Technology companies – where their skills and resources can be used to develop custom products and share costs, while allowing access of these products to other players in the industry, and hence making revenue out of these.

ii. Same industry or value chain companies – where there is enough to gain from digitalization and product costs can be shared, with a revenue split model.

Whichever way organizations decide, they need to be clear about who owns the IP of any innovative products, and how these are made accessible to industry participants, via a cloud, on premises or hybrid cloud.

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GAINS

To conclude, if each facet of operation is digitized effectively, it opens that area to being improved and efficiency gains being made, thereby saving organizations hundreds of thousands of dollars in operational and process costs.

Combined with digitalization and the ability to generate revenue from your digital products, businesses can use this money to invest in their additional initiatives and save up capital invested in adapting themselves to be digital ready.