Digital Transformation Is The Cause...

We are now ten years into talking about Digital Transformation. Companies have heads of digital transformation, software products are marketed as digital transformation tools and of course consulting firms will help you with your digital transformation. As I previously wrote (Getting "Digital Transformation" Wrong) the whole concept is wrong -- digital transformation is not something to do, it is something that is being done to you. Digital transformation is the cause, not the response.

Another way to think about it -- You don't need a digital strategy. You need a business strategy to respond to the way the world has changed because of digital.

Digital Transformation as a concept comes from the disruption that happens in markets as a result of three progressive stages:

1. A new technology is introduced that makes something possible in a market that wasn't possible before -- think personal computers, web browsers, the iPhone, cloud computing, social media...
2. Companies exploit this new technology to serve markets in new ways -- more efficiently, with a different solution, or even transforming what customers want. This is done by start-ups, companies that served adjacent markets, and sometimes by incumbent competitors.
3. As customers turn to the new solutions, their success reduces the revenue and profit available to companies still doing things the old way. This is digital transformation -- the market has been transformed by technology.

So what do you do about it?

As with any strategy question there are a set of options to consider -- put yourself up for sale, copy the new entrant's ideas, come up with a different way of addressing the disruption, change the business you are in. These are the same questions you should ask when there are other types of strategic threat -- regulatory change, political unrest, demographic changes, environmental issues. All of these are external threats that require strategic decisions and then execution.

And yes, using technology to change some aspect of your business or product could then be a program that you embark on to fulfill that strategic decision -- but that is part of the execution stage, once the strategic decision has been made. First you have to be committed to a new strategy.

That is where so many companies fail -- fail because they think that they will remain competitive by just doing the same things faster and cheaper with a new veneer of technology and not understanding that the solution is to do it differently.