Digital Transformation Explained

J.D. Meier's Blog | Program Management, Shaping Software, and Making Things Happen

Digital Transformation is everywhere.  Now it’s time to explain what Digital Transformation is, and make it real with examples.

Let's start with a few simple definitions of what Digital Transformation is:

1. Wikipedia defines Digital Transformation as  “the changes associated with the application of digital technology in all aspects of human society.”
2. The Altimeter Group defines Digital Transformation as "“The realignment of, or new investment in, technology and business models to more effectively engage digital customers at every touchpoint in the customer experience lifecycle.”
3. Agile Elephant defines Digital Transformation as "the process of shifting your organisation from a legacy approach to new ways of working and thinking using digital, social, mobile and emerging technologies.  It involves a change in leadership, different thinking, the encouragement of innovation and new business models, incorporating digitisation of assets and an increased use of technology to improve the experience of your organisation’s employees, customers, suppliers, partners and stakeholders.”

What I like about the Altimeter Group's definition is that it's an outside-in view of Digital Transformation.  They expect customers to be able to experience the change.

Satya on Digital Transformation

Satya posted his mental model for Digital Transformation.

I like the simplicity.

What I also like is there are four clear pillars or areas to look at for driving Digital Transformation:

1. Customers
2. Employees
3. Operations
4. Products

What I especially like is that this model matches what I learned while driving Digital Business Transformation with our field with real customers.

With the model in mind, let's walk through each of the pillars so we can get a good idea of what Digital Transformation really means with real examples.

Customer Experience Transformation

In terms of customers, you can engage with them in new ways.  You can connect with your customers through apps that provide a mobile experience, so that your customers can interact with your organization, anywhere, anytime.  You can listen to your customers through social listening and perform sentiment analysis.  You can learn about your customer’s behaviors through telemetry insights that reveal what features your customers use and which ones they ignore.  You can use data-driven insights to deliver personal experiences.  With the insights you gain, you can segment your customers in more effective ways, and you can target new customer segments.  You can use the Cloud to reach new customer segments around the world ,and you can test new experiences, and you can scale as needed.  You can deliver a seamless and personal experience across all customer interactions, providing a true omni-channel experience.

You can push the envelope of customer interaction and drive deeper engagement with more immersive experiences.

By walking your customer journey, you can identify Digital Hot Spots—places where you can connect better, collaborate better, share information better, gain new insights, visualize better, or use infinite compute and infinite storage in new and exciting ways.  And you can reveal new ways to create and capture value.  This is innovating at the edge in action.

One example of customer experience transformation is the story of Real Madrid, the Spanish football club and the world's #1 sports franchise.  Previously, Real Madrid had just a one-way communication method for broadcasting information and news, to it's 450 million fans, without the ability to get any feedback.  Real Madrid wanted to know who their 450 million fans are, where they are, and what they want from them, so they could engage in more personal ways. 

Fast forward to where are they now. 

Real Madrid's fan engagement platform captures and stores every interaction with a fan, including mobile check-ins at the club's stadium, online fan profile updates, and online merchandise purchases.  It also collects social media data from Twitter, Facebook, and other social media sites, for social segmentation of the individual fan, and analysis. Real Madrid's extended video platform provides new and historical video content, including previous Real Madrid matches.  Fans can filter searches to view specific games using criteria such as games where the club scored a certain number of goals. 

Real Madrid's consumer app lets fans virtually access the stadium before, during, or after each game, and they can search data on all the club's players, past, and present, while exploring detail statistics from specific games.  Real Madrid can now capture and discover personal preferences to provide more relevant content to their fan through the new mobile app, or when fans use the app to check in at the stadium, they an get a personal QR code for a loyalty in-stadium offer, or even a simple message that thanks the fan.

Employee Experience Transformation

In terms of employees and workforce, you can change how people work together.  Imagine if employees could bring their own devices and they can access the apps and information they need to do their job, anywhere, anytime to serve customers better.  Imagine if employees can find the experts they need to collaborate with in real time.  Imagine if they can discover the apps, the documents, the information, and the people they need to perform their work better, faster, and cheaper.  Imagine if employees could connect with their peers, as well as with customers and partners to innovate on new ideas as well as solve problems better together.

Imagine if your workforce can “work out loud” in a more open way, leading to more connection and collaboration as employees learn to “work like a network.”

Imagine digital assistants that can help employees find the information they need, perform routine tasks, and guide them through new scenarios.

One example of employee experience transformation is the story of KUKA’s Intelligent Industrial Work Assistant. Employees are able to collaborate with robots to perform jobs better, easier, and faster than ever before.  KUKA's lightweight  robot is able to sense its way around a complex task and perform precise automation movements safely and securely.  This enables human-robot collaboration in new and exciting ways.

Another example is the story of the Edge.  The Edge is a smart office space project that focuses on both a greener building and more productive occupants.  The building connects and communicates with employees through the Edge smartphone app.  The app helps employees find a parking spot at the building when they arrive.  Then the app finds them a desk. Because at the Edge, employees don’t have one. No one does. Workspaces are based on their schedule: sitting desk, standing desk, work booth, meeting room, balcony seat, or “concentration room.”   This helps

Wherever they go, the app knows their preferences for light and temperature, and it tweaks the environment accordingly.  Side note - the Edge is the greenest building in the world.  The British rating agency BREEAM, gave it the highest sustainability score ever awarded: 98.4 percent.

Operations Transformation

In terms of operations transformation, you can improve process visibility end-to-end, increase decision making speed, and improve collaboration across silos.  Another key to operations transformation is getting information to the people who need it most, when they need it most.

With machine learning, you can use predictive maintenance to replace parts before they break, provide just enough maintenance when you need it, and avoid expensive downtime. With predictive analytics, you can more intelligently optimize your schedule or logistics, or even figure out your next best offer to promote.

DevOps models and practices help drive continual delivery and IT service delivery agility.  By promoting better communication, collaboration, and integration between software development and IT operations, DevOps helps produce software and IT services more frequently, with rapid iterations.

An example of operations transformation is the story of Fujitsu.   Fujitsu enabled managers, engineers and scientists to simultaneously manage product quality, process efficiency, and equipment performance.  As Fujitsu CEO Hiroyuki Sakai put it: "...we are able to deliver real-time visualization of the engineering process for big data analytics to improve the entire production process and inform decision-making.”

An example of operations transformation in healthcare is the story of Dartmouth-Hitchcock.  Dartmouth-Hitchcock Health System is piloting a highly coordinated, intensely personalized solution to provide visualizations and deep insights that will transform business operations.

An example of operations transformation in logistics & transportation is the story of Scania.   Scania is a global company that delivers trucks, buses, and engines, as well as services in more than 100 countries.  Scania developed a system in the Cloud that measures the entire transport flow of a mine, with data sent wirelessly every second from the trucks in the production flow to Scania’s field workshop. This allows them to calculate uptime and down times and have useful data to make decisions that affect operational efficiency in real time in their customers’ mining operations.

An example of predictive maintenance is the story of ThyssenKrupp.  Using the Cloud, can ThyssenKrupp can guarantee a higher uptime percentage on our elevators to gain a competitive advantage.  Drawing on the potential of the Internet of Things (IoT) by connecting its elevators to the cloud, gathering data from its sensors and systems and transforming that data into business insights, ThyssenKrupp is vastly improving operations.

Product Transformation

Wrapping engineering teams around your customers creates a new world of possibilities.  By engaging with your customers more deeply, you gain new insights into their pains, needs, and desired outcomes that you can use to shape and create new products and offerings.

You can use your social insight and sentiment analysis to gain even deeper understanding of how to create and capture value for your customers. 

Best of all, you can use telemetry to figure out what features your customers actually use and which features your customers ignore.

An example of product transformation in automotive is the story of Delphi Automotive.  Delphi Automotive created Delphi Connect to give drivers many exciting ways to remotely monitor and control their cars.  Delphi Connect can turn any car into a connected car with affordable, cloud-based telematics. 

Another example of product transformation in automotive is the story of Qoros.  Qoros engaged Microsoft Services to design and build the Qoros telematics system, which it calls the QorosQloud.  QorosQloud provides more than 30 services, which can be also accessed from the driver’s smartphone, tablet, or PC, delivering functionality that goes beyond driving and the car.  Vendors can provide data to QorosQloud—traffic data, points of interest, restaurant reviews, parking data and so forth.  Qoros owners tell their car which points of interest they want to see on their in-car monitor.  QorosQloud connects to the Qoros dealer management system, customer relationship management, company websites, mobile apps, and other business systems that run both in the Cloud and on-premises in a small Qoros datacenter.

Business Model Innovation

Collectively, these four Digital Transformation pillars (customers, employees, operations, and products)  set the stage for transforming your business model.  According to The Business Model Navigator, you can think of your business model in terms of four components:

1. Customer – Who are your target customers? (This is the heart of your business model, and it’s where your customer segments come into play.)
2. Value Proposition – What do you offer to your customers? (This is where your products and services come into play.)
3. Value Chain – How do you produce your offerings? (This is where supply chain optimization can have profound impact.)
4. Profit Mechanism – Why does it generate a profit? (This is where reducing cost structures and adding profit generating mechanisms come into play.)

Business model innovation is a significant change in two or more part of your business model.

When you think through your business model, imagine if you could use the Cloud to reach new customer segments in emerging markets.  Or, imagine if you could completely change your supply chain.  Imagine if you can take an idea that’s working in another industry and bring it into your industry.

Another way to think about business model innovation in a mobile-first, cloud-first world is to think about new digital products you can create as you shift your mix from physical things to digital things for the digital economy.

Here are a few examples of business model innovation that you are likely familiar with:

• AirBnB is a large hospitality provider, but it doesn’t own any real estate.
• Netflix is a large movie rental service, but it doesn’t provide any physical retail stores.
• Uber is a large taxi service, but does not own any cars.

In the TED Talk: The Currency of the New Economy is Trust, Rachel Botsman provides a good overview of how service networking, the collaborative consumption, and the sharing economy are changing business models.

Putting it All Together

When it comes to Digital Transformation it helps to have an all up mental model to work from.  The more you can model and map out your Digital Transformation, the more effective you will be.

In the article, Microsoft IT cloud computing strategies continue to evolve, you can see how Microsoft’s IT department is going through it’s multi-year Digital Transformation journey.

In the article The systems approach on how to transform your digital healthcare organization, you can see some healthcare examples of the Digital Transformation pillars in action, such as customer experience transformation and operations transformation.

In the article Welcome to the Digital Revolution, you can get a really good overview of the big picture of Digital Transformation that is happening all around us.

Now that you know what kinds of Digital Transformation are taking place, along with concrete examples of Digital Transformation in the real world, hopefully that inspires you to re-imagine what you can do in a mobile-first, cloud-first world.