What is the difference between business transformation and digital transformation?
Envision Advisory Services
Crafting and delivering custom solutions for industry-wide challenges.
Transformation essentially means “change into a different form”. In the business sense, it is understood as change aimed at keeping the form and functions of a business in line with the changing world in which it operates.
Two types of transformation are prominent in our time: business transformation and digital transformation.?
What is business transformation?
Business transformation is an alignment of forms and functions that are misaligned (usually appearing over time, but often also during the conceptualising of the business). The misalignment then adversely affects the performance of the business.?
An example is the reporting ratio. In an efficient business, several employees report to one manager. Over time the middle management segment tends to grow out of proportion: in other words, the managers become more, and the workers fewer.?
This situation inevitably leads to an emphasis on administrative processes at the cost of operations, employees complaining over too much paperwork, too many unnecessary meetings, and so on. In most cases this is eventually also reflected in the budget: too many resources go towards funding outputs that do not add to the bottom line of the business.
Other examples of misalignment are product lines and marketing strategies that are out of step with the customer’s needs, fuzzy reporting lines (very often the case in transnational structures), unnecessary process steps, overproduction, time delays, and similar inefficiencies. All of these characterize a business model that is not “lean”.
Business transformation and “lean” business
Lean business is all about reducing “waste” (such as various kinds of misalignment, unnecessary process steps, and the other inefficiencies mentioned above), in order to get “value” to flow.
Ultimately, the misaligned state develops because changes to the business are made on the basis of subjective perceptions, such as employee/manager perceptions (e.g. “We need a separate section to focus on XYZ: let us appoint a specialist to take care of it”, “we need special meetings/special reports to deal with XYZ”) as opposed to more objective methods, such as process engineering and/or process mining.?
Business transformation has been around in some way, shape, or form since time immemorial, and it will remain a crucial part of any business that aims to stay competitive into the very far reaches of time.?
Its younger brother – digital transformation – has found new momentum since the internet started to spawn new technologies, platforms, and tools. The defining characteristic here is the very fast pace of business change enabled by digital transformation.?
Leadership, especially in the early stages of their digital transformation journey are faced with several challenges:
领英推荐
What is digital transformation?
At its heart, digital transformation is the fundamental re-wiring of leaderships thinking and actions that takes full advantage of technology. The scope of this leadership starts with executive management and the Board of Directors.
The competitive shift and re-alignment of a business via digital transformation cannot be outsourced to IT, the Chief Digital Officer, or strategic partners. For sure, they have significant roles to play in the shaping and delivery of the overall strategy, but the most successful organisations have insisted on the fundamental re-wiring of their businesses, starting with leadership.
The starting point for an organisation embarking on such a journey will be based on various factors – the sector in which they operate; the current and emerging competition; the war for talent; changing customer demand and behaviour (voting with their feet). An important point to bear (and often overlooked) is that there is no “silver bullet”. Foundations have to be laid (and these will differ) and typical cover (not exhaustive); IT modernization (eg quicker time to market; reduced risk; predictable costs); optimisation of the current business end-to-end for selected high-value functions (as a start) which covers all aspect of acquisition to fulfillment (including key support functions – sometimes a good starting point for early wins and to bootstrap further investment); opportunities presented by analytics and digital marketing and building and refining a partnership ecosystem.
Organising for such change is non-trivial. Think of the last time you were faced (for eg) with a significant regulatory or compliance hurdle (eg Know Your Customer) and how you needed to, not just bring in new skills and partnerships but re-tool the existing organisation in general.
One company we work with has a view that all of the strategic thinking and positioning is led in-house (supported by data from global best practices); IT development is selectively outsourced and strategic technology capabilities (in their case, AI skills) are kept in-house as their secret sauce. These types of decisions evolve as a function of learning and adjusting course as required.?
Organisations should not be romanced by topics such as “incremental innovation and disruptive innovation”. While important in their substance, the focus has to be one on moving the organisation into a more relevant, profitable trajectory.
Accepting that there is no obvious starting point and constant learning is everyone’s new, additional KPI and that these technologies are intertwined with the current business operations, drives clarity, focus, and prioritisation.?
In summary: the difference between business and digital transformation
By way of summary, let us draw the blurred line between business transformation and digital transformation with a formal definition:
REFERENCES: