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Why is Digital Transformation so important but so hard? And how do you execute it successfully?...
14th July 2020
The growing set of enabling infrastructure and tools (IoT, smartphones, smart wearables, AI, cloud computing, etc.) and the major business advantages meant that Digital Transformation (DT) was already a priority pre-pandemic – but now, it’s fast becoming a business necessity. The gap between digital-ready companies and those that aren’t has significantly widened during lockdown. The winners will be those that pay due attention to DT amidst the crisis and change, and that execute it best. We at Innovia are increasingly being asked to assess clients’ digital readiness or to help overcome challenges in execution.
Digital Transformation confers competitive advantage to virtually every business, whether product or service based, in any sector. If executed well, it can lead to step-change improvements in:
• Customer benefits and experience.
• Your customer reach.
• Your revenue model and value chains.
• Your internal process efficiency.
Digital Transformation is not “just” about making your existing processes or markets digitally accessible – that’s digital optimisation. Digital Transformation means digitally accelerated business transformation. For greatest advantage, it requires simultaneous changes in your business model, customer experience, products and services, management processes, and culture. This needs commitment from the very top. It is not just about the technology.
To drive a digital transformation effectively, you first need a transformative vision for how and where your company will deliver and capture value. This means:
1. Revisiting strategy, business model, and enabling philosophies, and considering which new value chains you can access via which new partners.
2. Re-imagining and enhancing the customer benefit and experience.
3. Envisioning how your internal culture and processes need to change to embrace DT.
Let’s explore how to go about creating and implementing your vision:
1. Business model
In a previous blog, we described how ‘digital superpowers’ can help you develop your business model to avoid digital disruption. Here are the superpowers to leverage in your vision to enable digital transformation:
• Being more popular – improved access, reach, and recognition, from a wider audience.
Example enablers: ownership of a community’s discussion platform, social marketing, gamification, or personalisation.
• Leveraging context – better understanding the partner and customer need-states through (timely) data from adjacent sectors, products, or situations.
Example enablers: the Internet of Things, customer pre-existing connected devices, AI and ML, simulations or ‘digital twins’.
• Being asset-light – flexibility in your business model by leveraging virtual assets, which are more easily scalable and adjustable.
Example enablers: owning digital transaction or experience platforms or interface standards, or subscription models.
• Being agile – structuring your offerings or processes in ways that can be more quickly responsive to market changes.
Example enablers: lean and fast-feedback processes, an explorer’s mindset, multiple value chains and a broad partner ecosystem.
Note also that most of these create synergies with each other. Thinking how you can unlock each of the superpowers is a great way to innovate your business model.
2. Customer benefit and experience
It can be hard to go about creating a vision of the experience you want your customers to have. Traditionally, this starts with customer insight work to understand the customer needs and experience journey, and to extract insights to drive new benefits, products, experiences, or services. But often that process does not capture underlying behavioural drivers, which are often unspoken. It can also be hard to use the output from the customer insight work if it is at odds with the business goals and capabilities. At Innovia, we believe two powerful ways to address these drawbacks are a holistic perspective and a behavioural science lens.
Holistic perspective: because change and innovation require us to link many different aspects. Business strategy and competitive landscape. Market and customer needs. Technical – especially digital – and organisational solutions. And design and communication. Successful innovation requires successful integration of all of these perspectives – the customer experience can’t exclusively determine the company strategy, nor vice versa. All these factors need to be weighed up, balanced, and addressed holistically. During gradual change these can be separated out, but when change is more dramatic, they must be integrated.
Behavioural science: because incorporating a systematic understanding of behaviour in a multidisciplinary approach enables us to ensure we’re solving the right market question first. Understanding how and why people behave allows us to ensure that our innovation is focused on creating products and services that people will use. This is why we often integrate behavioural science right at the start of our innovation process – we call it behaviour-led innovation.
A behavioural science approach helps us to first set behavioural and experiential goals which are aligned with the business needs. We can then go on to use behavioural science to understand the real determinants of behaviour – including tacit social or cultural ones – and then to design specific behavioural interventions to achieve behaviour change which meets our overall objectives.
You can find more about behaviour-led innovation here
3. Internal culture and processes
Finally, for your transformation to be achievable, you need to envision alternative internal culture and processes which support the new business and customer visions. We could write an entire article on this, but here are a few key points.
First, the human element is key. Changing business processes will create a learning and adjustment burden on your staff and partners, so make it attractive for them. Lead with a clear vision of how it will benefit them, and make sure the first step is one which makes their ways of working easier for them. This might include enhanced data-visualisation and decision-support tools. Fear of change, and uncertainty, nearly always accompany culture and process change. At Innovia, we have successfully used behavioural science to help drive acceptance of change in large organisations. Of course, change management must be accompanied by a clear change message and evident support from the very top of management.
Secondly, the culture and processes, of course, need to be aligned behind the new core strategy and enabling philosophies, as described in the two sections above. This is likely to involve embedding customer-centric mindsets, holistic business views, and constant agility. Existing silos – indeed any strong silos at all – are likely to be unhelpful.
In conclusion: Digital Transformation may sound like a tough challenge. It is. But transformation is becoming a core competitive skill. In this rapidly changing world, organisations need to evolve rapidly to survive.
I’m a physicist and co-founder of Innovia, and I’ve been inspired and educated by smart clients and colleagues for over 30 years. I can’t stop innovating, especially at home, and I drive my family nuts.