Date posted: 1/12/2016 5 min read

6 tips for digital transformation

Don’t miss the technology-driven “Fourth Industrial Revolution”

In brief

  • The next decade will see substantial industry disruption and transformation — via technology
  • Determining what the impact of a disruption will be, and then clearly understanding where and how your business will change, is critical to your ongoing success
  • No one knows the current issues better than your customers and staff who deal with the processes and systems every day

By Mithran Doraisamy FCA and Geoff Stalley

The next decade will see substantial industry disruption and transformation — via technology. The World Economic Forum dubs this the Fourth Industrial Revolution, and there seems to be little doubt that it will lead to a step-change in customer experience and productivity. Especially when this is already playing out.

Why now?

The simultaneous maturing of multiple breakthrough technologies has allowed combinations of these technologies to be deployed in ways that can fundamentally challenge current industry and business models. These technologies include — to name a few — smartphone applications, cloud computing (with ubiquitous fast-speed fixed and mobile broadband), machine learning/AI, big data, sensor technologies, additive manufacturing (for example, 3D printing), blockchain, drone technology, GPS, robotic process automation and augmented reality. These are being combined to produce new products and services not previously conceivable. Think ride sharing (Uber), driverless cars, pay wave and drone deliveries.

“Adapt or be extinguished” is an apt phrase. Remember Kodak? Retailers and financial institutions have been feeling it too, the latter courtesy of fintech. Domino’s Pizza in Australia is transforming the industry by deploying technology in innovative ways to capture substantial market share and margins.

The technologies alone are only one aspect of a complex rearrangement of business in the digital age. More importantly for existing businesses is the impact of new and different business models. Uber didn’t just challenge with a new technology, it fundamentally changed the business model. Apple didn’t just make it easy to purchase music, it changed the entire business model for accessing and distributing music — and disrupted many of the players in the existing value chain to profound effect.

Determining what the impact of a disruption will be, and then clearly understanding where and how your business will change, is critical to your ongoing success. To do this you need to examine the traditional value chain and work through the ways the new technology will impact you, you need to have a clear picture of how you can be an important part of the platform business that serves the customer, and then you need to establish your point of differentiation.

Engineering change is a challenging task. Many corporations have spent many hours and millions of dollars on trying to secure advantage through technology, with mixed success.

So how should companies digitally transform?

1. Target the benefit, not the technology.

Don’t wrap a programme of work around an enthralling technology. Instead, target the competitive advantage that technology can help deliver. Benefits tend to fall into several key categories, for example, productivity, customer experience and global reach (the internet knows no boundaries).

This list is not exclusive — it can also drive better pricing and new business models.

Be clear about the benefit that you want to gain through technology, then ruthlessly work to secure it. Yes, there needs to be a good awareness of what the technology can do, and how different technologies can be combined to provide new options. But there must be absolute clarity about the business problem/opportunity being solved and how this can be secured.

Know the technology; secure the benefit.

2. Be bold. Think holistic and end to end.

Businesses have been securing benefits from technology for a while. However, in most cases it’s been used to fix “point problems” (for example, one part of the value chain or end-to-end process), or to act as sticky tape over legacy processes and systems.

The total potential benefits are therefore compromised, and may actually end up being more costly for the organisation.

One example is where web forms have been introduced to the salesforce to accelerate the customer interaction process (a point benefit), which then requires backend manual processing to manage the incomplete flow of information flowing into the core systems (resulting in back office costs).

Worse, this manual handling causes errors and activation delays, and ultimately results in a poor customer experience.

Instead — think holistic and end to end. In the example above, rather than simply accelerating the ordering process, think of how the entire order-to-billing process can be automated — both hastening (reducing effort) and improving the customer experience.

Even bolder, how can the entire model be turned on its head? For example, using analytics to predict purchasing and configuring of likely solutions — with proactive and pre-configured offers to customers.

3. Engage customers and the business.

No one knows the current issues better than your customers and staff who deal with the processes and systems every day. It’s vital to engage both these groups of stakeholders early — both to understand issues and potential solutions, as well as to secure their support in driving the improvement going forward. This is particularly true in large and complex environments, eg surrounded by regulation with lots of legacy systems and processes.

4. Be disciplined. Have a rigorous approach.

Many companies feel that they are playing catch-up on the issue of digital. The temptation has therefore been to throw funds at it — particularly capital expenditure, which tends to attract less intense scrutiny (as opposed to operating expenditure, which immediately impacts the P&L). Don’t.

Instead deploy a rigorous and disciplined approach — which requires the benefit to be defined and quantified through stage gates, followed by a business case, prior to the commitment of significant funds.

5. Be agile. Take risks. Fail fast and persevere.

Agility is important — as is the concept of failing fast. This does not contradict tip four. Rather, a disciplined and rigorous process should actually embed the need for pilots, tests, etc so as to accelerate and minimise the cost of failure, and to ensure learning for the next iteration.

Taking risks is vital — but aim to minimise the downside.

In this sense, perseverance is also critical. New products, services and operating models are not built overnight. Most particularly, persevere with targeting the benefit. Not necessarily the technology.

6. Have an inclusive and diverse team (plus partners).

This is not an option. It’s a must. Every credible piece of research has found that diverse teams are more creative, produce better results and attract superior candidates (that will make the team even better).

Given the desire to disrupt the status quo and to reconstruct it (that is, to transform), having diverse teams is even more important.

Only gender diversity then? Of course not. It’s that, plus diversity in thinking, backgrounds, culture, skills and experiences too.

Technologists are important, but given the need to secure business benefits, so are people who understand the customers, the industry, processes, etc. What’s vital is that they be able to work together – being inclusive yet robustly challenging each other.

Mithran Doraisamy FCA is a corporate executive and was previously a management consultant. Geoff Stalley is a management consultant. Both are transformation experts.

This article was first published in the December 2016 issue of Acuity magazine.

Indicators of failure

  • 1. A solution looking for a problem

    A well-funded and resourced big data team of (primarily) data analysts seeking “use cases”. That is a solution looking for a problem. A non-diverse group of people who were inadequately plugged in to the business to begin with. Two years and $A20m later, the team was culled. Worse, think of the opportunity cost.

  • 2. A poorly thought-out way of implementing changes

    The inability of any digital transformation-oriented team to succinctly explain their work, the benefits and how they are going to secure those benefits. If your mother can’t understand what the team does then the chances are that senior management and the Board won’t either. This is often an indicator of unclear benefits and a poorly thought-out way of implementing the changes.

  • 3. Mega or multi-year projects

    There are only a handful of projects that truly need to be huge. Australian examples are BHP’s SAP implementation and CBA’s core banking platform replacement. These were truly platform building. Almost all others – including those involving digital transformation – can and should be chunked down. Think agility and discipline. And the number of big technology failures in recent years. And how little some of your competitors are actually spending in disrupting your industry.