A key challenge for organisations approaching digital transformation is knowing where to start.
There are many reports available about the why, how and when of Digital Transformation. After reading them, you might think it sounds like a simple process for organisations to get right:
- Focus on strategy, not technology
- Make your leaders more digital
- Be agile and iterative in everything
- Make taking risks and failing part of your culture
But this does not tell organisations where to begin. What to focus on at the start of a digital transformation process is as unique as the business itself. The transformation blueprint needs to allow the good bits of the culture to shine through. An evolutionary DNA, combining what makes the current business successful with the new capabilities needed. The devil, as they say, is in the detail.
In a 2014 Altimeter report on Digital Transformation, Brian Solis observed that:
“Only one-quarter of the companies we surveyed have a clear understanding of new and underperforming digital touchpoints, yet 88% of the same cohort reports that they are undergoing digital transformation efforts.”
This, to me, indicates a clear gap that needs filling. If Digital Transformation is not all about the technology, then where should organisations focus? For a long time organisations have taken the (reasonably) easy technology implementation route. But technology is no longer a key differentiator. The biggest opportunities are in changing structure, culture and practice, enabled by service-driven IT. It is clear that leveraging digital business models creates new opportunities, services and products. It can also protect more commoditised products by wrapping them into new value-adding components. But the detailed knowledge of what to create is known not by a change team, nor at board-level, but in the operational areas of the business.
Using digital to transform your organisational operating system can mean many things. Identifying a start point is tough when a business is operating so well that it produces good profits. We need to leverage change leads across the business. They can identify the opportunities and risks and develop better understandings of where to get started. So, how can you uncover the immediate and future need states that can be addressed through digital transformation?
There are several approaches we find useful in analysing need states and opportunities for transformation. Here are five that we use a lot:
1. Market Dynamics Mapping
- Research the organisation, its key markets and the competitive context in which it operates
- Consider known changes and trends that are driving a changing context, and analyse existing responses to them
- Build a picture of the digital transformation landscape affecting the organisation and its market
2. Ecosystem Mapping
- Map the market ecosystem in which the organisation operates
- Count likely changes in areas such as customer behaviour, technology, new competition, etc. Understand how to address these issues
3. Analysis of Existing Pain Points
- Study employee surveys and feedback to gather pain points that digital transformation could address
- Cluster and analyse these to identify target organisational capabilities for the initiative
4. Business Model Innovation
- Plot existing products and services against market maturity/business model (commodity, mature, agile, disruptive). Design new higher-level service and platform offerings that can extend or protect existing products.
- Perform feasibility studies on these hypothetical business models. Understand what the organisation would need as new capabilities to deliver them
5. Customer Journey Mapping and Touchpoint Analysis
- Plot key customer touchpoints and feedback channels to highlighting customer pull from the market. These need new business models, new ways of working, new structures, etc.
- Cluster and analyse customer pull against market dynamics and hypothetical business models. This can help to prioritise new capabilities.
Once we understand the strategic drivers, we can begin to map the capabilities needed. This is crucial to avoid the common misconception that digital transformation is just about technology.
Data is more tightly fused into processes in a company that is successful in the digital age. Digital transformation projects are a microcosm proof point of this. Transformations that begin with data and embed measurement into their process are more successful. Using data to create momentum for ongoing change within every area of the business is a more successful approach.
Another benefit to identifying need states in this way is that as the data changes, so new need states can develop. Once the necessary capability develops, a new need state will emerge. That fits what we know about the evolving nature of organisations. Digital transformation can never be ‘finished’.
Digital savvy organisations recognise this evolutionary capability as a key goal of digital transformation. It is not about developing a single new business model, product or way of working. But instead it is crucial to develop the flexibility to deal with the VUCA world in which we live.
If you want to find out more about how to kick off a meaningful digital transformation process, please head over to our dedicated pages, which outline a practical approach to getting started, or just get in touch to discuss.