Digital transformation is receiving a lot of press as businesses relentlessly redefine how they deliver value and relate with customers. The question that needs to be asked is, “How will digital transformation produce value and differentiation for my organization? In the midst of increased digital transformation “noise,” strategic and organization design implications are often assumed but not specified. Just like any other organization transformation, a digital transformation should fulfill four basic principles to truly help an organization achieve marketplace success.
Make things easier for the customer. Digital transformations can make customer interactions easier, simpler, more fluid, and provide greater decision-making information to customers. One example of this is the increasing number of retailers installing self-checkout lines. This digital transformation has reduced wait times and has sped up the buying process for customers.
Taken a step further, many retailers also allow customers to complete the transaction on a device rather than stop by a designated checkout station. Customers can review information about their potential purchase, read reviews, handle the product in the store, and purchase/checkout right from their mobile device. This kind of digital transformation allows customers to conduct business, receive the help they need using a mechanism, and ultimately experience maximum convenience.
Simplify work for employees. Like facilitating customer interactions and experiences, digital transformation also has the potential to automate and simplify process steps as well as provide information to employees to help them perform their jobs more efficiently and effectively. With greater productivity for the employee comes the possibility of repurposing employees time to more value-creating activities (like consulting with a customer or answering questions).
We can see this kind of digital transformation taking place in air travel. Much of the experience in an airplane has been digitized for employee convenience: flight attendants carry small devices to complete in-flight purchases like meals, drinks or duty-free items. Pilots use iPads in the cockpit (rather than large binders) to complete pre-take-off procedures, create flight plans, and as reference guides. These new technologies automatically update with current information and drastically improve and facilitate the employee experience resulting in greater overall efficiency and effectiveness.
Remove steps from a process through automation and/or process changes. In addition to facilitating an employee’s experience, digital transformation allows organizations to remove process steps and/or automate work altogether. For example, in large manufacturing plants and distribution centers, robots are used to perform many of the production steps. Similarly, companies use RFID technology to track inventory and shipments using scanners. Rather than check, scan, and record the progress of products manually, these chips send automatic updates about the product/package’s location and production progress. These digital transformation methods improve product delivery speed, quality, accuracy, and efficiency that would be unobtainable through manual methods.
Leverage enhanced information, analytics, and technical capabilities (e.g., machine learning). As perhaps the most transformative way that digital transformation is making an impact, data and machine learning uses the incredible amounts of data to predict decisions and anticipate customer/consumer needs and outcomes.
In the healthcare industry, machines with the right algorithms can predict and diagnosis peculiar or specialized health conditions better than humans, because they can compare the images and diagnostic tests against massive databases of information and historical data. Leveraging technical capabilities like this, healthcare diagnosis is becoming more accurate and faster.
The four digital transformation principles mentioned above certainly offer appealing upsides. Before jumping in line (or on your device) for these new technologies, there are a few watch-outs of which to be aware. Any transformation (digital or otherwise) must:
- Drive strategy. Just because you can put more information in the hands of consumers and employees, eliminate process steps, and more effectively utilize data doesn’t mean that these things will be strategically helpful to your organization. If these digital transformations don’t drive your value proposition, they won’t necessarily bring marketplace differentiation or long-term economic value. If your organization (work, structure, systems, people, etc.) isn’t aligned around your strategy, even the best digital transformation solutions won’t bring full marketplace value.
- Have a business case. Implementing a digital transformation presents substantial investment costs to your organization. Before uprooting your tried and true methods, make sure there is a substantial business case for the change – not just an economic case but a strategic case. How will investments in a digital transformation give you a competitive advantage?
- Align all organizational systems. With any transformation, you must think about the organization like a system. Digital transformation is NOT an IT solution, a tool, or a single solution. A digital transformation affects the entire organization, and leaders must consider all the implications of a change to the system including how it will impact the work, the processes, the roles/structures, measures/KPIs, the rewards/incentives, and the culture. These parts of the system combine to produce an output. A technology alone cannot sustainably improve your output. It is in the alignment of the organizational systems that true differentiation is achieved and sustained.
While digital transformation presents fantastic possibilities, it cannot be considered an IT solution when it is much more than that. To fully leverage the power of a digital transformation, leaders must consider their entire organizational ecosystem and have the patience and wisdom to only say “yes” to the right digital transformation that will align with and drive their unique strategy.