What Does Digital Transformation Really Mean?

DIGITAL IS ... AN ADJECTIVE

… which is why the question "What Is Digital" so often leads nowhere. We need to get some nouns into the discourse! 

Here we focus on understanding digital transformation through the complementary lenses of digital culture and digital business. 

Having set the scene, we move on to the overall strategic imperatives of every enterprise transformation. We then map the three sequential stages of transformation that summarise the enterprise journey.

Simply put, the question we’re asking here is “What problem are we solving for the enterprise?”

REFRAMING THE CHALLENGE

Digital Culture

Digital culture is not, at its roots, about networks and smartphones. It’s a societal condition, now effectively global, that is driven by the systemic and technologically-enabled shift of power from institutions and corporations to individuals and groups.

It began, and continues to evolve, along the narrative of the ongoing Consumerisation of Technology, a quite recent phenomenon that was born in the 1980’s, at the intersection of the PC revolution and early forms of interactive entertainment technology such as the karaoke machine and the (analogue) video game.

The key dynamic here is that of the increasing agency of the individual: there’s a direct line between these origins in so-called “multimedia”, and today’s empowered, connected consumer.

Digital Business

Digital business is not best understood merely in terms of software, networks and devices: these are of course key enabling components.

It’s the impacts of these ever-changing technologies that matter: this is above all about meeting the challenge of the consistent acceleration of market clock speed, which has been set in motion (in digital culture) by the migration of billions of end consumers onto global networks.

It’s this radical shift in the locus of value onto networks that has seeded and enabled the unprecedented growth of the most powerful and disruptive brands in history.

When we talk about “the Uber effect” (whether as threat, opportunity or both) we are, consciously or otherwise, referring to explosions of disruptive market power through network value innovation.

This is driven, above all, by Network Velocity.

Digital Transformation

Digital culture and business combine to frame the essential strategic context for transformation. This is about a programme of change to reconnect the enterprise with the market, and align its functions around the end customer.

For the C-suite, there are three “prime” transformation imperatives:

• Acceleration – the paramount challenge is a managed shift from corporate, then to customer, then to network speed;
• Adaptation – the ability of the entire enterprise to flex and react quickly (at micro and macro levels) to opportunity and threat;
• Automation – the systematic and focused encoding into software of any and all functions that are susceptible, increasing speed and quality, while reducing cost.

These three prime activities combine to define the boundaries of any truly strategic digital transformation programme.

GETTING TRANSFORMATION WRONG

Two common misconceptions tend to block the enterprise from genuinely strategic transformation programmes, delay the instigation of productive work, and suck up important budgets.

It’s correct, to a degree, to focus on customer experience: this is not itself transformative, it’s at best incremental.

While UX/CX work is important, if made the core of a strategic programme, it diverts attention and spend from the deeper interventions while over-emphasising touch points and interfaces;

Equally common is a focus on data over value, linked to an assumption that information is the key to faster, more accurate end customer insights, and a deeper and more sustainable relationship.

Of course, this is an important consideration, but as with the interface problem does not in itself support a differentiated, meaningful brand><customer relationship.

THE TRUE JOURNEY OF TRANSFORMATION

It’s recommended for initial analysis and planning purposes to view digital transformation as travelling across three distinct and logical stages:

1. Efficiency – streamlining and cost-cutting in business processes, where most enterprises have focused to date, and many get stuck;
2. Integration – the reorganisation of enterprise products, people and processes (overall, its philosophy and culture) around the end customer (meaning the external market environment);
3. Migration – most challenging and disruptive, the shift in the enterprise’s model of value creation and distribution onto the network.

We immediately recognise that the most admired and highly-valued innovators – from Google, Facebook and Amazon, through to the ubiquitous Uber and AirBnB – have already jumped straight to the third stage: their models fully leverage network speed and scale.

They dominate in an entirely new, albeit recognisable, form of cultural and commercial power.

This is Network Agency. Network Agency is, above all, the prize towards which all enterprise programmes of digital transformation must, in the end, aspire.