Digital Transformation (DT) is a prime subject of discourse – and hyperactivity – across organizations. It’s on top of the CXO agenda. Key industry analyst firms and consulting firms advise organizations to ramp up DT initiatives to stay relevant. What makes DT so profound that hardly any technology conferences can go without discussing this buzzword?
First, let’s be clear on the widespread misconception: Digital Transformation is NOT the same as Digitization. Digitization is more about getting house in order by standardizing processes and tools. The main objective of digitization efforts is achieving desired operational efficiency. Organizations, small and big alike, have been pursuing this task over the last few decades. Using a software for production planning or accounting or getting website done for business are all simple examples of digitization. But all these digitization efforts, irrespective of the size and type, are driven from an operations standpoint.
Digital Transformation (DT) is far more radical and evolutionary in nature. Though, embracing bleeding technologies is a critical success factor, DT is essentially about business transformation. Organization will not have the luxury of an easy to-do-list when it comes to DT, unlike their digitization pursuits. It urges incumbent organizations to re-imagine their value narratives to existing and new customers, in a brave new world characterized by unprecedented competitive threats and disruptive innovations. Digital Transformation has eviscerated key industry players from multiple industries ranging from retail to hospitality to transportation. Such disruptions shed more lights on this trend: Digital Transformation is a long and arduous journey.
Technology investment, especially on Cloud, Mobile, IoT, Cognitive, Social and Analytical, does play critical role to tide the wave of Digital Transformation, but organizations must do more than this. Exploring new business models, strategic investment in promising startups, co-creating value with partners, incubating in house business disruption models, attracting and nurturing new digital native workforce and redefining performance metrics that’s in line with present reality are more significant and prudent steps to minimize risks associated with DT efforts.
Recent case studies on digitally disrupted organizations offer good lessons on survival: organizations, especially larger ones, with huge investments in legacy systems and technologies, will find it difficult to navigate digital transformation journey at right pace. Maybe, creating “Bimodal IT organizations” would help them tackle this conundrum.
A recent analysis by The Economist on digital disruptions raises many eyebrows. It says digital disruption is rampant and many firms are facing the heat, as per many top business leaders, but firms disrupted in recent times account for a small percent of the S&P 500 Profits! “The toll that digital disruption has taken so far on overall earnings is thus tiny”. And “Across America’s economy profits are high and stable relative to GDP.” says The Economist. So, from an investor’s standpoint, digital transformation is not having much impact, as it projected to be.
Come what may, organizational obsession – or collective hysteria – with digital transformation “projects” and “journeys” will continue for some more time, till we accept it as the new normal.
A good post Vijayan. Digital Transformation (DX or DT) is neither about Digital nor is it about Transformation, it is definitely to do with how the expectations of clients, employees, and other stakeholders is changing. Clients in the B2B space also want an ‘Uber’ like experience. It is about being agile to the change and having the right leadership for making this change.