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Uporabne vsebine in članki

Threats and Opportunities of Digital Business Transformation

Part 1 - Where to start to succeed

Within the COVID-19 economic consequences, many organizations found themselves in a struggle for survival. But not the best ones. These have and will take the opportunity to become even stronger. If we disregard pharmaceuticals and companies with protective equipment, what these organizations have in common is that they have already successfully implemented their digital business transformation. The truth is that there are not many of these organizations, because according to research, the percentage of successful digital business transformations with realized planned business effects is deficient, less than 20%. Scary information! But, at the same time, information that gives other organizations a second chance. It means that they have not entirely missed the last train in the fight for their customers' share. However, they face a difficult task because they will have to carry out their digital business transformation in significantly more difficult circumstances. Still, at the same time, they have the opportunity to gain an advantage in the market. Their job is not to repeat the mistakes of failed digital business transformations and arm themselves with the experience and knowledge of those successful ones.

Organizations are in a difficult position in order to succeed in digital business transformation

When deciding to implement a digital business transformation, organizations found themselves in an even more difficult position. Questions that organizations have asked themselves so far, such as:

  1. Is digital business transformation necessary at all? We've been talking about it for a few years now, and even without doing it, we are still doing well.
  2. Who to trust? Who will help us to achieve the successful implementation of the transformation? Aren’t these just new sales approaches of IT vendors and consulting houses?
  3. What do we need to do to not end up among that 80% of organizations that have spent money, time, and motivation on people for digital business transformation, but without the proper effects?
  4. What exactly is digital business transformation anyway? In the multitude of information and various explanations, we don't know how to deal with it to be successful in the end?
  5. Should we use the last reserves, or should we keep them for survival at the next such event?
  6. Should we focus the already limited resources on the demanding digital business transformation, or should we use them in traditional business activities to increase sales? 
  7. What is the new thing we need to do - will online sales and door-to-door logistics save us from similar situations? Do we need to do anything more?
  8. What are the strengths and weaknesses of our organization related to digital and COVID-like situations?

Organizations need to get answers to these questions right away. There is practically no waiting time. Economic conditions have changed radically. At the next similar event, they will even more so. Organizations will not be able to cope with cost efficiency alone. Therefore, they need transformations at least a part of their offer. But above all, they need to develop digital culture and new digital capabilities. Otherwise, they will be in even greater trouble.

Where to start

Digital business transformation is primarily business and then about digital technology. Digital technology is a necessary inclusive factor, but the key to successful digital transformation lies in understanding what the business part of the transformation means. We already know from the traditional economy that the purpose of business is to obtain revenue from customers and, at the same time, earn more than we have invested resources in this revenue generation. Within the digital economy is the same. What is new and different is that customers are better informed. They want special personalized treatments and offers, they look for different forms of value (e.g., experience has become a decisive factor in buying, quality is something to be taken for granted), they have a wider choice of offers to satisfy the same needs, they are no longer loyal to brands, and they change producers of products and services even faster, with just a click. What is also new is that digital technology has provided the customer advantage described above, as organizations, on the other hand, are still increasingly focused on using digital technology to reduce the cost of automated processes. Digital technology has enabled a shorter time to bring new products and services to the market and thus led to the arrival of new competitors. They offer similar or better products and services. They also provide them differently, with a different business model. In short, in the digital economy, new trends have developed with different customers and new digital technologies and new rules and conditions for a successful business that new competitors can handle better than our organization. The latter is a significant threat to existing, traditional organizations that have not or will not be able to adapt to these new business conditions shortly. An additional problem for them is that entirely new capabilities are needed to adjust to these new conditions. Those abilities that have enabled them to become successful in the past and in the present will not ensure their success in the future.

So, where to start? 

At the very beginning of planning their digital transformation, organizations should:

  1. know and correctly understand the new digital economy characteristics (we will describe them in Part 2), especially their impact on their business as threats or opportunities;
  2. measure their competitiveness in the new business environment and assess/evaluate their ability to adapt to a successful business in the digital economy and thus obtain guidance on what new (digital) capabilities they need to develop to close the gap between the current and necessary state for a successful digital business transformation;
  3. define what the success of the digital business transformation means to them and, accordingly, define and (measure) the constituent elements and their progress during and after implementing the digital business transformation;
  4. establish a digital business transformation management system with the right responsible bodies and procedures to prepare, implement, and monitor the transformation;
  5. develop the characteristics of digital culture and digital competence;
  6. Targeted use of digital technologies and digital solutions for innovating new business models and a new offer for (new) customers, while of course, also taking care of additional cost-efficiency. 

What must be avoided 

The most significant danger to digital business transformation is to skip the correct start described above and instead start in the way of traditional planning of a set of digital projects or a pilot digital project. 

The second most significant danger is the silo approach, which usually manifests itself in two forms:

a) vertical silos, already known from traditional business, which fights for available resources, especially for their projects; approved projects are assigned to individual functional departments (IT, marketing, sales, organization and quality, development…), other parts of the organization then completely leave their implementation to domicile stakeholders, which is reflected in passive monitoring;

b) a new horizontal silo approach, where digital initiatives in technologies, processes, and competencies are implemented mostly unrelated.

Succeeding means

Without a clearly understood and predefined result of digital business transformation, which will be reflected in business effects, it doesn’t even make sense to start. Examples of components of the result or examples of (digital) business effects are:

  1. The higher level of visibility of the organization and its offer by customers.
  2. Customers are guaranteed a higher level of business experience with us.
  3. The new (digital) value provided to customers.
  4. Customers are active promoters of our offer
  5. Breakthrough innovations, either in business models or in new digital products.
  6. Digitized processes among all stakeholders of the organization's business ecosystem, which harmoniously build a good experience of customers and other stakeholders.
  7. Employees are provided with a higher level of experience.

Without measuring progress and the degree of success achieved, there is no success in any business change, even, or even more so, in digital business transformation. 

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