So let's talk about why we need to distinguish between digital transformation and digital optimization. And also about why you have to destroy the existing business model in order to create new value for your users.
What we called digital transformation about 15 years ago was the usual digitization of data. Now digital transformation has a different context, but not everyone understands it correctly. Some people think that they are digitally transforming their businesses, but are actually doing digital optimization.
Digital Transformation Specialist, Early 2000s
Optimize or transform?
Let's say you have introduced machine learning that is fashionable today, which analyzes contracts and looks for risky places in them. Now lawyers are less involved in routine, and they spend their time on solving intellectual problems. This is what is called digital optimization: you left the business process of negotiating contracts the same, but accelerated it and made it more efficient.
We get the definition of digital optimization – the modernization of systems and processes using digital tools. The benefit is that employees work better, and you spend less, because now employees need not ten, but, for example, only five for the same range of tasks. Typically, digital optimization is applied pointwise: for complex business processes, products or services.
But digital transformation is called the creation of products and services with a new value. This is not “introduced a new technology, and now instead of people, robots do part of the work”, but “created a new product that dramatically changes the user experience”. And this is no longer machine learning, which somewhere quietly rustles and helps only your lawyers (programmers, accountants, operators, etc.). After the digital transformation, users will consume and perceive your products and services in a very different way.
Talking about digital transformation is easiest on real success stories. Take Netflix: At first, the company was engaged in sales and rental of films on DVD. Then she left only a rental, and sent the discs by mail. After some time, she launched a streaming service and a recommendation platform, which with high probability guesses which movie or program the user will like. Over the past six years, Netflix has been successfully producing its own films and series.
Another example of a successful digital transformation is the story of the Financial Times, which has abandoned the print version and now exists only in the web and mobile application. But the company Kodak, which until recently held on to the usual model of work, is not doing very well: if you google this name, then on the first page of the issue you will see headings like: "Why Kodak died …"
Digital Transformation – Like a Chess Game
Get ready to have to think a few moves ahead. It is not necessary to radically change all processes, but you need to imagine what you will do next, which difficulties await. Perhaps digital transformation is not needed, is digital optimization enough?
Nobody knows what you will face in the process of digital transformation.
To doubt this situation is normal. If digital transformation were so easy, then everyone would have done it a long time ago. But this is a complex process, where first you have to destroy the established business model and rebuild it. You need to consciously destroy your business before someone else does it.
How to start a digital transformation
Ok, Netflix did it. How do you succeed in digital transformation? To begin with, we propose changing something not quite obvious: corporate culture.
Start with Employees
In many companies, the lack of corporate culture is hampering the digital transformation. Often in organizations there are closed formations that are called “silos” or “bunkers”. Employees with a bunker mentality carry out their tasks and have no idea what value their work is, and after it the products and services of the business are for the final consumer. As a result, the quality of services is falling, but nobody is interested.
If you get rid of the high walls between the departments, you can take a big step forward. But the corporate culture will have to be “pumped” at the level of senior management – the C-level – and only then will the support of managers of all levels in all divisions of the company be secured.
Until employees understand that it is possible to work differently, the business will stagnate
Report to employees that they work in a single system and the value of the company's products and services depends on the actions and efforts of each of them. Be prepared for the fact that at the lower levels your ideas will support the worst. How to prepare a team for change is well written in J. Cotter’s book “Our Iceberg Is Melting” – we recommend reading it.
Hire broad-minded T-shaped employees in various fields (horizontal part of the letter T) and expertise in one narrow area (vertical part of the letter T). They are also called generalists for their holistic views on the stream of value creation (superficial knowledge in each field) and for professionalism in a narrow field (without the ability to see the big picture).
Why do you need such specialists: they do not focus on their tasks, are ready to interact with other employees and departments for the sake of a common cause, and perceive the whole picture of creating new values in the organization.
Remember the walls? T-shaped specialists are capable of destroying them, as they quickly adapt to changes.
It’s good if you hire a P-shaped professional who is expert-level in two areas.
Create a single recording system by combining the classic information systems of vendor accounting, business transaction accounting, vendor ecosystems and others that manage organization-critical data. Integrate disparate components on one platform and provide a Single System of Engagement (SSE). This is a technology for organizing the way for users through personalized, seamless interaction at different points of contact. These points will be social networks, e-mail, mobile applications, service portals.
A single engagement system will help you destroy the walls of the bunkers, and then employees will see the work of colleagues and understand how their joint actions affect the goals and objectives of the company. SSE will link all dimensions of service management: information and technology, partners and suppliers, value streams and processes. All this will “live” on a single platform, providing a seamless and convenient interaction between the above dimensions.
Unity and convenience are the main qualities of integrated platforms, which ideally should be fast and convenient – like an application on a smartphone. In the end, new generations have digital thinking, and they will have to meet their expectations: a slow and cumbersome platform with forms of 50 fields is not their choice.
The path of digital transformation must begin with people, changing their thinking. And only when you dismantle the old business model and prepare the company for large-scale transformations, you can connect specific tools. Remember that your engagement system must be unified – this is the only way participants in business processes will continuously interact, and customers will gain new user experience and decide whether your business needs the market.