The Chrysalis of Digital Transformation

The metamorphosis of a butterfly is one of nature’s wonders. From ground-bound, clumsy caterpillar to elegant and beautiful butterfly, this transformation takes place within the small confines of a chrysalis. Only when the butterfly frees itself from its chrysalis is it free to fly. Many of today’s companies are in the chrysalis of digital transformation struggling to break free from their Industrial Age roots. To complete their metamorphosis, McKinsey analysts, Michael Bucy, Stephen Hall, and Doug Yakola, assert, “Companies must be prepared to tear themselves away from routine thinking and behavior. In industry after industry, scenarios that once appeared improbable are becoming all too real, prompting boards and CEOs of flagging (or perhaps merely drifting) businesses to embrace the T-word: transformation.”[1]

The Digital Transformation Imperative

digital transformation 02One thing many analysts agree upon is the fact that “transformation” is becoming an overused buzzword. Patricia Panchak (@PPanchakIW) writes, “The word ‘transformation’ is fast becoming overused. … The problem isn’t that we’re not living in transformational times. We are. Rather the danger is that too many business leaders will use the word too casually or push their ‘transformation’ too hastily, without truly understanding the mindset change that’s required.”[2] The McKinsey analysts agree. “Transformation,” they write, “is perhaps the most overused term in business. Often, companies apply it loosely — too loosely — to any form of change, however minor or routine.” The point they are making is not that transformation is overrated or unessential — quite the opposite. They are arguing that putting digital lipstick on an industrial age organization doesn’t transform it into a digital enterprise.

The business landscape is shifting dramatically. Business leaders are trying hard to keep their feet while ensuring their companies can survive the violent shakeup caused by digitization. IDG analysts observe, “Once cutting-edge trends such as data analytics, digital labor, IoT, cognitive automation and design innovation are now becoming more mainstream, creating a wide variety of challenges as well as opportunities for the C-suite. For the IT organization, that means supporting business efforts to thrive in this digital world by thinking and acting digitally — rapidly adjusting to constantly shifting disruptive forces and evolving customer expectations in the face of increased competition. This new landscape should not be viewed as a mountain too steep to climb, says Rick Wright, Principal and U.S. Leader of Digital and Mobile Solutions at KPMG. Instead, [digitization] should be embraced as a powerful way to transform businesses and gain long-term competitive advantages, ‘We believe digital is not a thing, but rather is an enabler that allows organizations to exploit new pathways to create value — whether that’s new customers, new experiences, new markets or new business models,’ he says. ‘And, we believe it’s industry-specific in its impact and has gone far beyond the front office to facilitate true enterprise-wide business transformation.'”[3]

Digital Transformation Strategy

Jeanne W. Ross and Ina M. Sebastian, from the MIT Center for Information Systems Research, along with their colleague, Cynthia M. Beath, a professor emerita of information systems at the McCombs School of Business at the University of Texas at Austin, assert, “To succeed today, companies need a unique value proposition that incorporates digital technologies in a way that is difficult for competitors to replicate.”[4] They add:

“As leading technology companies embrace biometrics, artificial intelligence (AI), drones, and other exciting digital technologies, senior business executives at many other companies feel pressured to do the same. But if they are to maximize the value from investment in new technologies, business leaders first must make sure that their companies have a great digital strategy. … A great digital strategy provides direction, enabling executives to lead digital initiatives, gauge their progress, and then redirect those efforts as needed. The first step in setting this direction is to decide what kind of digital strategy to pursue: a customer engagement strategy or a digitized solutions strategy.”

At the heart of digital transformation lies data and data analysis. Martin Doyle (@DQMartinDoyle), founder and CEO of DQ Global, explains, “A data-driven business utilises data to inform every business decision they make. By analysing relevant data and evaluating it they are able to form a conclusion and predict trends. Data-driven businesses ensure their company culture evolves to encourage innovation and agility. It is imperative for all employees within a data-driven business to collect, analyse and learn from data on a regular basis in order to consistently drive results and improve their skill set.”[5] Some analysts suggest the best thing a company can do is create the company that could put their current operational scheme out of business. Panchak writes, “To avoid half measures in the transition to your digital future, you’d do well to heed the advice of EOS founder and CEO Dr. Hans Langer, a pioneer of additive manufacturing. It’s not about simply installing a new piece of equipment or a new technology, he insists, “It’s a question of mindset. It’s a question of what you do with such a technology.”

Leveraging Digital Technologies

IDG analysts believe four emerging technology trends are going to be particularly disruptive in the years ahead. According to the analysts, “These should be high-priority areas for organizations to harness and leverage in order to achieve their most important business outcomes”:

  • Design innovation is about designing for people, not processes, and needs to challenge legacy business and industry models. This will accelerate organizational change and help create and shape future value. Keep in mind, the typical design-build-run does not foster design innovation — more agile design models are necessary.
  • Internet of Things offers a new ecosystem of sensor-based connected devices, technologies and objects that drive the volume, velocity and variability of data. This new level of connectedness can capture substantial business value.
  • Digital Labor represents a convergence of robotic process automation (RPA), machine learning, cognitive computing, artificial intelligence, and advanced analytics, which is automating workflows and bringing structure to vast unstructured data sets and the knowledge base of organizations.
  • Data analytics add tremendous business value by leveraging big data and identifying insights, which has become critical to the success of any organization.”

KPMG’s Wright told them, “Organizations can leverage these disruptors to achieve their business outcomes in ways that were never possible before. The opportunities to reduce costs, automate processes, maximize growth objectives, and reinvent business models are vast.”

Summary

IDG analysts conclude, “Companies that capitalize on these digital opportunities — think Uber, AirBnB, and even GE — should thrive in the market, while those that do not will most likely lose out to new players. A business-first, people-oriented approach is key.” Panchak agrees that companies need to think and act in new ways if they want to truly embrace transformation. She explains, “Succeeding with a true transformation requires a team with a mindset willing to imagine approaches not tethered to conventional [operations]. Keep that in mind to ensure your digital transformation is worthy of the words.” Doyle adds, “Data and analytics must touch almost all aspects of your business. Technology continues to evolve providing businesses with the means to collect an increasing amount of data from more sources than ever before. Since becoming data-driven requires a cultural transformation, you may also decide to hire a data analyst to help you maintain your evolving business model, drive change, increase adoption and encourage innovation.” One thing all of these subject matter experts agree upon is that companies need to transform as completely as butterflies do during their time in their chrysalis. They need to break free of old thinking, old ways, and old organizational arrangements and figure out for themselves what it means to become a digital enterprise.

Footnotes
[1] Michael Bucy, Stephen Hall, and Doug Yakola, “Transformation with a capital T,” McKinsey Quarterly, November 2016.
[2] Patricia Panchak, “Transformational Thinking,” IndustryWeek, 12 October 2016.
[3] IDG, “A Whole New World: The challenges and opportunities of digital (Part 1),” CIO, 5 October 2016.
[4] Jeanne W. Ross, Ina M. Sebastian, and Cynthia M. Beath, “How to Develop a Great Digital Strategy,” MIT Sloan Management Review, Winter 2017.
[5] Martin Doyle, “Six Tips to become a Data Driven Business,” Datafloq, 2 October 2016.

Follow me on Twitter