Digital Transformation ̶ what’s wrong with that?
Digital transformation is the organizational change that uses digital technologies and management models to improve the performance of the organization and the customer experience.
A few days ago I was asked, “why am I not reducing the costs and why the efficiency of my processes is not increasing with the investments I have made in Digital Transformation?”
First, I asked the manager to answer the following questions to structure my answer:
– Were your processes all simplified, standardized and automated by some efficient ERP?
– Is your IT environment always available and committed to the business areas and available to improve operations with integrated and modern solutions?
– Do your area managers work together to find solutions for your customer?
– Is there any conflict between managers or problems with overlapping functions?
– Do the performance indicators show clearly which points should be improved in the operation?
– Does your integrated management system allow easy and friendly integration with other technologies?
– Does your integrated management system have a low dependency outsourcing consulting to meet market conditions and changes?
– You don’t have an Excel spreadsheet in use in your operation, do you?
– You don’t have any sheets of paper going around for some approval in your operation, do you?
-You don’t use email as a communication and control tool for management and approval, do you?
So I concluded: IF YOU ANSWERED POSITIVELY TO ALL THESE STATEMENTS, THEN YOUR COMPANY IS READY FOR DIGITAL TRANSFORMATION.
Digital Transformation is a complex subject and is featured in many events that point out the advantages we will achieve by using it. But why are there some companies spending so much and reaping little benefit from this remarkable solution?
The focus of this transformation should be based on a better strategy, where digital technologies can be used to implement it. In other words, the emphasis is on strategy, transformation and organizational context and not only on the use of technology.
I always remind that the organization is based on 3 elements: Processes, Technology and People. Transformation starts with people and a change in the way of thinking, which must focus on the organization, collaboration and experience of the customer/user and not on solving their particular and momentary (tactical) problems, or the right to use technology for themselves, but yes, it should focus on business models and operational processes, and finally on products and services, and the use of new technologies as viable and automating tools in order to improve people’s quality of life and customer satisfaction by using solutions that really flow between the organizational processes.
Thus, successful digital transformation measures focus on the customer experience (deliveries). Those measures begin by transforming the operational processes, then breaking up archaic business models focused on operation and moving on to the definition of new technologies, emerging or maybe not, but prepared for the new plug & play design by using APIs, IoTs and integration with fintech partners.
Far beyond Robots, Apps and Artificial Intelligence
Digitization began in the 1990s, with the use of computers and the standardization of business processes associated with cost cutting and operational excellence ̶ the ERPs arrived. Later, with Internet access, companies were able to use the power of communication skills both inside and outside the company including the connection to suppliers and customers ̶ it was the wave of CRM and e-Commerce.
But now, “digital” refers to a series of powerful, accessible technologies with potential to promote changes, such as social media, BPMS, RPA, mobile devices, cloud computing, big data and analytics, Internet of Things, cognitive computing and biometrics. These digital trends offer the organizations opportunities for transformation and growth. Digital transformation implies rethinking the company’s values, not only its operations, where it can innovate to deliver improved products, better services and customer engagement.
Transformation is fundamentally about changes, and organizational change is the ground for transforming your future digital business. Organizational change takes place where most of the challenges and opportunities lie, because it is related to people (how they work), processes (how they were designed and integrated among silos or organizational departments), strategies (how mature they are and where do you want to go in term of goals?), structures (governance model with well defined roles and responsibilities, without conflicts and overlaps), and competitive business environment (the market and the customer).
An organizational change requires:
• clear recognition of the need (why) to transform
• understanding of what should be transformed, and
• a roadmap (how) to make necessary changes.
Successful transformation requires the development of agility that enables organizations to respond to a high rate of demands and unpredictable changes, which are characteristics of disruption or digital paradigm.
Digital technologies and business models
A business transformation becomes digital when it is built on the basis of processes in accordance to the digital technology pool, without, however, stifling or hindering the business from adapting to any change or disruption of the digital paradigm. That is where propaganda and reality clash.
Technologies and business models that sustain the digital transformation cannot be grounded as they vary over time and, to some extent, by industry and geography, and, thus cannot respond to the wishes of the leadership, they must be designed to meet the demands of the business.
Nowadays, the following technologies are significantly linked to the digital business transformation:
• Process automation tools ̶ BPMS
• Tools and analytical applications, including “big data”
• Mobile tools and applications (Apps)
• Platforms to build shareable digital resources, such as cloud-based solutions and the markets of apps
• Tools and apps for social media, and
• The Internet of Things (IoT) including connected devices and “smart” networks.
Together, these digital technologies, often known as the Internet of Everything (IoE), are having a major effect on how companies and industries are transforming or reshaping their processes, often due to new flexible and versatile business models to meet the customer needs, or better saying, “the customer experience”.
Combining organizational changes and digital technologies, in their turn, have the potential to improve performance in several areas. In fact, it is a mistake to restrict evaluation to a single metric. Overall, performance improvements can be achieved in the following areas: revenue growth; improved efficiency and cost reduction; faster and successful innovation; more effective collection, sharing and use of knowledge; more customer engagement and customer service; and sustained protection against digital disruption.
These performance improvements are quantifiable because they can be measured and reported. The quantifiable nature of many digital technologies, such as connected devices, big data and social media, is a key element of digital transformation.
Thus, under a more critical or conscious view, an organization can see its maturity gap from the organizational transformation it intended to achieve (but not yet planned), and believe me, this lack of organizational maturity will cost you a lot of time and money, some disappointments, and unreached results.
The difference between these two stages represents how much organizational transformation will be necessary to achieve the ideal maturity for your effective digital transformation. In some cases, the difference may be relatively small, requiring gradual changes. In other cases, the difference can be very big, suggesting the need for more sweeping changes. According to Gartner, currently, only 30% of digital business transformation efforts will be successful. Very little, in my opinion!
It is crucial to understand the relevant trends and to decide on the right answer, but necessary changes must be carried out quickly. This means, fast implementation is required.
There are some crucial elements for fast implementation that can be learned from the concepts of Agile and Lean methodologies. One of them is the importance of an organizational culture that encourages experimentation and tolerates failure.
Innovation and experimentation fail all the time. In fact, most new efforts fail. A fast execution capability recognizes that the failure will occur, and considers it acceptable whenever there is a strong effort to learn from the failure, adapt and try again. It is a continuous improvement in action.
Another aspect for quick execution is the ability to move resources quickly and efficiently to where they are most needed. High levels of bureaucracy and organizational silos are enemies of fast execution. Organizations that adopt Shared Services as an organizational model are usually enabled to act at lower levels of the company hierarchy, they tend to be more agile and their focus is on the customer.
The tasks are digitized as far as possible to allow fast and integrated transactional processing, and teams are dedicated to meet and to analyze customer demands.
Digital transformation is the organizational change that uses the right digital technologies in mature business models which are able to adapt in order to improve continuously the organization’s performance and customer experience. Such change starts from understanding the advantages, risks and motivation, in other words, why to transform followed by a planning questioning what should be changed (business model, structure, people, processes, IT capacity, offers and culture of services), and finally how to do it, considering trends, collecting information, and acting quickly.
This transformation can be facilitated by an entrepreneurial and innovative thinking such as the successive experimentation and refinement of startups, using the concept of business ecosystems, characteristics of fast-growing organizations (some say exponential, but I think it is “forced”, unrealistic, and misleading that a company grows 10 times faster. Would your planning and organizational process structure, people and technologies support this growth? Do the math!), and the possibility to generate or participate on business platforms. But remember that technology is not the solution it is only the path and the enabling element for change, if used properly.
Be successful on your Business and Digital Transformation journey.
Carlos Magalhães has been working as an Advisor and Business Advisor for more than 20 years. Recognized as a notorious expert in Shared Services, he is committed to implementing and improving SSC initiatives and networking with hundreds of SSCs in Brazil and abroad. As a consultant in Corporate Restructuring and Transformation, he is actively involved in creating and developing efficient Shared Services models through simplification, standardization and efficient use of automation, using innovative technologies related to the Digital Transformation concept, searching for superior performance and cost reduction in a sustainable manner to the organization. Recognized specialist on the implementation and maturation of Shared Services models in Brazil and Europe. Author of the book CENTRO DE SERVIÇOS COMPARTILHADOS – Estratégia para Maximizar o Valor de sua Organização – 2ª Edição (Shared Services Centers ̶ Strategies to maximize the value of your company–2nd edition). He is a member of Xcellence & CO. and editor of the electronic magazine XMagazine – www.xmagazine.co