Upstart visionaries ranging from Uber to Airbnb to Netflix have achieved stunning success by blending cutting-edge technical capabilities with innovative business models. In most cases, their success has come at the expense of established industry players who were blindsided by these emerging competitive threats. Faced with the possibility of being victimized by new digitally driven disruptors, companies are scrambling to “reinvent” their own business strategies and processes before someone else beats them to the punch.
These proactive efforts are typically proceeding under the banner of “digital transformation,” and often focus on exploiting so-called “third-platform” technologies. Most notably, these technologies include mobile devices, cloud computing, social networking, and Big Data analytics. And indeed, the companies now changing the rules of engagement within different industry sectors are each using some combination of these digital tools and platforms.
Unfortunately, in response to these threats, some companies are placing themselves at risk by putting the technological cart in front of the business-case horse. It’s easy to get so swept up in the features and capabilities of, say, mobile devices or Big Data analytics, that you neglect to focus first on the specific opportunities, challenges, and requirements your company faces.
Determining the best course of action involves many variables, including those that are unique to each company and market sector. Still, there are common, business-driven considerations that every company should explore. One approach to digital transformation, promoted by SAP, involves addressing five key pillars:
- Customer experience: What do customers expect when interacting with your company across all channels (web, social, phone, in-store, etc.), and how can you improve their experience in each?
- Supplier collaboration: Which suppliers do you need to work with, and how do you most effectively interact with them to deliver your products and services and also optimize your own operations?
- Core business processes: What are your most-critical business processes within each sphere of operations (e.g. finance, manufacturing, R&D, sales…), and how might you enhance or replace those processes?
- Workforce engagement: What tools, support and incentives do your employees expect and require to be both effective and enthusiastic when performing their jobs?
- Assets and the Internet of Things: What digital assets and information sources do you have, and which can you develop, to drive real-time insights and help create new business models?
Clearly, addressing each of these digital transformation pillars requires you to leverage a variety of technological tools. But it’s important to fit the tools to the needs and opportunities identified when exploring the five categories above, rather than allowing the capabilities of the tools themselves to set the business-strategy agenda.
That said, you must fully understand the depth and breadth of third-platform functionality in order to identify the ways in which you – or your competitors – may upend the status quo. You are also likely to face some hard choices when it comes to writing off some existing IT investments sooner rather than later. One of the biggest drags on digital transformation is the presence of unnecessary complexity throughout the IT infrastructure. To most effectively exploit advanced technological platforms and the new business models they permit, you may need to make a clean break from inflexible and fragmented legacy systems that were designed to support the old way of doing business.
For more insight on digital transformation, see How To Develop A More Effective Digital Transformation Strategy.