What Exactly Is Digital Transformation?

Geoff Scott

Digital Transformation – The SAP User Community Perspective – Part 2 of 4

Last week we began our six-part series on digital transformation by presenting the challenges and opportunities that we all face on our digital journey. Hopefully we inspired you to more deeply think not only about how digital transformation impacts your organization but also how it impacts you. This week, we are going to take a step back and talk about what digital transformation is before we continue forward.

The phrase digital transformation has been used widely in articles, blogs, keynote addresses, books, and podcasts. A simple Google search returns more than 4.2 million results. Unfortunately, as the phrase is more widely used, it becomes more all-encompassing – and therefore increasingly vague. From our perspective, digital transformation is simply this: the relentless pursuit of the conversion of our physical world into an environment represented by information, software, analytics, technology-enabled business processes, bits, bytes, and data.

That is still a lot of words. Perhaps said another way, digital transformation is made possible by:

  • Pervasive and omnipresent mobile technologies – mobile phones, tablets, and, most importantly, cellular and Wi-Fi networks that connect these devices together.
  • The Internet – which provides a common highway on which this mass of data travels at immense speed and at ever-increasing capacity.
  • A global society that is increasingly reliant, and increasingly dependent, on these devices and networks to accomplish common daily tasks, and successive generations that adopt and incorporate these advances easily.
  • Easy, fast, and almost infinitely scalable infrastructure, such as the cloud, which makes the creation and delivery of applications far easier than ever before.
  • Sensor equipped devices, a.k.a. “things” that are connected and transforming our physical world into a real-time digital world, also dubbed the Internet of Things (IoT).

Within the broad topic of digital transformation are many other concepts: Big Data, predictive analytics, mobility, IoT, and cloud computing are often the first terms that come to mind. While these are important components of digital transformation, we believe the concept embraces much more: new insights available from new sources of data, the use of real-time analysis as a competitive differentiator, and the emergence of event-driven, disruptive new business models. Your technology investments, most importantly ERP, stand at the crossroads of digital transformation. They can either be huge enablers of this change or immense roadblocks. In many of our member organizations, both statements are equally true. The challenge is to definitively and quickly transform roadblocks into enablers.

Companies trying to implement a digital transformation strategy have taken many different directions. Some businesses are increasing the emphasis on e-commerce sales or creating a more immersive customer and user experience. Other companies are transforming by building important new initiatives around IoT and increasing their use of mobile devices – tablets, smart watches, sensor-rich machines – to improve productivity. And many are initiating Big Data analytics projects in order to do a better job managing core business processes, adapting their supply chains and services to new business realities and looking for faster and more comprehensive ways to identify patterns that drive competitive advantage.

At the core of these projects are some key unifying themes:

More data, better analytics, and new business models

Data is an increasingly important asset that is entering your company from a growing list of new sources: from Web-based commerce and customer data to sensor-rich intelligent devices. Organizations are asking many of our members to do more with this data, and to use it to better connect the dots that allow companies to create new business models that are better suited to understand demand, improve customer engagement, and ultimately impact the bottom line – the Internet of Things being just one of many examples.

This requires a fundamental rethinking of how organizations collect, aggregate, architect, and summarize data for both insight and action. While standard operational reports are still a necessity, member organizations need to move to rich, real-time, and forward-looking analytical capabilities that predict outcomes instead of reporting on yesterday’s realities. Ultimately this is not about the commoditization of data but rather about advanced analytics – such as pattern detection – that in turn can generate predictive and other advanced analytics. It’s not enough to deploy the latest generation of analytical tools. Rather, leading organizations are looking at multiple solutions, such as hiring data scientists and dedicating resources to engaging in big data opportunities. These activities will help them find the most relevant information that will shape their future products, services, and operating efficiencies.

ASUG member Jason Sprunk underscores this point by saying, “by connecting our organization to a single, global instance of SAP, we are now ready to shift the dialogue from consistent process execution to game-changing disruptive execution strategies that leverage the investment and the accessibility to data on a global scale, such as the best pricing strategies for a new global product launch.”

Device diversity, simplicity, and omnipresence

The increasing number of mobile, wearable, miniaturized, connected, and embedded devices can be used to continuously collect, display, and analyze data – and in some cases, the device itself can be made to take corrective action. Devices in the enterprise will gather data and act on the results, thus helping to create and manage demand, drive value, and enable new business models. The clear reality is the number of devices that will be used inside your enterprise will continue to expand exponentially. Simultaneously, the wall between your enterprise and the outside world will rapidly decay to nothing. The modern, digitally transformed enterprise knows no walls, operates across a dizzying array of devices, and runs all the time in instant time.

New user experiences

The user experiences of mobility, touch, and voice are critical table stakes for member companies that are serious about digital transformation. The user experiences we are accustomed to in today’s consumer applications (Facebook, Amazon, Uber, Twitter, LinkedIn, Snapchat, and others) and emerging new experiences, like virtual reality and augmented reality, must be reflected in the user experiences of our enterprise applications, including SAP’s. The more our work experiences resemble our consumer experiences, the better our workplaces will be, the more seamless the transition will be for users at all levels, and the less time we will have to invest in training on basic operations. User experience is both the front line and the beginning of this transformation. If your enterprise does not have a plan to modernize your user experience, then this should be something to focus attention on. The existing workforce may be reluctant to change, but the new generation of employees now entering your company represent the mindset of the customers of tomorrow. The intuitive user experiences they grew up with must be brought inside your business.

Computing without borders

The cloud is a transformative software deployment and consumption model – not just because of its raw cost-effectiveness, but because of the massive analytical and operational changes that can be realized. The cloud enables simple provisioning, access, and speed at levels most member organizations can’t match by going it alone. As an SAP user community, our cloud strategies must move beyond the first generation shift from on-premises to on-demand and must now be embedded into net-new business models and processes. If terms such as AWS, Azure, HEC, and HCP are not on your radar or not understood, this is another area to invest time and energy to not only learn but develop an agile strategy that considers adoption scenarios and ultimately creates business value.

Business process renewal

Digital transformation comes with the requirement for business process renewal. Old, siloed processes based on 20th century transaction models must be reinvented and net-new processes must be created to capitalize on the new business models and work patterns generated by digital transformation. Today’s business processes likely begin and end outside the traditional four walls of your enterprise. Sizable chunks of your business processes may be outsourced, reengineered, or obliterated as digital transformation moves through your organization. How might your critical business processes operate in a mobile enabled, multi-device, outsourced, and always-on world that is rapidly moving away from physical assets to services?

Talent and the future of work

The shifting workforce demographics in Europe and North America, especially with respect to the influx of millennials into the workforce, are underscoring the case for digital transformation. How do you engage a future workforce that has grown up with these technologies versus a workforce that inherited them along the way? In much the same way the mouse was a disruptor for those who were used to only a keyboard, text-based interfaces, and dial-up Internet, digital transformation is a disruptor for those who are firmly embedded in today’s technology. Either way, digital transformation will drive, or be driven by, a workforce revolution, and with that revolution will come massive changes in how employees are hired, trained, and empowered. New roles, responsibilities, and skills, combined with new business processes and technologies, mean that a company’s digital transformation strategy must include a comprehensive transformation of the workforce as well. We are already seeing the seeds of this change take root and grow quickly. Nevertheless, we should not underestimate the cultural and structural changes that member organizations will undergo.

Privacy, security, and intellectual property

While the previous issues underscore the social and business potential of digital transformation, the conversation cannot be complete without underscoring the importance of data privacy, security, and the protection of intellectual property. Many user group members cite these critical subjects as key “trigger points” in the digital transformation groundswell. Our customers and employees have high expectations that their data is secure. This security forms an essential element of trust, which is something that the whole technology value-chain must be willing and able to comply with. Similarly, the security and integrity of corporate intellectual property and proprietary information must be scrupulously protected. No organization should jeopardize its intellectual property in this new digital world, as it will likely become one of the organization’s most valuable assets.

But with all of that being said, digital transformation enables you to more quickly get the word out about your company. Is there intellectual property you can freely distribute to help win opt-in audiences who are more prevalent in this age of social media?

To learn more, join us for our upcoming webcast on April 20: Ready or Not, Digital Is Your Business – What SAP Customers Need to Know.

Next up: Part 3 of 4 – Digital Is Your Business: The Case for New Business Models

This article originally appeared on SAP Business Trends.

Geoff Scott

About Geoff Scott

Geoff Scott is CEO of Americas' SAP Users' Group (ASUG), the world's largest community of SAP professionals. He has more than two decades of experience as a CIO and senior IT leader. Scott has more than 20 years of ERP experience, including seven years of extensive SAP implementation and operations experience covering global operations. He has implemented SAP for a number of organizations of various sizes. His experience in the automotive, food, fashion/retail/apparel, and startup spaces brings unique and broad-based industry experience to ASUG.