Digital Is Only Half of The Story

The catch-cry of many organisations

we have to go digital

Boards are mandating “digital” as the next big thing. CEO’s are appointing “Chief Digital Transformation Officer’s”. Are they right in doing so?

Our point of view is: they are “half-right”. Certainly, there is an enormous amount of material, together with great examples, of how the world is becoming digital. We don’t really need to regurgitate here the rise and rise of Uber, Alibaba and Amazon, each of which is driven by digital technology at its heart. We live and breathe digital every day ourselves. The use of cash is trending significantly down, and the use of smartcards, phones, and in recent years watches, for payments significantly up. The smartphone in our pocket is a digital “Swiss Army Knife” that does much, much more for us than make phone calls. At a personal level, we already are “digital”. We communicate digitally. We access news services digitally.  Most of us live in a truly digital world.

The solution, then, is obvious, is it not? Take the existing business model, make all the processes more efficient using computer technology, tell the clients “we are now digital”, and we are done. Right? Wrong. This is where companies fail to understand what digital transformation is all about.  It is not about using digital technology on existing processes. It is about re-imaging the business in the light of “what is possible”. It is about starting with a deep understanding of the organisation’s existing business model, projecting 20 years forward to question if the model will even work in the future, and then looking to restructure the legacy model in a way that will give the company longevity, undoubtedly using digital technology in the process. And guess what? The business model we come up with in this process may bear little resemblance to the business model of today. And that’s OK – because it gives us a new platform upon which to build the future of the company, rather than be left with the dinosaur of today.

When it comes to corporate digital transformations, recent research suggests that only 5% are successful. According to James Macauley and Joel Barbier in their recent book “Orchestrating Transformation”, many company leaders don’t even begin to understand the problem they face.  Our point of view is that before commencing a “digital transformation”, an organisation needs to spend considerable time understanding:

  1. its current business model. The Business Model Canvas is an ideal tool for this if applied correctly
  2. how the digital economy is eroding its model. Do we really appreciate the competitors within the industry, and more importantly, the competitors outside of its industry?
  3. the opportunities for transformation – again, within the industry and without.
  4. the timeframe in which transformation is needed given the pace that its industry is being transformed
  5. the opportunities for a portfolio of new business models – the immediate opportunities as well as the longer term, exploratory ones
  6. the culture change needed and the process for bringing the entire organisation along for the journey

Only then can an organisation, faced with disruption and an out-of-date business model, truly benefit from the process of “digital transformation”. It takes time and careful thought, however, done successfully, provides the organisation a platform for success over the next 20 years.

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