Three guiding principles for a successful digital transformation
Everybody is talking about digital transformation! In the previous decade the emergence of trends and technologies like Cloud Platforms, Software-as-a-Service, Shared Economy, and connected mobile devices has created an opportunity for companies to re-imagine how they do business.
Since the start of the COVID-19 pandemic, this opportunity has turned into an imperative. In most industries, the crisis has shifted the majority of customer and partner interactions online. With many employees working from home, digital collaboration tools have become crucial for workforce effectiveness. As a result, the share of digital or digitally enabled in the portfolio of the average company has accelerated by a shocking seven years. (Source: McKinsey Global Survey of executives).
So, we understand that digital technologies have become more prevalent, but what really is digital transformation? Why should you care? And most importantly: How can your company’s digital transformation become a success story?
What is Digital Transformation and who should care about it
Digital transformation is the process of using digital technologies to create new — or modify existing — business processes, culture, and customer experiences to meet changing business and market requirements. This re-imagining of business in the digital age is digital transformation.
This definition by Salesforce touches upon three of the most important elements of why digital transformation matters: The effective use of digital technologies in core business processes can help 1) reduce cost to remain competitive, 2) increase employee satisfaction, and 3) improve products or services for the customer.
Hence, you should care about the topic of digital transformation, for example if you are
- a business executive looking to future-proof your company and accelerate growth
- a manager trying to improve your team’s performance and satisfaction
- an individual contributor aiming to see better results and improve the interaction with your trade partners
- an innovator looking for creative ways of solving old problems with new technologies
The three guiding principles of a successful digital transformation
Not surprisingly, digitalizing core processes and re-imagining how your company does business is not an easy task. A recent BCG survey of about 800 companies showed that while more than 80% of the respondents wanted to accelerate their digital transformations, 70% struggled to demonstrate results from them.
In order to be successful, it is crucial to prioritize and implement those technologies that actually bring value. Both in your day-to-day activities, but also to the strategic positioning of your company in the long run.
We found that there are three guiding principles that help you effectively select the right areas to focus on: Simplifying complex processes, Empowering non-IT users, and making data usable. You can think of these as the core beliefs for your organization or underlying objectives as you embark on your digital transformation journey and adopt digital tools across your business.
💫 Simplifying complex processes
The complexity of business processes has been ever increasing. One the one hand, this is driven by higher specialization of companies, on the other hand there are more different tools and processes that an average employee has to work with. This increased complexity leads to longer cycle times, lower adaptability, and decreased output.
Hence, simplifying complex processes can turn into a real competitive advantage. For example, a streamlined process - enabled by digital solutions - can reduce the end-to-end time for sourcing simple items like office supplies by up to 80%. (Source: BCG Article — Meeting the Need for Procurement Speed).
Companies should therefore implement digital tools that streamline processes and help automate or accelerate low-value activities. The primary success factor is to strive to fix entire processes instead of simply digitizing specific steps. Hence creating what some call a “broken, but digital process”.
In many cases, this can be an iterative process. Start by defining the value or output being created, then work your way backwards through the process to see which steps are truly required. Next select digital tools that help streamline the process — finally, reiterate this process based on the selected digital tools and look for further improvements.
One example of tools simplifying complex processes is Calendly. It is simplifying the process of scheduling appointments. Another one is Pipedrive, which is streamlining the sales process. As well as Pitch, which is improving the process of creating presentations with multiple people.
👩💻 Empowering non-IT users
When striving to digitize processes and implement new tools, for most companies the bottleneck are IT-resources. Seemingly small requests for changes to day-to-day processes often become a backlog. IT teams are occupied in large scale projects, such as implementing a new ERP or CRM system.
Apart from the obvious frustration this creates for non-IT employees aiming to improve their business processes, this stunts innovation and increases time to adoption of digital tools. In the context of business-to-business communications for example, integration teams tend to have long backlogs. As a result, usually it takes multiple weeks or even months to establish a digital integration with one trade partner, for example via EDI.
Therefore, successful companies implement tools that empower their non-IT employees to orchestrate processes and do tasks on their own that historically required IT-capabilities. For example, it can be a real game-changer to implement tools that allow employees to establish simple integrations or workflow automation. An important success factor when implementing these tools is to have clear guidelines as to which process steps are in the users’ hands and which ones are handled centrally by IT.
One example of tools empowering non-IT users is Zapier. It is creating simple integrations and automation between different applications. Another one is Alteryx, which is enabling complex data analysis through a drag & drop interface. As well as Airtable, which is setting up interactive databases and workflow automation.
📊 Making data usable
Data has likely become the biggest untapped resource for companies today. While the flow of data is ever increasing — internet traffic alone is expected to reach 400 exabytes per month by 2022 — most companies have not yet found effectively use the data they have access to and turn into value. A survey of companies with $1 billion in revenue conducted by Bain showed that only 4% of companies say they have the right people, tools, data, and intent to draw meaningful insights from their data. (Source: Bain & Company — The value of Big Data).
It is hard to estimate the lost business potential that lays hidden in the unstructured, unusable data across companies globally. However it is easy to imagine use cases where effective data analysis can help reduce costs or increase revenues. For example by analyzing which processes cause more work than others or by identifying the customers with opportunities for cross- or up-selling.
The companies performing well in the coming years will be those that not only capture a lot of data, but find ways to harmonize and structure it. And above all companies who deduct actionable insights from that data. Digital tools can guide this process and hence accelerate the transition to data-driven decision making. There are two main success factors for companies adopting these tools. First to establish clean master data and second to have clear business goals in mind when conducting data analysis.
One example of tools making data usable is Celonis. It is enabling process analysis through available data from ERP systems. Another one is Tableau, which is simplifying the process of creating interactive dashboards. As well as Segment, which is funneling user data to different analytics and marketing tools.
We are still in the early days of digital transformation
What is exciting, is that we are still in the early days of digital transformation. The previously mentioned technological shifts will continue to accelerate. IDC forecasts that by 2023 global spending on digital transformation will reach close to $7 Trillion — a staggering number currently growing at a 15% CAGR. This will create countless opportunities for established businesses to further improve their digital adoption as well as for new players to enter the market and offer simpler digital solutions.