What is “Digital” ?
Our love for being connected has driven an unprecedented change in how we live, communicate, develop and enjoy our lives. The web laid the foundation for this change. Digital however fed steroids to this movement and accelerated it. Digital began as a consumer driven movement but is now a focus of leading enterprises.
In the past, Digital meant the digitization of manual tasks. But it has evolved beyond this simple meaning into something a lot more specific and interesting. If you work in an industry which is getting rapidly reshaped by technology, it is useful to understand the context and reasons behind these disruptive changes before you can prepare for them. In my opinion, understanding the meaning of Digital is a humble beginning to this grand goal.
So what is “Digital”?
If at this moment, you are going “Blah, blah, blah”, it is understandable. So before you tune out, let me elaborate.
1. focuses on customers and improves their overall experience.
Improving experience involves improving ease of use (access, convenience), improving the user experience, increasing ubiquity, offering rich information, personalization, contextual action etc.
2. utilizes digital technologies and the advantages that come along with it.
As of 2015, technology areas include SMACIT (Social, Mobile, Analytics, Cloud, and Internet of Things)
3. extends existing business models or creates new models using digital technologies
This is the most important attribute of being Digital. It should involve a fundamental change in how the business creates value and makes money. The change is usually achieved by taking advantage of the nature of digital technologies. For instance, this can be moving to new digital channels, creating new products that could not have existed without the internet / web, new market structures (2 sided or n-sided markets), new revenue models (product as a service), new processes (change in supply chain structure etc.) and new services (collaboration, crowd sourcing).
How is it different from IT ?
While IT can use digital technologies, their primary focus is around improving enterprise operations and customer interactions. Even mature IT organizations look at IT as a means to serve existing business. They follow the traditional notion that IT should follow business needs and fail to realize how technology can overthrow traditional business paradigms and how business are restricted by the environment and markets they were envisioned to serve.
As a result, traditional IT does not explore or innovate using collaborative approaches such as design thinking and systems thinking. They view building products and services as a means to deliver functions and not as a means to develop and test ideas. Furthermore, the evolution of IT in the enterprise has made C level executives look at IT as a cost function and not as an investment, a cardinal mistake when IT can be a means of competitive advantage.
Why Digital and why now?
It all boils down to competitive differentiation and changing consumer expectations. When everything can be commoditized or copied within months, achieving competitive advantage and sustainable differentiation is incredibly hard. This has forced businesses to explore new ideas, ideas that are harder to discover by analysis and quantitative methods. In the past, consumers were driven by cost, brand and a bit by service quality. The new consumer (Millennials and younger) has a different perspective of the world and gives importance to a new set of values such as convenience, personalized experience etc., These values themselves keep evolving rapidly. Companies that understand this customer really well can create the next defining product or service and with the help of digital technologies achieve network effects and first mover advantage that can bring them a semblance of sustainable success.
This Digital movement had its roots in Digital agencies like IDEO, which developed novel approaches to solve design problems and evolved to technology change agents. It matured into a movement around innovation, human centered design and start-ups. In its current iteration, it is trying to shed its agency roots and adapting to include the broader business redesign and is taken over by the enterprises and consulting firms. The downside of this agency driven movement is sometimes the overemphasis on collaboration, brainstorming and experimenting and ignoring the benefits of data and strategic thinking.
A better system will utilize the strengths of traditional and digital approaches and therein lies the opportunity.
What do people do in Digital?
The traditional view is of a group of “hipster” designers brainstorming and creating a new user interface, followed by a developer building an app around it. The industry is maturing beyond this simplistic product design approach and hence you will start seeing Digital work spread around a spectrum. At one end is the operational IT work (Just IT, nothing Digital) and in the other end is disruptive Digital work.
Broadly, there are 4 different roles involved in serving this spectrum of needs (I am using this term “roles” rather loosely here). “Hipster” designers, “Geeky” developers, “Suited up” strategists and “well groomed” marketers.
The impact and involvement of each of these roles and capabilities vary based on business need, the focus of change (in the spectrum) and the phase of enterprise change.
The spectrum of Digital transformation in Enterprise
Digital transformation can be technology driven enterprise transformation (operational IT, traditional IT implementations), an end user focused customer experience improvement (mobile apps, CMS), a full scale business model reinvention or anything in-between.
Irrespective of the type, there are 3 “digital” dimensions involved: Imagine, Plan and Do.
1. Imagine — involves understanding, brainstorming and designing.
2. Plan — involves traditional strategic analysis, market research, financial analysis, operating model definition etc.,
3. Do — involves building, testing, iterating the solution or service development.
Based on the business need and focus area, different dimensions take priority. Let’s consider the following example: Improving customer experience for a grocery retailer.
Changing the customer experience through an app or tweaking a service requires understanding the customer journey, collaborating with people involved in various roles across the journey and brainstorming to gather insights that will help improve the customer experience. The implementation of technology often plays a trivial part as it is requires tweaking of existing solutions and services rather than radical new developments. Similarly, it is useful for strategists to evaluate the cost vs benefit of various options, but in the end it is design that opens up new possibilities and strategy helps choose one of them using traditional analysis.
Lack of clarity and appreciation for this spectrum of digital transformation and its dimensions prevents organizations from succeeding in digital transformation initiatives. Consulting firms that do not understand this variation end up as pure IT/tech shops or full scale design agencies or even worse, neither. In the end sustainable, true digital transformation appreciates the strength of various players and utilizes them effectively to create customer value. So, how exactly do we do that? And for that we have to wait for the next part.
In my future stories, I will dive into the details of the digital spectrum, the value brought by different roles across the spectrum, the optimal way to use various skills based on the transformation and its relevance to SAP consultants and customers. (Hopefully !)