By Fred Isbell, senior director and head of Thought Leadership – Digital Business Services Marketing, SAP
One of my favorite business initiatives emerged from a customer program called the “Universal Conversation.” Related to the notion of conversation starters, this approach provides a compilation of questions frequently asked by customers and provides a set of thorough answers. Like applying technology standards to solutions and services, this is a great way to define foundational topics that need to be underscored throughout the digital transformation discussion.
During a recent Webcast briefing meeting with IDC, I noticed that the session’s lead analyst spoke to these common digital transformation concerns with great insight. Here a snapshot of our own universal conversation based upon these questions and concepts.
1.) What is digital transformation?
According to IDC, digital transformation can be defined as:
“The application of 3rd platform–related technologies to fundamentally improve all aspects of society.”
Businesses can realize this outcome through:
- Transformation: Simply modernizing the technology that underpins existing systems is not enough to support significant change. New sources of innovation and creativity should be leveraged to enhance experiences and improve financial performance.
- Decision making: Through information access and sharing, organizations can gradually transition into an evidence-based culture. Companies can expect 100% greater productivity from their knowledge workers by using information more effectively.
- Technology: Digital transformation should not be confused with digital technology; however, 3rd platform technologies are enablers. This includes the cloud, mobile solutions, Big Data, and social tools, as well as innovation accelerators including the Internet of Things, robotics, and 3D printing.
2.) How do we move beyond the hype of digital transformation and measure its impact?
The process of innovation and other critical business areas must address the need for business impact. In this case, three concepts come into play:
- Enhancing customer relationships: Increased reach, relevance, and efficiency are all components of building customer loyalty. The business impact of these relationships is measured through monetization. From this viewpoint, organizations can achieve significant advantages such as more personalized marketing, increased customer engagement, improved fulfillment, and better order handling
- Optimizing operations: Scale, scope, and speed are evaluated by the length of process cycle time. With familiar processes such as order to cash and creation of service-level agreements, digital transformation enables service-level guarantees.
- Leveraging information: Digitalization paves the way to an information-intensive business culture. To create and influence revenue growth, business intelligence can be used to generate new customer insights, pinpoint cross-sell and up-sell opportunities, preserve revenue, and expand into to new market segments.
3.) How mature are digital transformation strategies?
Like new technologies and their eventual adoption and maturity, digital transformation follows an adoption curve where the majority of users are in the exploratory phase and early adopters and innovators are reaching high levels of proficiency and maturity. These two user segments – digital explorer and digital players – represent approximately two-thirds of all organizations.
4.) How and where are organizations investing in digital transformation?
According to IDC, organizations are increasingly focusing their attention across three main areas:
- Modernization of IT: These initiatives touch traditional systems of record and back-end systems, as well as compliance, process-driven information enablement, and new strategies for the finance function.
- The digital business: Pure digital plays and the rise of the chief digital officers are emerging. Information-driven processes and line-of-business organizations that are influencing and investing in digital technology are steadily moving the enterprise towards true digitalization.
- Monetization: Like Jerry Maguire shouting “Show me the money,” the end goal of digital transformation is real and tangible results. IDC categorizes industry clouds layered on 3rd platform technology and innovation accelerators as a critical step to engaging a networked model of transactions and information as the new currency. The analyst firm also predicts that 40% of IT projects will create new digital services and revenue streams that monetize data and information by 2019 – opening the door for a new leadership role for IT.
5.) What is the relation between digital transformation and business transformation?
Digital transformation is an evolution of business transformation with a few distinguishing attributes:
- External focus: Through this transition, businesses are shifting their focus from internal business processes and automation to an external ecosystem and innovation.
- New measurements: Moving from costs and risks to the development of entirely new streams of revenue, the traditional applications-driven mentality is being replaced by a single digital platform.
- New leadership: The C-suite is expanding – welcoming the arrival of the chief digital officer and the opportunity to collaboration with partners along the digital transformation journey. This change in leadership brings a cadre of digital influencers that can consult on strategy, develop digital agency models, and add new elements of systems integration.
- Sales and delivery: Businesses are adopting a more iterative approach that takes on smaller chunks of the business with pragmatic business cases and unique points of view. Plus, agile methodologies, for example, are used to create innovations such as cloud technology as a solution accelerator.
- Shifting market technology landscapes: From traditional players to pure-play digital and born-in-the-cloud players, the world is quickly changing. Market landscape maps, such as Lumascape, visually display the plethora of options across technology and business.
IDC expects over US$15 trillion of value will come from digital transformation. Much of that success will emerge from a combination of investments in critical areas, organizational maturity, and collaboration with new players and traditional industry leaders.
I’m looking forward to attending the IDC Directions 2017 event in Boston and learning more soon. I hope you can apply these elements of the universal conversation to showcase your own perspectives and stories on digital transformation.
Fred is the senior director and head of Thought Leadership for Digital Business Services Marketing at SAP.
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