Digital Transformation. Two words that are so widely used nowadays, they have become almost meaningless. Certainly there is a lot of misunderstanding about what Digital Transformation (DT) is and what it isn’t. It’s been used to describe technology platforms, networks, automated processes, numbers, web services and even manual work (involving your digits or fingers) so it’s little wonder that it has become meaningless to a lot of folk.
So for the purpose of clarity for this blog, my definition of DT is internet enabled radical change.
“Excellent” I hear you rejoice, “I’m glad you have cleared that up, but I still don’t understand what it means for me?”
And that is where I think a lot of businesses are right now, staring into the precipice but knowing a leap off the edge could be really dangerous. You are not alone.
Consider this quotation:
“The last ten years of IT have been about changing the way people work. The next ten years of IT will be about transforming your business.”
Aaron Levie | CEO of Box
I like this quote, because I’ve been working in the field of Business Transformation for 15 years and it pretty much sums it up. The early days of Transformation were about efficiency savings, and the low hanging fruit for most organisations was to change the non-core processes or back office. The thinking behind this is sound, most processes in departments like Finance and HR are pretty similar so transforming those to be tech enabled and optimised meant productivity savings, shared services, outsourcing, off-shoring (and then on-shoring again), system migrations to one instance, customising technology to fit your processes quickly followed by changing your processes to fit the technology etc etc.
They were simpler times, at least for the big companies and the public sector. However as 99% of businesses in the UK are SMEs, that early transformation activity was probably called “putting in a finance system” or “building an access database for customer contacts”
The Next Ten Years
Now, ten years on, we find ourselves in Transformation Decade two and it has been rebranded as “Digital Transformation.” Unlike the previous decade there is a lot of activity and hype about digital and its associated technologies including blogs (like this one), conferences, new jobs, companies advertising technology and associated services, podcasts, vlogs, videos and social media posts. But the change from IT Transformation to Digital Transformation is significant. As Aaron said, Digital is about transforming the business, not the systems. And transforming the business means tackling the core processes – customers to cash.
The effect of the online marketplace now being everyday life is big news. The big daddies of the retail world as we know it are on the news almost daily with profit warnings and store closures. High Street retailers big and small are struggling to compete and most high streets are now a pitiful mixture of charity shops, bookmakers, café’s, pubs and an occasional niche retailer like a pet shop or antique store.
New Purpose Needed
The days of a thriving shopping mecca with a mix of big brands like M&S and local retailers in your town are gone. Economically its disastrous, Councils are thinking up “smart town” initiatives to try and get their citizens out their houses and into the community but they are flogging a dead horse in my opinion, no offer of free wifi is compelling enough for people to leave the comfort of their own home based Wifi, no matter how philanthropic their intentions are. Britains’ High Streets need a new purpose in life, but that’s a whole other issue (and perhaps fodder for another blog)
Back in the land of DT, the public sector, who have been pursuing modernising Government in its various guises for over 15 years are still diligently improving continuously because it’s mandated by the government and 15 years on they get why it’s actually worth doing. Meanwhile in the private sector that mandate has been missing, and for me, the majority of businesses seem to fall into four camps:
A: we have done as much transformation as we want (new website and an online accounts package) and we are happy with the business as it is
B: we think we could probably do things better but we don’t know how or where to start and we don’t have the time or expertise anyway
C: we recognise competitive advantage lies more and more with the digitalisation of our core processes, so we have set up a programme for Digital Transformation
D: digital is part of our DNA, we started as a digital business and we are a digital business
For the sake of simplicity we shall give these segments a company persona – Apathy, BeHesitant, Cleverly and Done and Dusted.
Apathy Inc. have been trading since 1982 and have 30 employees all based in Central Scotland. They operate in quite a niche market, are well known in their home town and their customers are “local” i.e. within a 50mile radius. The owners of the business want to retire in five years and are hoping the “kids” aged 30+ will step up and take over running the business and grow it enough to pay them a handsome pension.
Company BeHesitant Ltd have been trading since 1991 but they adopted online quite early and have dabbled in lean processes and exporting. They see the opportunity of using technology and updated processes for being more efficient and selling more product but are stuck in a mire of “where to start, it all seems too huge”
Both of them are facing the same challenge, albeit with different mindsets. But if I were a betting man I’d bet on BeHesitant still being here in five years and Apathy not. Why? Consider this quote from Jeff Bezos, the founder of Amazon:
“If your customer base is aging with you, then eventually you are going to become obsolete or irrelevant. You need to be constantly figuring out who are your new customers and what are you doing to stay forever young”
It’s a great quote except for one thing, the first “If” isn’t required. Unless there are businesses selling anti-ageing products that actually stop time, then every business has ageing customers. The reason Apathy and BeHesitant are still alive and kicking is partly due to that fact, their ageing customer base has been as worried about change as they have, and until now it has represented a big enough proportion of their total market to allow traditional channels to remain viable.
But the internet is in its third decade, and “Digital Natives” are now mature consumers and business owners and colleagues. For them Digital access is not a matter of preference so much as an expectancy. That’s not to say they won’t have individual channel preferences, but they will expect digital to be one of the options. And there are more coming, our young primary children nowadays are the first cohorts entering education not knowing how to use a mouse.
Like the government campaign for the Digital TV switchover a few years ago, they expect every business to be “digital ready” – and there are plenty of other options available if their first choice supplier is not. As also referred to in my previous blog The Evolution from CRM to CMR the power is all with the customers, businesses need to accept, adapt and then keep up.
In this example therefore, Apathy are in danger of being Analogue TV, still working but no longer able to do the job the market demands.
BeHesitant know what they need to do, but they need to stop wavering and take action. A good start would be to engage with someone who can help to guide them through their digital journey.
Cleverly were founded in the 1950s but they have listened to their customers, suppliers and partners and now have a plan of what they are doing and why. They must remember that change is unsettling regardless of how necessary it is, and people will resist. Strong leadership and belief are critical to transformation success, and they need to keep their focus.
Done and Dusted are bright and shiny and new, being only 5 years old. They are currently in the strongest commercial position, but they run the risk of becoming complacent; just because digital is “in their DNA” doesn’t mean they are exempt from evolution. In todays (and tomorrows) world no-one will really ever be “done and dusted”, because to quote the most overused idiom of recent years, the only constant is change.
So they all still have a Digital Transformation journey ahead of them and how they choose to view that – as Friend or Foe is in their hands. The stakes are high – and they range from competitive advantage to organisation survival.
No company is exempt. In fact the rate of publicly quoted companies failing has quadrupled to 10% since the 1960s.
But the key message here is that’s it’s not too late to find your own path to being digitally enabled, so start looking quickly, because your business will become invisible or irrelevant sooner than you think.