The Digital Journey
Making digital the standard is needed in order improve a company’s ability to respond to changes in the market, to stay ahead of technological disruptions, to improve risk management, and to deliver value to all stakeholders.
Many companies want to go through a digital transformation, but often times companies get stuck. Many initiatives have a lot of potential, but then don’t emerge from business units or functional areas. Those companies have not developed the required capabilities to go digital throughout the entire enterprise, and they have not made going digital the normal way of conducting business.
In order to not get stuck, companies have to get through a critical time by doubling down on their digital transformation. That critical time is when a company decides if it will refocus its efforts using the capabilities it has built and apply the lessons it has learned to that point. There are five key elements that companies can use to get past that critical time, and there are also some practical steps that leaders can take in order to focus their teams on these most important aspects.
Stakeholders are applying pressure to companies, and it is pushing them to get past that critical time and make digital the normal way to do business. Customers are expecting new digital products and services, and partners expect digitized transactions. Additionally, making digital the standard is needed in order improve a company’s ability to respond to changes in the market, to stay ahead of technological disruptions, to improve risk management, and to deliver value to all stakeholders.
A company goes through three stages during a typical digital journey. The first stage involves exploring digital. Leaders assess possible projects and launch digital pilots to show their value. While small in scale and focused on specific technologies, the pilots help teams develop the company’s first set of digital capabilities, as well as lay the foundation to support development of features. If successful, companies can create excitement and momentum for change that will lead to the next stage.
The objective of the second stage is to scale the pilots into solutions, which will show stronger proof of their value. The human and technology capabilities that are used for the new solutions are limited to a specific context. In this stage, technology departments set the digital agenda, which is generally motivated by emerging opportunities to drive development. When these technology departments set the agenda, there can be time when the objectives of the initiatives are not aligned well with the needs of the business units.
While moving from the first stage to the second often feels natural, continuing to the third stage requires bigger change. In this stage, operating as a bionic company, business units need to take active ownership of the digital initiatives and transformation efforts. They need to commit resources to move their agenda forward. Companies in this third stage are able to engrain both human and technology capabilities into the main processes, as well as change how business is conducted.
In order to assist in the transformation into a bionic company, there are five boosters that can speed up the process. Some are more powerful than others, but it is important that all of them become activated at the same time in order to get the maximum benefit.
Let the business lead. While digitally proficient companies already centralize the oversight for their digital initiatives, the business units in bionic companies drive their digital agenda and capture value. They set their own agenda to make sure that their digital vision translates into tangible goals that match their business objectives. They also communicate directly to the board of directors to guarantee that their goals are consistent with the company’s digital strategy. Finally, the business units work with the chief digital officer to make sure they have the resources needed for their initiatives.
Focus on high-value initiatives. Companies that are digitally proficient sometimes define initiatives narrowly, such as digitizing only certain processes in a specific part of the value chain. However, bionic companies focus on several high-value initiatives whose goal is to reinvent core operations from beginning to end. By taking this overall view, companies are able to separate themselves as ones that transform the business model, rather than just digitizing some business processes.
Educate the workforce. By automating, employees are given more time to work on redesigning processes and reinventing how they conduct business. Employees need to be trained to leverage data and technology in order to improve decision-making and outcomes, which is where bionic companies invest a lot.
Adopt platform thinking. Bionic companies adopt digital platforms and implement policies so that all employees have access to the data they need. As these platforms also facilitate cross-functional teams to use data from all over the organization, they will promote more effective use of the data. In the long run, this cross-functional accessibility creates platform thinking, which allows for a common approach, making it easier for people across the company to communicate and focus themselves on products rather than a business unit.
Leverage data and AI. Bionic companies are becoming more committed to integrating AI into their business processes and using its power all over the business. Digitally proficient companies consider AI as just an enabler of their transformation efforts, not as a key driver of them.
Finally, there are three steps that organizations should take in order to prepare themselves for putting these boosters into practice:
- Put the business in charge. Bring the business unit leaders together so they can discuss their digital goals and the return on their investments. By designing appropriate incentives, they can encourage those leaders to own their digital transformations, can hold them accountable, and can ensure that they deliver value.
- Mandate a digital upskilling program. Ask the chief digital officer, chief information officer, and chief human resource officer to determine the programs that business units would need so they can implement their digital initiatives and meet the goals they set. The programs should be tailored to coincide with the business units in order to develop a plan for training those employees in certain technical skills.
- Double down on tech and data. Meet with the chief digital officer and chief information officer to create a roadmap for putting the required technology and data capabilities into place to meet the business targets and specific outcomes.
Every company will need to get as much value as possible from its digital journey as they travel the path to the next area of value creation in the new digital reality. This will mean confronting a critical time that will separate merely digitally proficient companies from the bionic ones. Speeding past this critical time requires a significant change in a company’s digital transformation, and the five boosters discussed above can help every company realize its bionic future.
About the author
Arthur Mansourian has a 12-year track record as both a management consultant and investment banker, advising clients on valuation, capital markets, structured financing, mergers, acquisitions and divestitures and general corporate strategy.
Mr. Mansourian served as Vice President while at NMS Capital Advisors, when the company achieved cumulative sales growth of over 5,100% with annual compounded sales growth in excess of 120% from 2012 to 2017.