I talk a lot with very large enterprises in Europe, Asia, and Latin America. Sometimes they have a question regarding their IT infrastructure, sometimes they want to hear about shifts in industry trends (few of them want to hear ‘trends in the Silicon Valley,’ thank god!).
Sooner or later they tell me about their digital transformation strategy. I listen patiently. A well-named initiative can create buy-in, momentum, and action, I get that. But too often these initiatives become parallel organizations. They are sometimes speed-boats that are trying to turn around the ocean liner (and I chose that word carefully :)). And they are often ‘innovation labs’ that are hatching new ideas or think about how to
copy incorporate emerging competitive business models.
You do not need a digital transformation strategy. You need a solid business strategy that takes advantage of all relevant tools required, including digital ones.
Second, most enterprises’ “Transformation” is rather an iteration. That is not helpful. Digital tools and platforms are likely going to change the way your organization is designed, how you touch your customers, and how you deliver value. That will be transformational. And it will fall short if you’re doing the same-old-same-old just a bit differently. There will be no buy-in from the rest of the enterprise if a good process is replaced by something different but equally good, only with more friction of learning it and basically achieving the same thing.
Here are two questions that I usually ask:
What digital tools and platforms could transform the value for the customer?
This question is centered around customer value. Can customers get to the value you deliver to them with less friction? Often, that means faster or more convenient. Sometimes you are solving a painstaking, repetitive task that customers are willing to pay extra for so that they can focus back on hard problems. An example would be a business analytics product for budget planning: you can do forecasting and budgeting, which is a considerable value for your customer. But when you know that budgets run over or timing changes, you could also help with rescheduling projects. You could notify downstream teams and deliverables. You could make space recommendations in your warehouse for materials and deliveries based on a delay in consumption of said materials. And so on …
Which cost transformation would allow you to access new markets or segments?
Are there any markets or segments your current cost configuration prevents you to enter these areas? Would a transformation through digital tools and platforms change this cost configuration? Would that change still keep your core assets, core activities and core values intact?
Remember that you have to assess risks and your own risk tolerance. You don’t have to decide to execute on that transformation, either. But such business strategy discussions (versus digital transformation strategy discussions!) will inform you about potential competitor moves, or attacks from new entrants and ‘left field.’ You could develop entrance barriers, or start developing defensive answers for future threats. That should all be part of your business strategy, digital or not.