Is digital transformation an overused buzzword or has it matured? How does BCG define digital, and do companies fully understand what digital transformation means?
Digital is no longer a trend; it has already “happened" across industries. Even if digital transformation is used to describe many different changes occurring in the business landscape, it is not just a buzzword. Businesses are impacted along many fronts by the rapid developments of technology and Big Data. BCG defines ‘digital’ as a business’ ability to 1) rapidly build new business and ventures, 2) digitize its customer offerings and engagement, 3) transform its operations (e.g. manufacturing, supply chain, R&D, etc.) and back office (e.g. HR, IT) using modern digital solutions and tools, and 4) build digital enablers like digital talent, ecosystems and accelerators. Visionary companies not only grasp this full breadth of digital, but also orchestrate their transformation around them.
While outcomes from digital are described above, key inputs to digital transformation include technology selection, new customer habits, emerging ecosystems, new ways of working such as Agile and DevOps and, central to it all, Big Data and analytics.
While the definition of “digital transformation" could be still debatable, we are at the risk of considering an ill-conceived mobile app as “digital"; a report from an ERP system as “digitization"; a piece of regular analysis and data crunching or a nice graph as “analytics" or, worst still, business users constantly changing their needs or IT developers not being robust with their testing as “agile". SMAC (Social Media, Mobility, Analytics and Cloud) is another acronym that is at risk of really under-selling the art of the possible in digital. Companies genuinely do not understand the breadth of digital and what it takes and that is where organizations like BCG have a role to play—helping demystify digital, evangelize it, incubate it for organizations and help them change their DNA.
What are the major hurdles that companies face when implementing digital transformation?
Some of the common impediments to “implementing" digital transformation include lack of clarity of digital strategy or vision. In a frenzy to catch up with digital, many organizations do not clearly define digital ambition or end state. They may end up with a plethora of several low cost apps with no real business use or adoption and feel that they have become digital.
Also, clear ownership through a chief digital officer (CDO) is essential. A dedicated CDO will be responsible to ensure that right resources are committed and there is commensurate value delivery. What’s more, adapting digital should not be superficial; organizations need to acquire a new DNA. Existing organization structures and governance must be challenged and revamped. Is it that certain industries are more prone to digital disruption than others? Even then, how excusable is it for certain companies to continue to take a wait-and-watch approach to digital and for how long?
In BCG, we research and survey organizations across various sectors every six months or so. We have a view of the digital demand within that sector and the readiness of that sector. We map these sectors and the underlying organizations across these dimensions and it is clear that some sectors are ahead of others.
Many firms are responding to digital disruption by throwing a lot of technology at the problem. What’s your take on this?
A score of technologies enable digital transformation and innovation of completely new business models and new capabilities. Having said that, technology by itself never has, and never will, create a business opportunity or solve a business problem. Companies should have a clear vision of how digital technologies and the increasing access to abundant, cheap data create competitive capabilities for them, whether they create new growth through new products and services and personalization, or improve business operations through robotization and data-driven decision-making.
How do you think is artificial intelligence (AI) impacting or likely to impact the way new age technologies such as big data analytics and IoT are embraced by organizations?
Digital technologies create ever-increasing possibilities to create, acquire and process an abundance of data at low cost. Combine this with the ever falling cost of computing power and this enables new ways of solving problems through computing: deep learning and artificial intelligence. We see companies implementing many different types of analytics to reach better decisions, whether in their day-to-day operating processes or in their strategic planning. AI will become a standard part of the many tools to solve business problems.
What advice would you give to companies looking to future-proof from the constant onslaught of up and coming technologies?
Whatever an organization does today by way of defining a digital strategy, evaluating all the options and charting a way forward; it suffices to say that “way of working" will be obsolete in two years—faster than any other erstwhile strategy. The only thing organizations can really do is to become more prepared to adopt and adapt to trends and disruptions they face.
The fundamental trends that drive digital will continue to accelerate ‘the art of the possible’ for businesses. In such environments, it becomes impossible to apply the more traditional planning approaches, often based on extrapolation of past trends and results. Companies should therefore build a portfolio of digital initiatives, in which they combine applying proven digitization approaches as well as experiment with newer technologies. Successful digital companies apply a test and learn culture to every business change they envision, regardless of technologies used.
The one way to do this is to change their DNA, which is easier said than done. Tactically speaking, this means that almost every individual in the organization and definitely at mid- to senior levels, need to roll up their sleeves and be “trained" in digital and further evangelize digital within the organization. They need to know “enough" about the latest trends, data, technologies, customer behaviours and so on. This means that almost each organization needs to significantly shift its learning and development (L&D) agenda. That is the only way organizations are going to survive the digital onslaught that we are likely to witness over the next decade.