What are some of the key factors that legacy businesses and CIOs should keep in mind before embarking on their digital transformation journeys.
In the digital age, organisations can either be the disruptor or the disrupted. Naturally, no enterprise, big or small, wants the latter. An important aspect of avoiding being disrupted and not fading into oblivion is to plan a successful digital transformation. In fact, digital transformation is not an option anymore; it is what organisations need for survival.
The question is – are organisations ready to take the big leap and prepare their businesses for the present and the future? A new report by Accenture says that only 6% of C-level executives say they’ve successfully managed to embrace new businesses activities without hesitation.
“Embracing new businesses decisively is a challenge for most companies. Many cling to legacy products, services and brands, or have outdated technology," the report says.
In all of this, the Chief Information Officer (CIO) is the most likely member of the C-suite to take ownership of digital transformation. CIOs are in a position of advantage when it comes to digital transformation, as it is one role in the c-suite that touches every department of the organisation. They can, in fact, drive the digital transformation and use existing skills in a new way and create the best environment for the business to succeed.
Here are key factors that organisations and CIOs should keep in mind before embarking on the transformation to the new.
1. Building investment capacity
Businesses today understand that if they need to thrive in the digital age, they have to take on the disruptive forces. But the question is – how? This is where companies need the wise pivot, a strategy for the digital age that can help them pursue new growth opportunities without abandoning their core business.
Companies that pivot wisely are the ones that transform the core business to drive up investment capacity, helping the business become more competitive, and improving the cost structure to drive flexibility in the core model, and creating investment capacity to repurpose other parts of the business. They need investment capacity to scale new businesses as well as reinvigorate the core.
Companies can build greater investment capacity by revitalizing their core business. They have to make transformative choices like strategic cost-reduction, consolidation of tangible assets and divestment of non-core businesses. They need to fine-tune their existing business activities by streamlining assets.
Also, companies with profitable core businesses are more likely to generate and sustain strong investment capacity.
2. Driving incremental growth in the core business
A lot of businesses skip over this part, but driving incremental growth in the core business is one of the goals of changing into the new. For instance, a company whose core business is retail can start by improving the search functionality its website, making the mobile experience better, and enhancing the checkout information. Now this may mean realigning the backend with all these new functionalities and requirements. This is where some of the investment capacity must be used. All these moves will drive efficiencies in the core business and eventually result in cost savings.
Driving incremental growth in the core business can begin with digital basics like digital marketing, analytics and web interactions, which are all ways of getting closer to customers in the core business.
3. Scaling the new
The world has changed so much. Traditionally companies have been reluctant of entering new businesses, and when they did, it was done slowly and gradually. But today about 70 percent of companies generate less than one-half of their revenues and profits from new business activities. Now, to get there, companies have to be in a constant state of change.
And for that they need a constant flow of new ideas. Most businesses can identify new businesses that are closer to their core area, but scaling them is difficult. They need to build innovation architecture inside the business that is reflective of the different levels of maturity of those businesses. They can work with startups and innovation centres, which can help them commercialise these new businesses and ideas, and help them figure how they can go to mass market scale in a short period of time.
A focussed strategy will help these organisations identify relevant and promising innovations, prototype them, and test them quickly. This will also help them go commercial faster than the competition.
4. Creating synergies
Now this is the most important part, new businesses cannot come at the cost of the old. There has to be cross-selling between the new and old businesses. In fact, a truly transformed business will use the new business to reinvigorate and reshape the legacy business.
Moving to new business and creating synergies will also help in ensuring that organisations are future-ready and cementing their position as future leaders in the industry. A strong collaborating network is essential for this. Problems of the future will not be solved by companies on their own, they need collaborative partnerships and joint ventures, that can be used for constant innovation, and refuelling the core business.
5. Technology isn’t everything
Sure, modern technologies are at the heart of transformation, but they aren’t everything. It is not about going to the market and buying the latest technology. Rather, it is about optimising that technology to get maximum value for your business. It is also about creating the right environment for that technology to help your specific needs.
This choice between new technology and the right technology can be more difficult for traditional companies that have to connect new digital applications to legacy systems that are important for the business. In such cases, companies can try a staged approach, and not just change everything at one go. While such an approach may take longer, it gives the organisation and people time to get used to a new way of working, while not disrupting everything in an instant.
Accenture’s report outlines that the success stories of tomorrow will be determined by executives who know how and when to pivot wisely.
“This will call for courageous decisions that enable today’s companies to: generate sufficient investment capacity by revitalizing their legacy business, then deploy that capacity to scale new businesses, while redesigning the organization to innovate more pervasively," it concludes.
So how do you prepare to pivot wisely? Start by being investment ready, innovating by design, and blending the old and the new. Find out more here.