While digitization is causing disruption across many industries, it is also ripe with opportunity for incumbents in those industries.
As buzzwords go, Digital Transformation is starting to wear thin. It has become so widely used and applied to so many different products and service packages, that it is easy to forget it is not just a marketing gimmick but actually applies to real phenomena. It is also easy to forget that while those phenomena are disruptive, they are also ripe with opportunity.
Embracing digital transformation is like embracing a printing press in a world of scribes; or a high-end truck in a world of horse-drawn carts. Both transitions take a great deal of work. Processes must often be rebuilt from scratch. The old technology is usually incompatible with the new. New leadership styles are often needed to redraw organizational structures and change enterprise culture. And entirely different skills are required.
The telco sector is a good example of an industry that must change. PC-based communication, cheap fixed and wireless broadband, and over-the-top voice and messaging services have upended traditional telephony business models built around voice and text. That’s why many operators, such as Australia’s Telstra, have done the analysis and have concluded the gains in efficiency, scalability, flexibility, and rapid innovation far outweigh the risks of radical structural and strategic changes that “leave their legacy behind”. The financial sector must also rise to the challenge of customers that expect payment, account management, advisor services, and even corporate banking to be increasingly self-driving. Which is why banks like Emirates NBD is committing Dh 1 billion (~USD 272 million) to digital transformation over the next few years.
Still, the drastic contrast between before and after makes digital transformation a daunting task. The examples of digital disrupters widely used in the business and technology press – Alibaba, AirBnB, Uber – only makes matters worse, as they were born digital and are often so large and dominant in their main areas it is near impossible for traditional firms to emulate them. Also, technology evolution is accelerating; and emerging technology types often don’t fit neatly into the existing business and operating models of enterprises that have been around for more than 15 years. As a result, many business leaders can be unsure of how to use them, which often leads to delayed initiatives, half-hearted attempts at pilots, or continued use of outdated methods, especially in markets where business is good. Why mess with what works?
The Digital Glass is Half Full
Fortunately, the current dynamic means there are plenty of opportunities to not just adapt but excel when it comes to digital transformation. Technology has never been cheaper nor easier to obtain (See Figure 1). The rapid expansion and reliability of fixed and mobile bandwidth makes computing infrastructure, platforms, and applications particularly easy to acquire. Architecture modularization, APIs, and low-code and no-code development means integration of off-the-shelf and customs applications with business and operational processes takes a fraction of the time it did just five years ago. Online tools and cloud delivery has brought prices way down. And upgrades, overhauls, and additions are often self-reinforcing, creating a multiplier effect (See Figure 2).
So when it comes to technology, it may be an exaggeration to say anything is possible. But not much of one. This means that CEOs, COOs, CIOs, and board members can use digital transformation principles to serve larger, overlapping business goals, such as:
Digital transformation often begins with making better use of tools already in place. Staff just need to learn how to better use their integrated communications software. Underused features need to be tapped on ERM systems and integrated customer databases to simplify SG&A activity. Predictive analytics can then be added to crunch data to determine how restructuring or service changes will impact sales. Artificial intelligence can then automate decision making. And cloud- and API-based architectures can make systems more flexible and responsive, decreasing time to market. The Zain Group, for instance, is launching a group-wide API program to create a single platform for accelerating new digital services with greater efficiency. And the volume and velocity of the data increases manyfold once IoT is introduced in supply-chains, further enhancing the efficiency potential.
Winning over customers
In addition to websites and email, enterprises can now deploy apps, social media, and IMs to engage customers. Also, partner platforms and API-based ecosystems can extend corporate reach into new areas. But the channel is just the beginning. Call centres are experimenting with emotion-recognition software to assess caller mood to provide the most appropriate response. And financial firms, such as the US-headquartered Capital One and the Singapore-based DBS, are leveraging artificial intelligence in various ways to improve sales and customer satisfaction.
Some argue that agility is the final goal of digital transformation. It is often easiest to see in incremental developments. For instance, a global software vendor based in the Czech Republic automated creation of value-add and upselling emails, which reduced total production from days (and occasionally weeks) to just a few hours. The increased speed enhanced collaboration between designers, copywriters, and sales, resulting in more effective campaigns. A few thousand kilometres to the southeast, the Kuwait-headquartered Agility, a global logistics firm, has started using digital transformation principles and technology to rapidly embrace new business models, quickly run pilots, then conduct phased rollouts with problem-fixing controls built into the process.
Speeding up innovation
A more efficient and agile company on the hunt for new customers helps foster an innovation mind set. IT firms such as Apple, Microsoft, Samsung, and Intel are known for this. They make customers part of software development, deploy advanced analytics, and encourage internal collaboration. But so do a number of other forward-looking firms in traditional industries. For instance, DeWalt, which makes high-quality power tools, maintains its position as an industry leader by working with customers, deploying a range of DX tools to accelerate time-to-market, and using analytics to assess package design, product use, and marketing.
Create new sources of revenue
LEGO is perhaps one of the better known examples of an enterprises that remade itself. What many do not realize is that LEGO deployed multiple digital transformation initiatives that were crucial for new revenue streams from games, movies, and applications. Its customer-focused platforms increasingly shift product design to fans and allow fans and partners to use what is essentially an incubator to experiment with “microbusinesses”. There are also a number of examples of firms generating revenue from services more immediately connected to core business. The digital division of Turkcell, the leading mobile operator in Turkey, has pioneered a range of apps and services for messaging, music, and streaming, all of which depend on its increasingly fast data services.
Grabbing the opportunities afforded by digital transformation is not easy. Bold, systemic actions that can push people far outside their comfort zones are almost always required. By adopting the perspective that digital transformation is less a threat and more an exciting opportunity, and by clearly communicating how they plan to transform, enterprise leaders can go a long way towards rallying staff, accelerating the process, and reaping the benefits of change.
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