Too often, technology leaders focus on “Digital” and forget the “Transformation” aspect of Digital Transformation.
For most technology leaders, the recent prominence of Digital Transformation as an executive-level topic has been exciting and perhaps a combination of frustration and fun. Most of us have lived with technology for the majority of our careers, and we often feel like lone voices advocating for technology as a means to achieve, accelerate and enable broad business and strategic transformations. Suddenly, we find ourselves surrounded by colleagues, board members and other new “tech evangelists” shouting from the rooftops about the power and potential of Digital Transformation.
Strangely enough, one of the biggest challenges most companies face when contemplating their Digital Transformation strategy is an excessive emphasis on technology. Unfortunately, this is an easy mistake to make. Many savvy technology leaders embrace exciting programs focused on exciting technologies, ultimately ignoring the concern that they are being applied to incrementally improve current businesses rather than transform or create new products, markets, or business models. In short, they are focused on “digital” to the detriment of “transformation”.
Transforming today's business versus tomorrow's
Historically, much of our work as technology leaders has gradually improved our current business. Complex and powerful systems can streamline and accelerate business processes and, ultimately, allow our company to grow far beyond what would be possible without technology.
Over the past decade, the time for an emerging technology to reach market acceptance and maturity has shortened. Technologies from VR to drones and AI that were extremely expensive and complex become Christmas gifts for children in months rather than decades. Computing power that only a few governments could access can now be acquired by anyone with a credit card while taking a coffee break, running a task, and then being turned off at the end of the workday.
It's easy to get caught up in the variety of technologies that can be acquired and employed by companies of all sizes and the similar innovations in acquiring and sourcing technical and development talent from around the world. Where things go wrong is in applying these technologies only to incremental improvements in today's business, rather than determining where and if they could create tomorrow's business.
Applying transformative technology to a current business is as likely to trigger true transformation as acquiring a sewing machine would make its humble author the next powerhouse fashion designer.
This may seem like a semantic game of trying to determine what “real” transformation is, but there is a very legitimate concern. Many companies that initially embrace Digital Transformation with much fanfare and investment quickly become frustrated when all the “cool” technology fails to produce meaningful business results. In most cases, this lack of results was not due to poor management or failed technology, but to the application of technology for incremental improvements.
When your peers expect transformation and all you give them are a few flashy new toys and efficiency improvements, Digital Transformation will quickly become another failed technology investment and undermine your advancement as a strategic leader.
This raises the question: how do you differentiate today's business from tomorrow's?
A simple model for transformation
There are dozens of models and rubrics for separating current business from potentially transformative future business. As is often the case, a simple view can be more useful, and most companies can be broken down into three building blocks:
- Customers/Market
- Products and Assets
- business models)
Transformation typically requires something new in at least one of these areas. Consider some common examples:
- Adobe transformed its business model from selling its design software “off the shelf,” where customers purchased a license for a single version of its products, to a subscription business model, where customers pay a monthly fee to access the latest version of dozens of products. of products. Digital distribution has eliminated complex supply chains and production cycles.
- Nestlé and Keurig created new assets for the distribution of single-serve coffee, as well as licensing and distribution agreements that spread the concept of “single-serve coffee” in homes and offices around the world.
- Analogic, a medical imaging company, used its existing assets to enter the airport security market, applying core technology that could essentially “look inside” a human to allow security personnel to inspect baggage.
When considering technology investments, ask yourself whether the investment under consideration allows you to innovate or create a new asset in one or more of these three areas. For example:
- Cloud-based computing resources can allow you to serve a new market that was previously too complex or expensive to serve, or allow you to quickly experiment with new business models without the risk of purchasing expensive new data centers.
- An interesting combination of drones and AI-based image recognition that you develop for internal use can create an entirely new asset that can be sold to an untapped customer segment in a cost-effective subscription model.
- Remote work technologies and new collaboration models can allow you to create an external team from a partner organization for small “innovation sprints” focused on creating new digital products, all without investing in internal resources.
If you can identify investments that impact all three areas, you may have found a significant opportunity that can truly transform your company's business.
Strive to talk about Digital Transformation in the context of true business transformation, linking it to the creation of new markets, products and assets, or new business models. In doing so, the connection between digital transformation and business transformation will become increasingly apparent. You will also be able to more accurately articulate and discuss how technology could drive results without resorting to fickle, contrived discussions about ROI.
Many technology leaders discover the happy surprise of underestimating the impact of a truly transformative initiative and discover that their funding requests are not only approved, but also funded at a 2-5X multiple to accelerate the transformation to market.
Even more important, you will focus your organization's discussion on the impacts of transformative technologies on your business. With this mindset, many companies discover that they are investing little in true transformation. They often assume that huge tech budgets and cool technologies have allowed them to check the transformation box on their to-do list and move on. However, this is a recipe for investment that focuses on incrementally improving today's business rather than transforming for tomorrow.
Your colleagues are increasingly able to speak the language of technology. If you rise to the occasion and can articulate a compelling transformation story, you may find that you are leading your company into the future rather than optimizing it for the past.
