What is digital transformation *for*? What drives us to invest time and money in changing not just our tools but our processes, the very way we work? Even our whole value proposition?
The conversations I have with leaders about digital transformation are driven most often by two things. The first is efficiency. In the private sector people naturally want to do things more profitably. In the public sector, they’re under pressure to meet rising demand with falling budgets.
The second imperative comes from the customer. People want things faster and faster and the only route to meeting that demand seems to come from digital technologies.
As critical as these drivers are, I would like to advocate for third and even more important motivator for digital transformation: agility.
Adaptation not optimisation
Efficiency, the optimisation of our operations, has been the motivator behind so much business change and investment for decades. The critical question is usually, “How do we do better tomorrow what we did yesterday?”, where ‘better’ means ‘at lower cost’ or with greater added value. This is an effective approach in an age where yesterday’s business might have another few decades of life in it. It’s less valuable when that business model might only have a lifespan measured in months.
This is not an argument that everything is changing faster now. That would be a surprising conclusion for a man writing in a 140-year-old house. But as I outlined in my first book, High Frequency Change, every organisation now faces small and fast-moving waves of disruptive change. Our world has been compressed by communications and transportation technology. The tools of innovation and production are in the hands of many more people, and the skills to use them are freely shared. Information and products can spread incredibly quickly across the globe.
The result is that a new paradigm can appear on the near horizon and in the space of a few months or a few years, turn an industry upside down. And this is before we consider the globe- and industry-spanning disruptions that can be caused by a pandemic or environmental change – both accelerated by the very same effects that have created our compressed, accelerated commercial world.
In my new book, Future-proof Your Business, I lay out three steps to building a more agile, resilient business. Digital transformation is core to two of them.
The first is in the acceleration of our decision-making ability. Data still moves incredibly slowly through many organisations in forms that are hard to interpret. It gets bound up in spreadsheets and committees, and takes too long to reach the people making decisions.
Digital transformation is one of the solutions to this, with careful redesign of process to eliminate barriers, and investment in technology to both speed the slow of information and improve its presentation. Some of the best case studies I have for this come from my work with the software company Prophix. Talking to finance professionals from around the world I have heard incredible stories about how much time and effort used to go into the collation and preparation of financial data for budgets and reports. About tangled knots of multiple spreadsheets, and manual verification of data streams. Through programmes of change and investment, this has been replaced with a software stack that automates much of the workflow, speeding the path of information to the people that matter and presenting it in ways that properly informs decision-making.
This sometimes leads to surprising changes in an organisation: once the information is released into a form that is easier to access and query, it can be used by a wider audience. Decision-making can be more widely shared, further reducing response times.
Digital building blocks
The other component of a future-ready business for which digital transformation is critical is its structure. Optimised businesses are inherently streamlined and integrated. That means either having everything under the same roof, whether it’s physical or legal, or building tightly-structured, outsourcing relationships.
The agile business is built more like a network, a collection of building blocks that when brought together present a value proposition, but which can be rearranged to meet the changing the needs of the customer. This creates challenges. It takes more effort to maintain those dynamic relationships. There is often cost involved, so more agile businesses might be less profitable. But the forward-thinking leader will trade some profitability for sustainable success.
The critical factor in the success of this building-block approach is lowering the friction in the interfaces between them. Digital communications allows this, with perhaps 80% of the interaction between functions existing purely in software speaking machine to machine. Only those organisations willing to embrace digital transformation can reorganise along these lines.
Low friction business
For me, digital transformation is about lowering the friction inside an organisation, and between the organisation and its partners and customers. You can do that to drive efficiency, or you can do it to enhance customer service. But perhaps the best reason to do it is for resilience. Applied in the right areas, digital transformation is a critical part of the route to sustainable success.
Tom Cheesewright is the author of Future-proof Your Business and High Frequency Change. As an applied futurist, he works with governments and global 500 corporations including Facebook and Google, Audi and BMW, Barclays and HSBC, to help them to see what’s next, share that vision, and respond. https://tomcheesewright.com