Three traps to avoid on the path to digital transformation

Three traps to avoid
on the path to digital transformation

By Ben Pring,
Co-Director, Centre for the Future of Work, Cognizant, and Co-Author of “What
to Do When Machines Do Everything: How to Get Ahead in a World of AI,
Algorithms, Bots, and Big Data” (Wiley, February 2017) 

Within the next ten years, disruptive technologies
such as mobile internet, cloud technology, 3D printing, and advanced robotics
are expected to result in 30% GDP growth in Southeast Asia
alone. There is no doubt that across industries, these emerging
technologies are the biggest disruptors today. However, many organisations
undergoing digital transformation are crumbling under their own weight.
Business leaders are struggling to set a digital strategy, shift organisational
structures, and remove the barriers that are keeping them from maximising the
potential impact of new digital technologies.

One of the key determinants of digital transformation
is the right business model. In this context, the business model is the process
architecture, and the supporting organisational model used to run the business.

The truth is, many organisations follow business
models that are too slow, too expensive or too cumbersome to achieve these very
goals as they were built long before the digital age. Complexity hinders the
process of digital transformation. To make the most of their digital
initiatives, organisations need to implement new business models and new ways
of working.

Too often, organisations take the easy way out by
“doing digital” instead of “being digital.” They mistake the superficial usage
of digital technology as digital transformation. Initiatives such as putting a
mobile front-end on an existing enterprise application tend to be used by
business leaders as examples of successful digital transformation. This jamming
of fourth-generation technology into third-generation business models is quick,
cheap and low risk. However, it doesn’t bring any real added value to the
business.

To truly be digital, businesses must
rethink, rearchitect and rebuild their supporting business models. To truly
gain results, the supporting business models should be thoroughly digital, with
process flows and supporting organisational structures based on digital principles.
In this journey to being digital, there are three traps that
companies must avoid at all costs. 

Trap 1: The FANG Trap ― I want to be the
next unicorn

           

Some enterprises try to mimic technology unicorns such
as Facebook, Amazon, Netflix and Google.
However, in most cases, not only does this approach not work, but it also turns
out to be highly counterproductive. Different companies have different starting
points, face different business challenges, and eventually have different goals
and success metrics in their digital transformation journey. Traditional
companies often need to go from being industrial firms to following a
digital/industrial hybrid business model. That’s a different challenge from
what it takes to build the likes of Airbnb that’s a digital middleman or a
social media platform such as Facebook or Twitter.

Trap 2: The “Boil-the-Ocean” Trap ― I
want it all, and I want it now

This trap can often be the most difficult to avoid.
Many highly ambitious management teams decide to go “all in” on digital. They
communicate their plans to employees, and confidently declare their intentions
inside the company and out. However, a year or two down the line, people start
asking basic questions: “How is the digital plan going? How has it changed core
metrics, such as sales or profits? How many customers are now on the platform?”

Such questions usually induce highly uncomfortable,
staring-at-shoes body language. Although well-intentioned and in many cases,
very well-resourced, broad-brush change initiatives don’t work.

There are cases in which companies, due to industry
structure or competitive landscape, find themselves extremely far behind in
digital. In such cases, a high-risk “go big or go home” approach is warranted.
However, for 80 percent of other companies, starting small with clearly defined
metrics and a concrete action plan is a better approach.

Trap 3: The Denial Trap ― Closing eyes
on digital

Many fall under the category of deniers, who like to
believe that they will not be affected by the digital wave sweeping the world.
Such thinking is dangerous because those who voice this sentiment are usually
in industries that have not been fully touched by digital yet.

The digital revolution is unevenly distributed. Some
industries and their supporting business models have been transformed, while
others have so far emerged unscathed. There are many factors that account for
this variability, including industry structure, the nature of the product or
service, and the regulatory landscape. However, in this era of hyper
connectivity, digital will eventually force structural change upon all
industries. Deniers are in for a shock if they don’t keep up.

Digital transformation is a learning journey for all
businesses and with the world changing at a tremendous pace, it is important
for companies to do a self-assessment and see if there are any traps they have
inadvertently fallen into.

For companies looking to drive meaningful change, it’s
important to make sure that any digital initiative is aligned with changing
industry dynamics and the shifting needs of their customers. Companies should
also look at any new initiative through a human lens, using insights to ensure
that initiatives are aligned with the new experiences that consumers and other
stakeholders want. Insights can also be used to start the important work of
re-thinking the company operating model and enterprise architecture. Implementing
the right strategies early on can help companies to not just avoid these traps
altogether, but also leap over the other traps that we have yet to uncover.