What does achieving digital transformation means ?

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Here’s a very popular topic when digital practitioners or executives meet : what are the best examples of businesses having achieved their digital transformation ? What are the most advanced ones ? Everyone has his own examples, with the biases caused by his own expertise and concerns : some will focus on the sacrosanct customer experience and won’t pay attention to anything else, others will focus on cultural transformation or process transformation etc. There are lots of studies trying to provide an answer to this question, with the same biases. A more or less comprehensive set of criteria, a questionable weighting of some criteria ect. In the end there are lots of discussions about the real state of achievement regarding any mentioned business.

So back to the starting line.

Dont mistake digital transformation for digital transformation

To start, we should first agree on what digital transformation means. There are two approaches : digitization and digital transformation.

By digitization I mean digitizing the existing. Moving from brick and mortar to web. Moving one’s customer service online. Making a app to broadcast one’s media or sell products. Turning a paper based process into a paper-free one. Nothing changes fundamentally, it’s just about adding new channels and touchpoints.

Then there’s the transformation. As its name suggests, it’s about transforming the existing. I’ll use the Gartner’s definition : “the use of digital technologies to change a business model and provide new revenue and value-producing opportunities”.  Like any definition this one is not perfect but it clearly show the difference with digitization.

So when a retailer opens an ecommerce site it’s “just” digitization, no matter the effort it takes. Going fully omnichannel is more transformative because it has a real impact on the organization and the business, changing the business model to a freemium or subscription-based one, leveraging differenciating assets to tackle a new sector through technology is real transformation.

Not every businesses is comparable regarding digital

On the other hand there things one must be aware of. A business trying to assess how digitally advanced it is will look at other businesses according to its own needs and will overweight some criteria. A retailer will pay very little attention to a business excelling at Industry 4.0 and will even think it did nothing regarding digital even if the benefits are huge. It’s only because they don’t face the same challenges and that their business is different. There are also businesses that had nothing to do regarding some fields because they were already advanced and had little transformation to drive. Defining a comprehensive list of criteria is one thing but what matter is to weight each one properly regarding one’s challenge.

However there is a pitfall to avoid : focusing on businesses close to yours because they do the same things, face the same challenges, are on the same markets. There are two reasons to that. The first is there are always ideas worth stealing in industries that have nothing to do with yours. That’s one of the easiest ways to innovate on one’s market. The second is that many businesses beliefs that some issues are industry-related while everyone should care about them. I know many businesses that mention Amazon as the absolute benchmark while their business have nothing to do with Amazon’s. But in the customer’s head Amazon is the reference and he wants the same experience with his bank, airline or even public services. In the same way, the B2B customer experience has been overlooked for a long time while businesses are starting to understand that B2B clients are B2C consumers who went through an office door and have the same expectations in terms of relationships, tools and experiences as they have as consumers.

Then come the key question : what to measure ?

How to measure digital transformation ?

Without any surprise, I’ll say :

  • internal processes and operations
  • employees culture and digital maturity
  • agility of management
  • business models
  • moves to new industries and verticals
  • growth and profitability during the transformation process

What about customer experience ? Apps ? Websites. If none of the above mentioned points can be found behind it’s not transformation but window dressing digitization.

Should one digitize before transform ?

What brings a legitimate question : should a business digitize before it transforms ? It’s obvious that some businesses are so lost in digital that the transformation step is too high. An intermediate step is better to be pragmatic and will be usefully leveraged for learning and acculturation. For the rest, if we consider businesses that directly transformed they were able to do so because they were already digitized enough.

One should also look beyond the surface and look at what’s no visible. It’s easy to fall in love with the web’s sequins and focus on it while many structuring streams are invisble, most of all in the industry. I like to mention GE as a model but if you have a look at what’s being done at Air Liquide, Schneider Electric or Airbus there are a lot of admirable ambitions programs tackling operations, processes, factories. It’s not as sexy as the new Uber of anything but it’s as least as important.

The state of digital transformation ? Not impressive.

So if we consider the staate of digital transformation there are not that many reasons to be impressed but, as I said, it’s logical. Many businesses have a good level of digitization and must now move to next stage. And those who have achieved a good level of transformation they are, logically,  because it’s about changing structuring things in organization and it supposes that thet are businesses that were already mature in the early 2010s. So they are not that numerous.

But being a great visionary leader who led his business at the right place at the right pace does  not always pay. A transformation has a cost in terms on money and growth. If everybody agree to say that GE is an exemplary case, giving up some activies and the developement of new ones with new business models weighted to growth and profitability, what did not please some activist shareholders who had Jeff Immelt resigned.

Anyway, no business has achieved its transformation so far. Some are well advanced, some less, but non reached the end of the journey. But does the journey have an end ? Digital or not, transformation is an ongoing process that have no limits in time.

It’s not digital anymore

To end, I wrote earlier this year that the time when we won’t say digital transformation but transformation was near. We’re close to that. Once digitization is achieved it’s easy to see that the rest is about everything but technology. Technology has a role but it will be a tool, not a goal.

What do you think ? What business has achieved a good level of transformation ?