Digital transformation is a business strategy that has been increasing in importance in the past few years. The ubiquitous use of smartphones, access to fast mobile Internet, and the app store concept have all combined to create a platform where established companies can offer online services and new companies can go to market with innovative ideas extremely quickly.
In some industries, such as financial services, there is an arms race taking place. New companies are launching services that are free of the technical legacy a large company, such as an international bank, needs to manage. Freed from many of the traditional requirements – such as a chain of retail branches – these new services can offer better prices to customers and be entirely designed around the needs of the customer, not the legacy systems of an established company.
It’s clear that companies across all industries need to be exploring how digital tools can improve their service to customers, but digital transformation projects can be risky. If a company bets on the wrong type of service then they can quickly become irrelevant in their own marketplace. Alternatively, if a company fears the complexity of a major digital transformation and delays investment then they may find that entirely new market entrants steal their customers by offering a more customer-centric product.
There are some key areas of focus that should be analysed before commencing on a digital transformation project, both to mitigate against failure and also to increase the chance of success. New research published in Information Age highlights six key factors for success in digital transformation projects:
1. Leadership; is the company leadership really supporting change?
2. People; does your team have the skills you need?
3. Agility; are you able to change plan during the transformation?
4. Business Integration; how will the transformed business connect to the existing processes?
5. Ecosystem; what support do you have from suppliers and others in the value chain?
6. Value From Data; are you capturing the right data and analysing it at the right time?
These may appear to be obvious points that any executive team would consider before a major change, but it’s worth studying each factor in more detail because digital transformation projects do fail. Often the reasons for failure are clear – a lack of agility is a classic example. If your project is so large that it may take several years to implement then it is almost certain that the requirements in a couple of years will be different to now. Therefore agility is essential.
The increasing use of Artificial Intelligence is a good example why these six key factors are important. In the Information Age research 68% of respondents said that they had already had a positive experience of AI systems and 61% expected AI to be creating new jobs in the near future.
That 68% figure is quite high for a technology that is often talked about as a trend for the future. Technologies such as AI are becoming very important in the present-day business environment and many of these emerging technologies will lead to a fundamental change in business models and the competitive landscape. But digital transformation is not just about the integration of emerging technologies into your existing business processes, it is the enabling of new business models or services through the use of technology.
These six factors identified by Information Age really do speak to the way that a digital transformation project should be approached. Kodak was researching digital photography and yet they never saw Instagram on the horizon – digital transformation can completely change entire industries in a short period of time so this is an area of strategy that is essential to get right.