sponsored

What is Digital Transformation?

small bschmarzo blog q2
Dell EMC

By Bill Schmarzo

For a phrase that’s being thrown around quite a bit recently, what does “Digital Transformation” mean? When someone says that they want to digitally transform their business, what does one really mean, why do they want to do it, and how should they approach this “digital transformation” process?

First off, let’s start with a definition. If we don’t know what we are trying to achieve, then how do we know how to get there? Or to quote the famous Greek philosopher Yogi Berra: “If you don't know where you are going, you'll end up someplace else.”

In a recent blog “How To Achieve Digital Transformation” I stated with the following definition of Digital Transformation:

“The coupling of granular, real-time data (e.g., smartphones, connected devices, smart appliances, wearables, mobile commerce, video surveillance) with modern technologies (e.g., cloud native apps, big data architectures, hyper-converged technologies, artificial intelligence, blockchain) to enhance products, processes, and business-decision making with customer, product and operational insights.”

However, 45 words are too many. Good definitions should be 20 words or less. If it takes longer than one breath to explain something, go back to the drawing board!

So here is my updated definition that I will likely continue to refine:

Digital Transformation is application of digital capabilities to processes, products, and assets to improve efficiency, enhance customer value, manage risk, and uncover new monetization opportunities.

Dang it! 25 words. I’m going to need some help (maybe I don’t count the first two words “Digital Transformation”).

But to make this Digital Transformation definition clear and actionable, we also need to define “digital capabilities,” which we’ll define as:

Digital capabilities are: electronic, scientific, data-driven, quantified, instrumented, measured, mathematic, calculated and/or automated.

While it’s very useful to have a definition, how about we highlight the value of digital transformation by illustrating the difference between a traditional organization and one that has been digitally transformed? So let’s consider a hypothetical case study comparing two companies in the Grocery industry – a traditional Grocer and a “Digitally Transformed” Grocer – to see what the differences might look like.

Digital Transformation: Grocery Chain Case Study

Let’s create an example that most everyone can relate to – the Grocery business. Everyone has to buy groceries, and there is certainly plenty of business model disruption and customer disintermediation happening in the Grocery industry! So let’s compare a traditional Grocery chain with a digitally transformed Grocery chain.

Note: all the information for this exercise has been pulled from public sources, and I have provided links to those public sources.

tablev2

Digital Transformation Case Study Summary

While this assessment is certainly not thorough, I think one can start to see the dramatic differences between a traditional business model that mainly relies on a physical presence to be successful, versus a digitally transformed business model that employs these new capabilities – powered by customer, product, and operational insights – to enhance customer value, physical facilities, products and processes.

So how does this digital transformation affect the customer and the business? From a customer perspective, digital transformation can create a more seamless, more prescriptive customer engagement that yields the following benefits:

  • Easier for the customer to find the products that they want, especially those at the “long end of the tail
  • Easier for the customer to comparison shop and get recommendations from others to ensure that they are getting the product that they want at a competitive price
  • Easier for the customer to get their products and schedule delivery (same day delivery, drone delivery)
  • Easier for customers to share their shopping experiences and get timely resolution to any issues or problems

And there are significant benefits to the retailer, including:

  • Superior customer insights via more detailed and more diverse customer engagement data that can lead to optimized planning, procurement, logistics, inventory management, merchandising, marketing, sales and support processes
  • Improved customer lifecycle management (from acquisition, to maturation, to retention, to advocacy)
  • Reduced inventory costs through predictive product, market, and seasonal predictive analytics and real-time data feeds
  • Reduced security risks via a more thorough instrumentation of the entire order-to-cash cycle
  • Less product spoilage and shrinkage with customer, product and operational predictive insights
  • Superior business flexibility with the ability to identify shifting customer demands and predict the resulting customer, product and operational impacts

I would love to have the cycles to do this sort of Case Study across more industries, but I do have a day job that pays the mortgage (and Starbucks and Chipotle visits!!). The most exciting part of these new digital transformation discussions that I’ve been having with customers is that these outcomes are all now possible, and, in fact, are coming to fruition (that is, with a little guidance).

Bill Schmarzo is the CTO, Dell EMC Services (aka “Dean of Big Data”)

 

Dell E
NEW! Download the State of the CIO 2017 report