Three concepts to embrace for effective digitally driven innovation

As digital transformation moves from buzzword to business priority, understanding three critical concepts – and the subtle differences among them – will help you adjust strategies and mindsets.

When future economists look back at the exact moment in time when digital transformation became a business priority as opposed to a marketing buzzword, the black swan event of 2020 is likely to be at the top of the list. The connected society was already raising the bar in terms of what needed to be done and when, but the global pandemic flagged up just how many holes existed in the fabric of what many thought was a digital world.

Fast forward to Q4 2021 and there is an argument that COVID-19 was exactly the sort of catalyst that companies needed to not only accelerate their plans for digital transformation but also ensure that they were able to think both digitally and effectively. Overnight, the health crisis made brands more aware of where the customer experience or touchpoints should be, with the pandemic driving change across all channels or portals.

And while there were other agents for changes, decision makers quickly realized that effective digital transformation needs to done right from day one.

Digital thinking, increased priority

According to a recent report by Gartner, the number of business leaders who are now focused on digital change as a priority for their organizations has increased exponentially. Respondents to the analyst firm’s 2021 CEO Survey said that digital capabilities would receive more investment this year, with 20% of people citing digitization as a strategic path that they wanted to follow – for context, the same survey in 2012 recorded a response rate of 2% for the same question.

CEOs and business leaders may be on board with the idea of digital transformation, but there is no guarantee that acknowledging the need for change will bring the results that you want. The digital landscape has (and continues to) changed dramatically in the last few years, albeit that there is always some confusion over what an optimal strategy is.

For instance, there are three concepts which companies must consider before they can make the necessary adjustment to business strategies and customer engagement. To add to the confusion, all three are often used interchangeably: digitization, digitalization, and digital transformation.

However, there are subtle differences and nuances to each.

Digitization is the process of moving from an analog to a digital format – Gartner defines this as digital enablement. This is usually the first step and requires the company to understand the value of the data that it controls.

Digitalization, on the other hand, is the integration of digital technologies to change an existing business model, thereby generating new revenue streams and customer engagement opportunities. This step is usually associated with cloud migration, providing the requisite KPIs and ROI in a (relatively) short space of time.

The third concept is actual digital transformation. Gartner considers this to be linked to the unlocking of potential opportunities and the leverage gained from new digital business models. This requires a significant investment for both the company and its workforce, mainly because full-blown transformation to a digital first attitude brings its own set of challenges and pain points.

Importantly, the informed decisions that need to be made are likely to require a company to acknowledge the existence of what can be defined as a digital lifecycle. A proactive attitude then becomes vitally important – there is documented evidence that most digital initiatives either fail to get off the ground or are introduced as reactions to fluctuations in customer demand, market pressure and evolving technologies.

Digital assumptions, constant discussions

Discussions around digital transformation started long before the pandemic impacted our connected lives. Digital first had been pivoting towards digital only, but there were questions based around what the process should be that suddenly had more obvious answers. According to a recent MIT Sloan Management Review webinar, COVID-19 forced companies to not only look at the plans they had in place but also the technology that they were expecting to invest in. The problem was that most business leaders were often unprepared for the challenges that the pandemic flagged up, with organizations forced to change on the run.

These problems ranged from an assumption that customers always prefer the human touch in their engagements to the fact that being a “fast follower” of your competition’s innovations is a prudent path to take (spoiler alert, it isn’t).

Companies must now focus their initiatives on four areas: customer experience, employee experience, operations, and business model transformation. All these initiatives naturally require strong leadership and the right tools for the job, with the end goal being to create a digital-ready culture. Hitting that target will allow companies to compete in a society where employees AND customers both benefit from digital transformation.

Predicting the impact

A question that is constantly asked by companies at the beginning of their digital journey is whether the process can not only be sped up but also if the outcomes of that investment can be more predictable. Small to mid-size companies, for example, must be more pragmatic in terms of what they integrate and when.

A recent research report published in the Harvard Business Review attempted to provide an answer The key findings included the revelation that some teams in a chosen business unit (BU) found it easier to cope with the digital transformation – which was a top-down initiative – than others.

By analyzing the struggles and successes of various stakeholders in the BU, the researchers got a clearer picture of where the choke points were in the process and, importantly, the reasons why accelerated digital transformation can stall. The latter, which the authors of the report called “awareness of complexity-in-use” had implications for processes, people and projects, with the researchers concluding that a one-size-fits-all approach to digital integration is not always the best path to take.

For example, “quick wins” at the start of the process will allow a company to get a better understanding of where they are on the journey and where they need to be. Once a roadmap is established, then stakeholders and decision makers can focus “their digitalization efforts and deliver more effective transformations.”

Business priority, not buzzword

Digital transformation has morphed from being a tech-centric buzzword to a business priority in recent years, but there are still challenges to be faced and pain points to solve. Companies that understand why digital matters and why it needs to be a part of their culture will naturally gain from the channels it opens and the insights provided.

To transform successfully, you need to have both the right tools and mindset. Digital initiatives that fail are often down to a lack of understanding as to what the digital experience should be for the end user, with companies rushing to integrate projects before they are ready.

Organizations that don’t accept that digital transformation is no longer a question of if but when run the risk of losing both customers and brand awareness. The connected society has pushed the digital world to the forefront of our work and personal lives, the companies that don’t adapt now will be the ones that are consigned to history.

Copyright © 2021 IDG Communications, Inc.

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