Recently, I came across an article in the MIT Sloan Management Review, “The Nine Elements of Digital Transformation.” While it offers a basic framework for understanding the types of activities that typically come under the umbrella of ‘digital transformation’, what I was particularly interested in was the author’s definition of digital transformation:
the use of technology to radically improve performance or reach of enterprises[.]
This definition is borne out in the rest of the article, where the focus is on how technology can improve what companies do or create opportunities to expand their service offering. Even when they examine how technology can transform operational processes, the emphasis is on process improvement and better efficiency.
While it is true that digital technologies present companies with opportunities, they also disrupt the business, and it is this disruption that a true digital transformation strategy and programme need to address. If there is not an understanding that these technologies are disruptive, then the programme to implement the technologies will face serious risks and a much higher likelihood of failure. [For more on this, see our article ‘Why digital transformation projects fail‘]
A couple of years ago, we worked with a company on incubating a new digital service. The company knew that their customers wanted the service and the company saw the benefit of the service because it allowed them to market their extensive back catalogue of content. We worked with the product owners and technology teams to develop a prototype. At a certain point, we hit an unexpected issue. A key set of data was ‘owned’ by a part of the technology team and was not available to the rest of the business. We could only get a summary report of the overall trend in activity. Without access to the full dataset, we could not proceed with the project. We made our presentation and recommendations about data exchange. Recently, I spoke to my contact in the company and they still had not managed to get access to the full data set.
Digital transformation is more than technology
As the above example shows, in order to succeed in digitally transforming a business, it takes more than just developing new digital products and services. There are organisational and personnel changes that need to occur. Companies need to recognise that they have to reinvent themselves if they are going to succeed in the digital economy.
This is why our digital transformation framework is based on four key elements:
- Data models
- Business models and processes
Digital transformation definition
In light of this, we can look to formulate a better definition of digital transformation:
Digital transformation is process whereby companies reinvent themselves in response to the disruptions that digital technologies create. This reinvention addresses more than the company’s technology offerings. It requires the development of new business relationships, new skills and new business models.