A New Way to Think About Digital Transformation
Most business leaders agree that digital transformation is everywhere. Unfortunately, fewer of them agree what the heck “digital transformation” is supposed to mean.
From e-commerce and marketing to business automation, team collaboration, and employee empowerment, digital technology permeates virtually all business processes. This makes it easy for companies to think of “digital transformation” as merely a fancy name for the adoption of new software and the evolving of current IT.
This definition bears some truth but it sugarcoats the urgent reality: Businesses that aren’t embracing digital transformation today are likely to be out of business tomorrow. In effect, they must “adapt or die.”
The situation has grown urgent because the economy and the digital economy are now inseparable. Today, everyone is (or can be) connected to everyone else in near real-time. Smartphones are the primary customer interface. Digital business accounts for a growing share of trade and economic growth.
This urgency defines the kind of “digital transformation” I’m talking about.
In this digital world, new software and resources mean nothing if they don’t lead to disruptive businesses practices. To master these challenges (and keep stakeholders happy), business leaders must adopt modern IT techniques and look at the emerging patterns of digital business.
Pattern 1: Everything “as-a-Service”
At Apigee, my employer, we have used Gmail as our corporate email system, Expensify to manage our expenses, Salesforce as our CRM system, and Netsuite for accounting. Our internal IT department doesn’t manage any of it. All of these services are delivered as-a-service via the cloud.
The cloud promises many benefits for enterprises but arguably most important is the ability to instantly employ and scale hardware and software without incurring the capital expense of buying (or building). What’s more, software services that are available “as-a-service” (SaaS offerings) can employ other software services to bolster their own service as well. IBM, for example, sees a big market opportunity to become the go-to intelligence-as-a-service provider for enterprises via the Watson supercomputer.
There are also plenty of non-software examples of everything becoming as-a-service offerings. Think of Nissan and Renault sharing assembly manufacturing lines. Same goes for fulfillment by Amazon. Or search Google and Alibaba for “motherboard manufacturers” and you will find a glut of options.
A good way to think about “everything ‘as-a-service’” is through the lens of B2B relationships. What capabilities can you offer as-a-service? Likewise, what external services might you use to improve your own offerings?
Pattern 2: Rapid Product Innovation
The as-a-service economy empowers businesses to create more robust products and experiences, but it can still be unclear how to navigate and engage these new services for maximum value.
Frequently, pursuing this value means embracing a combination of services and integrations to enable rapid product innovation. Companies that have successfully executed this idea include Slack (a great collaboration tool spanning smartphones and desktops), Stripe (making online and in-app payments processing simple, secure, and plug and play), and Dollar Shave Club (a new way to buy shaving kits).
These examples suggest a common mantra: “If I can identify a need and if I can design a great product, then I can get it into the hands of customers really quickly and do it in a cost-effective way.” This simple yet powerful idea is spurring a wave of great new products from young companies differentiating themselves through innovative customer experiences and design.
To emulate the success of these hungry young companies, business leaders must ask how they can leverage cloud scale to stimulate business innovation. What happens if someone else can build your product 50 percent cheaper? What are your core competencies? Do you want to bet on design or backend services? When innovation moves fast, how are you going to compete?
Pattern 3: Everything Connects
Another key feature of our new digital world is connection — today, everything is connected.
For some, this idea brings to mind the Nest connected thermostat or the Withings connected light bulb. While these are useful illustrations, enterprises should instead consider GE as a whole.
GE’s aircraft engines constantly collect and send out real-time performance data. They have gotten so good at it that by the time a GE-equipped aircraft lands, the company knows whether maintenance is needed and can even (in some instances) proactively order replacement parts. For airlines, this translates to savings in time, money, and all-around operational efficiency.
Today, it’s possible to build connections among any physical device, its manufacturer, and its users. This level of connectivity provides new avenues for enterprises to create amazing customer experiences.
So in this connected world, why not engineer your products to talk back to you? Even organizations that continue to offer “dumb” unconnected products can get in on the game. Dollar Shave Club doesn’t sell smart razors that transmit user information, for example — but by virtue of using a platform that ties purchases to discrete user accounts, credit card numbers, and the Internet, Dollar Shave Club has much deeper customer information than a competitor who sells through brick-and-mortar stores could ever collect.
And if your current products cannot support this new world of connectivity, consider building a digital twin. Nike did this with the original FuelBand and now has vast amounts of user data that stretch far beyond the purchase of shoes!
Pattern 4: Agile and Data-driven
Etsy is a retail company known for its devops function. Netflix is a media company that has contributed a great deal to the open source community. How are they able to innovate their primary businesses with such speed and contribute amazing software and best practices to the broader community?
The answer is actually quite simple; these types of companies are designed to operate like agile software companies just as much as they are retail or media companies. They are purpose-built for agility and running their businesses in a data-driven way is a core operating principle. Companies like these often use big data and machine learning technologies to gain insights from the massive amounts of data they collect, which in turn leads to better decision making.
In today’s digital world, software doesn’t just power the business — it is the business model. Mastering agility and data-driven practices is about more than delivering software faster — it’s about fueling innovation at every level of the organization by adopting these principles as core competencies, top to bottom.
Adapt or Die
As digital continues to transform industries the world over, companies of every type — large, small, old, and young — are seeing opportunities to create new avenues of business value for themselves and their stakeholders. They are also facing new threats, both from incumbent players expanding into new lines of business and new entrants with digital in their DNA. This can make digital transformation a more urgent proposition: “adapt or die.”
As you embark on a digital transformation, here are a few questions to kickstart your journey: What are the boundaries of your business? Are they still valid? What is it your customers already want? How can you use digital to deliver these products or services easily and without friction?
Answer these and you will be on your way to answering the most important question of all: What’s your digital strategy?
