business-change

How Digital Transformation is Driving Business Change

Trend Analysis

Thus far, much of our understanding of the organizational impact of digital transformation has been shaped by data and feedback from major business consultancy firms working with large transnational corporations. Three companies in particular – IBM, Capgemini Consulting, and McKinsey & Company – have been early active players in the digital transformation management arena and have written extensively on their experiences. Following is a brief summary of their findings.

IBM

As early as 2011, IBM Institute for Business Value published a study on the challenges and opportunities posed by digital transformation. Its findings suggest three strategic paths to digital transformation, each of which requires changes to (internal) operations and the (external) customer value proposition:

  1. Create and integrate digital operations first. Then address the customer value proposition to achieve full transformation.
  1. Enhance, extend or reshape the customer value proposition with digital content, insight and engagement. Then focus on integrating digital operations.
  1. Build a new set of capabilities around the transformed customer value proposition and operating model in lock-step.

After noting that the best path for a particular company depends on its strategic objectives along with a host of other variables, the study concluded that to succeed in digital transformation, organizations would have to make changes to their internal operations and external customer value proposition simultaneously or in tandem.

Capgemini Consulting 

Capgemini Consulting partnered with MIT Center for Digital Business in a far-reaching study to assess the current state of digital transformation among today’s leading organizations. They interviewed 157 executives in 50 large companies (typically over $1 billion in annual sales) across 15 countries over three years to discover patterns that might point to a set of fundamental elements or building blocks of digital transformation.

Their research found that executives are digitally transforming three key areas of their organizations: the customer experience, operational processes, and business models, the latter of which is concerned with not only changing how business functions work, but also redefining how they interact with each other and how they might impact the evolution of the organization. Didier Bonnet, Global Practice Leader for Capgemini, sums up the key findings of their expanded research in the following video, The Front Line of Digital Transformation.

McKinsey and Company

Global management consulting firm McKinsey and Company focused its research on understanding how digital transformation drives business value. Recognizing that digital reshapes every aspect of the modern enterprise, companies that take a limited view of digital transformation make themselves “vulnerable to new entrants and agile incumbents that can translate operational improvements across the full value chain, combined with innovative operating models, into better, cheaper, more customized products, faster service, and an improved customer experience.” McKinsey’s research concludes that companies should fully embrace digital transformation but should do so in a manner and degree that maximizes their unique business opportunity.

Digital Transformation: Emerging Themes

Taking a bird’s eye view of these studies’ findings, two broad themes emerge regarding the impact of digital transformation on the organization: companies are using digital strategies, tactics, and tools to 1) reimagine the external-facing customer experience and 2) rework or redefine internal business processes and operating models.

A third potential theme to consider is the leading role of the marketing function in organization-wide digital transformation. Ashley Friedlein, CEO of Econsultancy, summarizes this concept:

“The bigger game here is that digital transformation is really part of marketing transformation which itself is part of business transformation…whilst digital is the catalyst and driver of change…it looks like marketing as a function within business is to be the primary agent of change.”

Digital Transformation and SMEs

One more thing is worth noting. Whereas larger companies may recognize the strategic necessity of digital transformation, they often face a harder road to digital integration, with entrenched management teams controlling functionally independent or semi-independent silos and overseeing geographically displaced workforces.

Small-and medium-sized enterprises (SMEs) have an advantage in terms of size, flexibility, and management adaptability to seize the gaps in the digital marketplace and transform their organizations to meet these needs. As UK Fast CEO Lawrence Jones says, “Large businesses have a much different process to go through than SMEs. If small businesses don’t innovate digitally and don’t try harder, they don’t survive. So I think we’ve seen a lot more digital transformation in smaller companies.”

Questions

  1. What is the relationship between digital transformation and business transformation?
  2. Why is marketing uniquely positioned to lead digital transformation within organizations?
  3. How might it be easier to implement digital transformation in smaller organizations? In what ways might it be more difficult?
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