Business Issues and Trends 306
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Week10-DigitalTransformation.pptxBUS306: Contemporary Business Issues and Trends
Lecture Week 10:
Digital Transformation
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Recognition of Traditional owners and Indigenous cultures
Charles Darwin University acknowledges the traditional custodians of the land on which we’re meeting and pays respect to Elders both past and present and extends that respect to all Aboriginal and Torres Strait Islander people.
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Learning objectives
Upon completion of this week’s topic, students should be able to:
Understand what digital transformation is and its key elements.
Examine the prospects and challenges of digital transformation among businesses.
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Learning objectives (cont’d)
Upon completion of this week’s topic, students should be able to:
Learn about the emerging approaches and strategies for managing the digital transformation transition process in businesses.
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PART 1: Digital Transformation: An overview
Digital Transformation
Background
And according to a McKinsey Digital Quotient survey from April 2019: 93 percent of executives believe that digital is critical to achieving their strategic goals.
Digital transformation marks a rethinking of how an organization uses technology, people, and processes in pursuit of new business models and new revenue streams.
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Digital Transformation
Definitions
Digital transformation refers to the use of new digital technologies (social media, mobile, analytics or embedded devices) to enable major business improvements (such as enhancing customer experience, streamlining operations or creating new business models) (Vial, 2020).
Digital transformation involves leveraging digital technologies to enable major business improvements, such as enhancing customer experience or creating new business models.
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Digital Transformation
Definitions
Digital transformation is an effort to enable existing business models to integrate digital technologies into already existing business models, changing the way you operate and deliver your product or service (McKinsey, 2020).
Digital transformation is often defined as the transformation of certain manual and nondigital processes to digital processes (Forbes, 2020).
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Faces of Digital Transformation
(A) Transforming Customer Experience
Customer Understanding
Companies are starting to take advantage of previous investments in systems to gain an in-depth understanding of specific geographies and market segments. Some are exploring social media to understand what makes customers happy — and what leads to customer dissatisfaction.
Examples: In financial services, for instance, banks are using digital transformation to dramatically speed things like account opening, loan processing and approval, customer wait times, etc. (Forbes, 2020; Westerman et al., 2018).
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Faces of Digital Transformation
Transforming Customer Experience
2. Top-Line Growth
Companies are using technology to enhance in-person sales conversations. Better understanding helps businesses to transform the sales experience. Companies are integrating customer purchasing data to provide more personalized sales and customer service or even to offer customized product packages.
Examples: A hospitality company engaged in location-based marketing uses analytics to send personalized mobile coupons to customers as they near a facility; the company can then track uptake in real time. (Loonam et al., 2020).
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Faces of Digital Transformation
Transforming Customer Experience
3. Customer Touch Points
Many companies are now offering customer apps to enhance customer touch points. Companies with multiple channels to the customer are experiencing pressure to provide an integrated experience. Multichannel services require envisioning and implementing change across customer experience and internal operational processes.
Examples: Hospitality companies are offering smartphone apps that are linked to the customer’s profile, enabling integration across SMS, apps and social media efforts. (Sebastian et al., 2017).
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Faces of Digital Transformation
(B) Transforming operational Processes
Process Digitization
Automation can enable companies to refocus their people on more strategic tasks. Automation allows researchers to focus on innovation and creativity rather than repetitive efforts. It also creates streams of data that can be useful in later data mining efforts.
Examples: An apparel company has moved to digital design processes when collaborating with manufacturing partners. Going digital eliminates most need to ship physical prototypes back and forth, reducing the product development lifecycle by 30% (Westerman et al., 2018).
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Faces of Digital Transformation
Transforming operational Processes
2. Worker Enablement
Individual-level work has, in essence, been virtualized — separating the work process from the location of the work. The company’s collaboration and networking tools allow employees to talk with anyone in the organization from wherever they are sitting – Digital platforms have become powerful enablers for knowledge sharing.
Examples: Many companies have rearranged their headquarters so that nobody had an assigned desk, even the CEO. Employees now work from home one or two days per week (Garcia et al., 2020).
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Faces of Digital Transformation
Transforming operational Processes
3. Performance Management
Beyond being better informed, digital transformation is actually changing the process of strategic decision-making. Transactional systems give executives deeper insights into products, regions and customers, allowing decisions to be made on real data and not on assumptions. This is happening in both internal processes and customer-facing processes.
Examples: Top executives in a medical device manufacturer used the company’s existing collaboration tools to extend strategic planning sessions from 12 people to more than 300 of the business’s top managers – improving input into the process and better uptake of decisions. (Forbes, 2020).
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Faces of Digital Transformation
(C) Transforming business models
Digitally Modified Businesses
The company is finding ways to augment physical with digital offerings and to use digital to share content across organizational silos. Businesses are building digital or service wrappers around traditional products.
Examples: A national post office is creating a free digital mailbox attached to each physical mail address that companies can use as a substitute for a person’s physical mailbox. (Forbes, 2020).
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Faces of Digital Transformation
Transforming business models
2. New Digital Business
Companies are also introducing digital products that complement traditional products. For example, a sports apparel manufacturer started selling GPS and other digital devices that can track and report on a customer’s workout. Other companies are changing business models by reshaping their boundaries through digital.
Examples: An airport authority is aiming to become the owner of a traveler’s end-to-end process by providing an integrated multichannel experience, including information on airplane traffic and reservations, duty-free shopping promotions and other benefits (Forbes, 2020).
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Faces of Digital Transformation
Transforming business models
3. Digital Globalisation
Companies are increasingly transforming from multinational to truly global operations. Digital technology coupled with integrated information is allowing businesses to gain global synergies while remaining locally responsive. These companies benefit from global shared services for finance, HR and even core capabilities like manufacturing and design.
Examples: Manufacturers are now able to shift production around the globe with only a few days’ notice in response to interruptions or excess demand (Anthony et al., 2019).
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Faces of Digital Transformation - Summary
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Source: Loonam et al., 2018
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PART 2: Prospects and Challenges of Digital Transformation
Prospects of Digital Transformation
Improve competitive performance
1. Increasing the flexibility of products and services by supporting the continuous evolution of their scope, features, and value
2. Lowering the barriers across industries, favoring connections, exchanges, and partnerships among companies operating in different sectors
3. Supporting companies in accessing continuous, timely, and reliable data streams
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Example:
Digital transformation reduces barriers between industries - Companies such as Google, Apple, and Uber are devoting more attention to the automotive industry for the development of autonomous vehicles.
Prospects of Digital Transformation
Transforming operational processes
4. Helping to create products and services that are more efficient and consistent with customer needs
5. Providing a shorter innovation process and time to market, and creating related digital ecosystems
6. Digital transformation favors the interconnection among diverse industries by guiding firms to new opportunities
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Challenges of Digital Transformation
A 2020 study by Boston Consulting Group found that a staggering 70% of digital transformation projects fall short of their goals (Forbes Technology Council, 2021).
According to recent estimates, 66% to 84% of digital transformation projects fail, which is a sizable proportion considering the costs, both monetary and otherwise, of putting these projects in place (Libert et al., 2016).
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Challenges of Digital Transformation in Business
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Source: https://www.netsolutions.com/insights/challenges-to-a-successful-digital-transformation-and-how-to-overcome-them/
Challenges of Digital Transformation in Business
Organisational Culture
The most common misconception that business owners have is that digital transformation is possible if a company upgrades its tools and technologies. However, the reality is that digital transformation is not just about technologies. It is also about your organization’s ability to adapt to these changes.
Failing to communicate the importance of digital transformation across the enterprise might lead to resistance amongst the employees to change (Tabrizi et al., 2019).
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Challenges of Digital Transformation in Business
Inconsistencies between strategy formulation and strategy implementation
Corporate practice shows that this is not always the case, and senior executives cannot achieve any benefit from digital transformation strategies if they cannot effectively implement them.
Prior studies point out that effective strategy implementation is more critical for avoiding failure as compared with good strategy formulation (Lee and Puranam, 2016; Greer et al., 2017)
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Challenges of Digital Transformation in Business
Lack of IT resources and management
According to one recent survey, 77% of companies consider missing digital skills as the key hurdle to their digital transformation.
There is an apparent shortage of digital workforce, and without them, you can never succeed in overcoming digital transformation challenges.
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Challenges of Digital Transformation in Business
Lack of clarity on the digital transformation budget
To drive digital transformation, an organization needs to make an investment in acquiring the right technology and the right digital experience team to execute it. This lack of clarity on budget affects the decision-making process.
Example, European insurer Axa, for example, invested €950 million over just two years (Catlin et al., 2017).
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Challenges of Digital Transformation in Business
Digital Security
According to study by SoftServe, 55% of companies said that security was the number-one challenge they face when implementing digital enablement technologies.
Research experts like Forrester and Gartner share that a company’s successful digital transformation journey relies on its ability to secure its digital operations (DeMartine & Pollard, 2019).
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PART 3: Emerging Approaches & Strategies for Digital Transformation
Emerging Approaches for Managing Digital Transformation
Research has found at least three new approaches that are emerging in some leading organizations around the world:
Innovating by Experimenting
Radical transformation through incremental approaches
Dynamic sustainable advantages via temporary advantages
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Refer to the following works:
Li, 2020; Anthony et al., 2019; Weill & Woerner, 2015; Dremel et al., 2017
Emerging Approaches for Managing Digital Transformation
(A) Innovating by Experimenting
Overview: From a linear process of strategy making and execution to an iterative, recursive, learning process.
Main Features: Using experiments to evaluate and recalibrate strategy and guide execution.
Examples: Alibaba, Google, Amazon, VMWare
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“If an idea works, then scale it up rapidly…””
[Senior Executive from Alibaba]
Emerging Approaches for Managing Digital Transformation
(B) Radical transformation via incremental style
Overview: From one radical transformation to a series of incremental inter-locked steps to achieve radical change cumulatively.
Main Features: Strategy is developed, evaluated and recalibrated frequently through execution .
Examples: Amazon, Slack, JD, Didi
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radical transformation does not have to be planned and implemented in one big step
Emerging Approaches for Managing Digital Transformation
(C) Dynamic sustainable advantages
Overview: From sustainable competitive advantages to an evolving portfolio of temporary, transient advantages.
Main Features: Using successive temporary advantages to create sustainable advantages dynamically and cumulatively.
Examples: This is clearly reflected in the competition between American and Chinese digital firms in China–for example, Alibaba versus Amazon, Baidu vs Google, and Uber versus Didi Chuxing.
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… new feature of the digital economy is the network effect and the “winner-takes-all” [Li, 2020]
Strategies to Speed Up Your Digital Transformation
Define a Digital Strategy
By articulating a digital strategy (whether customer engagement or digitized solutions) a company’s leaders can focus employees on clear objectives. With clear direction, a company can start building integrated, difficult-to-replicate capabilities to deliver on that strategy.
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Strategies to Speed Up Your Digital Transformation
Invest in an Operational Backbone
To get started in a meaningful way, company managers should focus on building just one capability critical to the company’s digital strategy, such as a well-designed customer database or a supply chain management system.
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Strategies to Speed Up Your Digital Transformation
Architect a Digital Services Platform
Once a company has established the data requirements for a small set of critical business components and has set up APIs for accessing the needed data, it can then build (or technology partners can help it build) the infrastructure needed to protect, connect, analyze and support innovative digital services.
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Strategies to Speed Up Your Digital Transformation
Design the Digital Services Platform with Partners in Mind
Our study suggests that effective leaders recognize that customers, suppliers and other stakeholders will want to develop innovative business services or front-end apps that also become integrated capabilities (or common business services). The digital services platform should therefore be designed with those extensions in mind.
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Strategies to Speed Up Your Digital Transformation
Adopt a Services Culture
Business and IT teams will jointly define, design, deliver, price, prioritize, implement, enhance and discard new business services. Companies are empowering service owners to deliver the innovations and efficiency that customers and employees expect.
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Refer to the following works:
Anthony et al., 2019; Frankiewicz & Chamorro-Premuzic, 2020; Sebastian et al., 2017; Westerman et al., 2018
Relevant reading List
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1. Westerman, G., Bonnet, D., & McAfee, A. (2018). The Nine Elements of Digital Transformation. MIT Sloan Management Review. Massachusetts Institute of Technology [электронный ресурс]: Available here: https://sloanreview. mit. edu/article/the-nine-elements-of-digital-transformation
2. Tabrizi, B., Lam, E., Girard, K., & Irvin, V. (2019). Digital transformation is not about technology. Harvard Business Review, 13(March), 1-6. Availa ble here: https://hbr.org/2019/03/digital-transformation-is-not-about-technology
3. Wade, M., & Shan, J. (2020). Covid-19 Has Accelerated Digital Transformation, but May Have Made it Harder Not Easier. MIS Quarterly Executive, 19(3). Available here: https://aisel.aisnet.org/misqe/vol19/iss3/7/
4. Frankiewicz, B., & Chamorro-Premuzic, T. (2020). Digital transformation is about talent, not technology. Harvard Business Review, 6, 3. Available here: https://enterprisersproject.com/sites/default/files/digitaltransformationtalent.pdf
5. Anthony, S D, Trotter, A & Schwartz, E I (2019) The Top 20 Business Transformations of the Last Decade. Harvard Business Review. Available here: https://hbr.org/2019/09/the-top-20-business-transformations-of-the-last-decade
Relevant reading List
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6. Kestenbaum,R (2018) Jeff Bezos Says 'Amazon Is Not Too Big To Fail.' He's Right. Forbes, November 16, 2018 Available here: https://sloanreview.mit.edu/wp-content/uploads/2015/09/a56d3fe8d8.pdf
7. Reeves, M, L. Fæste, K. Whitaker andF. Hassan (2018) The Truth about Corporate Transformation. MIT Sloan Management Review. Available here: https://hbr.org/2018/03/why-so-many-high-profile-digital-transformations-fail
8. Sebastian, I M, Ross, J W, Beath, C, Mocker, M, Moloney, K and Fonstad, N (2017) How Big Old Companies Navigate Digital Transformation. MIS Quarterly Executive 16(3): 197-213. Available here: https://core.ac.uk/download/pdf/132606601.pdf
9. Forbes Technology Council (2021). 13 Industry Experts Share Reasons Companies Fail At Digital Transformation. Forbes. Available here: https://www.forbes.com/sites/forbestechcouncil/2021/06/15/13-industry-experts-share-reasons-companies-fail-at-digital-transformation/?sh=5bb99acf7a3f
10. Catlin, T., Lorenz, J.T., Sternfels, B., & Willmott, P (2017). A roadmap for a digital transformation. McKinsey & Company. Available here: https://www.mckinsey.com/industries/financial-services/our-insights/a-roadmap-for-a-digital-transformation
Thank you!!!
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