Digital transformation: Ten Commandments
A few years ago, Gartner made a prediction:
- In 2017, 20% of all market leaders will lose their number one position to a company founded after 2000 due to the lack of digital business advantage.
- Summer 2020: Tesla has passed Toyota and is now officially the most valuable car manufacturer in the world. Tesla Volkswagen already passed by in January. By now the brand is worth twice as much as VW.
The same story applies in many industries, whether it is AIRBNB as an online marketplace for the rental and booking of holiday accommodations, Youtube in video or Amazon in retail. Where COVID19 has also set companies in various branches for even greater challenges.
It is needless to say that CEO's of 'legacy', non-digital, companies become nervous and probably even somewhat jealous. Many of them have a burning desire 'to become like them'. To accomplish this, a transformation will have to start: smart use of technology to radically improve performance or change the business model.
This journey to the digital future can be a long and even sometimes painful and complicated one, taking into account the Ten Commandments on Digital Transformation.
- Vision and Leadership: Unlike most stories, starting at the end is the best strategy. The CEO and the board should have a clear vision where the organization stands at the end line of the transformation;
- The Transformation must create business value: Nowadays it sounds very hip to 'become digital', because everyone does it. This is obviously the wrong reason for going digital. Opting for digital transformation must have a real impact on the business model with a direct impact on turnover, profit, costs and customer engagement.
- Think about the Customer Journey: Most organizations are vertically and functionally organized: Marketing, Sales, Production/ Operations, Customer Service. The customer, on the other hand, crosses the organization horizontally. Each function owns the customer for a period of time, which is then 'handed over' to the next function. The new, digital world demands a complete organization around the customer journey. The digital footprint and data that these customer journeys leave behind must be used to continuously improve the journey. This shift is the reason why digital transformation requires a fundamental change of perspective and radical change in business processes and organization.
- Link the Front-end to the Back-end: The digital front-end (website, app store, etc.) and the backend (CRM, ERP, billing systems, etc.) need to be in sync with each other, both 24x7 and real-time. It makes no sense to build a killer app without seamlessly integrating it into the backend.
- Strive for a product-market-fit: Digital wisdom is:creating a product that 'just works', you can turn it off, process continuous feedback and adjust it iteratively. Do this until the best product-market-fit is created. Look at Google Gmail, which existed in iterative beta for five years, until Google got the best product-market-fit and the customers came by themselves.
- Partnerships: Digital business is all about partnerships. This is in contrast to the situation with 'legacy companies'; competitors here are arch-enemies that need to be crushed or eliminated, their market share needs to be stolen and their brands need to be taken out of the market. In the digital world you work together with your friends and your 'enemies'. A good example is Microsoft's products; these are available in the Google Play Store, in the Apple Store and make use of all available clouds. In the digital world, you use each other's strengths to increase your market share.
- Reconsider the Business Model: The Business Model is how you make money. Uber makes his money by using existing chauffeured cars instead of setting up his own fleet. Today's business models that rely heavily on traditional resources and high investments are being replaced by 'platforms'; here existing resources, sophisticated matching algorithms, connected devices and data through Artificial intelligence are enriched together to create tremendous value. Most companies can be 'platformised', one of the most powerful ideas behind digital transformation.
- Unleash a 'Cultural Revolution': Digitisation is not just about technology, beautiful devices, data centres or the cloud. It's also not about making everyone's hair grow long. It's about the culture of an organisation in which the following should be the case;
- Fail fast
- Tolerate dissenting opinions
- Stimulating experimentation
- Creating products that just work
- Need for speed
- Fast decision making
- People above all: Culture is about people. These people need to be connected because digital transformation is a long process and a fundamental change. Forming a vision, telling people why this is necessary and providing insight into the future is very important. Most people will be happy to change. In many cases a Chief Digital Officer will be needed, someone who will become horizontal owner of the customer journey throughout the organization and will lead the digital change.
- Patience: It is a long road! During the journey you will get stomach cramps, serious doubts and obstacles on the way. The most important quality needed from the CEO is boundless patience. To conclude with the words of Michelangelo: "Genius is eternal patience".