Cristian Paun is the global digital strategist at DuPont. A thought leader using AI or IoT to transform ideas into digital business models.
Digital transformation is a term that is often misunderstood, leading to a significant gap between what people believe it entails and what it can actually achieve for a company. This misunderstanding contributes to the high failure rate of many digital transformation programs.
A recurring question regarding digital transformation programs involves their value and the efficiencies they create. When starting a digital transformation program, it is crucial to pinpoint your primary objectives—whether they are efficiency, productivity, headcount reduction or another goal.
With no clear, specific outcomes, a digital transformation initiative is likely to falter. Therefore, it is necessary to ensure that the entire leadership team is duly aligned on the definition of digital transformation, on the goals to be achieved and on the team responsible for execution. This process is one I am intimately familiar with as a leader in the digital transformation space who specializes in implementing AI and IoT technology.
Digital transformation can be effectively understood through three foundational pillars: “run,” “optimize” and “transform.” These pillars represent different aspects and goals of digital transformation, and striking the right balance among them is key to achieving comprehensive success.
Run: Efficiency And Productivity
The first pillar focuses on improving efficiency and productivity within the current operational framework. This aspect of digital transformation involves streamlining existing processes, reducing costs and enhancing the overall efficiency of your business. Technology plays a critical role here, as it can automate repetitive tasks, provide better data insights and improve decision-making processes. While this is an essential component of digital transformation, it is important to recognize that efficiency alone does not constitute a complete transformation.
Focusing solely on this pillar may lead to short-term gains in productivity and cost savings, but it often overlooks the broader picture. It is a necessary step, but not a sufficient one, for a company that aims to stay competitive and relevant in the digital age.
Optimize: Enhancing Customer Experience
The second pillar centers on the customer experience. This involves leveraging digital tools and platforms to better understand the customer needs, improve customer interactions and provide more personalized services. The goal is to create a seamless and engaging customer journey, from initial contact to post-purchase support.
Investing in this pillar means looking beyond internal efficiencies and focusing on how digital technologies can transform the way a company interacts with its customers. This can include implementing customer relationship management (CRM) systems, using data analytics to anticipate customer needs and deploying digital marketing strategies to reach and engage customers more effectively.
However, focusing exclusively on optimizing customer experience without considering new business models can limit the potential of digital transformation. Companies must strive to balance customer-centric initiatives with broader transformational goals.
Transform: Innovating Business Models
The third pillar involves rethinking and reinventing the business model itself. This is where true digital transformation occurs, as it requires a fundamental shift in how the business operates and delivers value to customers. Transforming a business model might involve developing new products or services, entering new markets, or creating entirely new ways of delivering value.
This pillar is about leveraging digital technologies to create new opportunities and disrupt existing markets. This could involve adopting new technologies such as artificial intelligence, blockchain or IoT to drive innovation and create competitive advantages. Companies that successfully transform their business models can stay ahead of the curve and lead their industries into the future.
Balancing The Three Pillars
The challenge for many companies lies in balancing these three pillars. Each pillar represents a different aspect of digital transformation, and an effective strategy must integrate all three.
The right start is to determine the appropriate focus and investment in each pillar at the current stage of the business in its digital transformation journey. For instance, a company that is just beginning its digital transformation journey may need to allocate a larger portion of resources to “run” activities to establish a solid foundation of efficiency and productivity. As the company progresses, the focus may shift towards “optimize” and “transform” to enhance customer experiences and innovate business models.
There is no right, single answer, and it is not wrong to allocate 60% in “run,” 30% in “optimize,” and 10% in “transform,” for instance, if that makes sense for the company. In this case, you’re just recognizing where you are in the digital transformation journey, allowing for gradual and steady progress.
Ready to get started? Begin with these first steps:
1. Define Clear Objectives: Start by clearly defining the objectives of the digital transformation initiative. What specific outcomes are desired? Whether it’s reducing costs, improving customer satisfaction or innovating new products, clear goals are crucial.
2. Align Leadership: Ensure that the entire leadership team is aligned on the goals, definition and importance of digital transformation. Without this alignment, efforts may be fragmented and less effective.
3. Assess Current State: Conduct a thorough analysis of the current state of the business. Identify strengths, weaknesses, opportunities and threats related to digital capabilities and infrastructure.
4. Develop A Strategic Roadmap: Create a strategic roadmap that outlines the steps needed to achieve the defined objectives. This roadmap should include specific initiatives, timelines and resource allocations for each of the three pillars.
5. Invest In Technology: Invest in the right technologies that will support the digital transformation journey. This could include cloud computing, data analytics, AI and other digital tools that enhance efficiency, customer experience and innovation.
6. Build A Skilled Team: Assemble a team with the necessary skills and expertise to drive the digital transformation. This may involve hiring new talent, upskilling existing employees or partnering with external experts.
7. Monitor And Adjust: Continuously monitor progress and be prepared to adjust the strategy as needed. Digital transformation is an ongoing process, and flexibility is key.
Final Remarks
The true value of digital transformation lies in the balanced integration of “run,” “optimize” and “transform.” While efficiency improvements are necessary, they are not solely sufficient. Enhancing customer experience and innovating business models are equally important to achieving a comprehensive and sustainable transformation.
Forbes Technology Council is an invitation-only community for world-class CIOs, CTOs and technology executives. Do I qualify?
link