Fuzzy, hyped-up interpretations of digital transformation aren’t going away anytime soon. There’s too much at stake for technology providers to self-regulate on terminology. Executives need to tune them out and focus instead on the full spectrum of transformation.
First, understand this spectrum and then decide where on the spectrum your initiatives should fall. Leaders who are clear about where their digital transformation goals lie will be better equipped to deliver them .
The spectrum of digital transformation ranges from simple digital automation at one end of the spectrum to new business models and agile culture at the other. It consists of five stages:
Stage 1. The Foundation. In this stage, enterprises actively automate internal processes, such as selling, manufacturing or finance, using SAP, Oracle, Salesforce, or similar platforms. This is more like automation (also called digitalization) than transformation, but it provides the digitalized foundation necessary for future transformation. Automating processes using digital platforms is necessary for converting manual effort into data.
Stage 2. Siloed. In this stage, individual functions or businesses begin to use disruptive technologies to create new business tactics. For instance, the manufacturing function may have made progress on using the Internet of Things to drive major changes in the way they manage logistics or make things. Or the finance manager, having learned about Blockchain, transforms the way intercompany accounting is handled across borders. Alternatively, a business unit within the enterprise may have used technology to created new capabilities, such as selling direct-to-consumer as opposed to retailers. However, these and other efforts remain siloed in discrete functions and there is no overall company strategy driving transformation.
Stage 3. Partially Synchronized. The enterprise leader, owner, or CEO has recognized the disruptive power of digital technologies and defined a digital future state. In this stage, the various parts of the organization have started rowing in the same direction. However, the enterprise has not completed the transformation to a digital backbone or to new business models. Nor has the company created a sustainable innovative culture.
Stage 4. Fully Synchronized. At this point an enterprise-wide digital platform or new business model has fully taken root. However, the transformation is a one-time occurrence. The company remains just one technology (or business model) change away from being disrupted.
Stage 5. Living DNA. The only way to survive continuous disruption threats is to make digital capabilities and an agile innovative culture the ongoing, living DNA of the enterprise. Transformation becomes perpetual. You maintain industry leadership because you are disciplined in constantly innovating and setting industry trends. You’re not just a market leader; you’re a disciplined innovator.
Founder – Transform Partner