SAP: Why True Digital Transformation Is Hard to Achieve
Digital business models are making our lives better, our economies more efficient and are keeping us healthier and more fit – incidentally they also generate tons of shareholder value.
That is why businesses are rapidly flocking toward “digital” by setting up digital transformation offices, appointing Chief Digital Officers etc. Even the word “digital disruption” is starting to show up in the annual reports.
But there are differences in their approaches. On one hand there is true digital transformation: a new business strategy that focuses on creating and delivering unprecedented value to customers at very large scale.
On the other hand, there is the “digital veneer,” which wraps old business practices in the cloak of digital technologies – adopting social media, creating a host of mobile apps, or refreshing the company websites. Like any other veneer, it looks good, it can be done quickly and it is not expensive. But does it really work?
Let me share with you my personal experience with the “digital veneer.”
I tweeted a product complaint and promptly got a response asking me to send a private message (PM) with more details. A few days after sending the PM I received an email notifying me that my case is with customer service department. About a week later I got another email from customer service asking for some pictures – now two weeks have passed. Another week passed and I received a voice mail asking me to call a customer care agent. After playing phone tag for a week I finally got a chance to speak to the agent who basically told me that there is nothing that they can do.
This was very far from an Uber-like experience and begs the question: Why do smart companies opt for a digital veneer?
Source: Digital Vortex, Global Center for Digital Business Transformation, June 2015 (click for full PDF)
There are two fundamental reasons. First is the need and urgency to act quickly. In a recent survey of over 900 business leaders conducted by Global Center for Digital Business Transformation, respondents believed that roughly four of today’s top 10 incumbents in each industry will be displaced by digital disruption in the next five years. Translation: “we have to do something and we have to do it fast”.
The second reason is that true digital transformation is hard to achieve, especially for the incumbents, because it challenges the status quo, questions traditional assumptions and affects almost every function in the organization. The companies need to rethink their business models, their investment focus, monetization model, routes to market and many other fundamental aspects of their business and most importantly their corporate culture.
To harness the benefits of the digital opportunity, incumbents must have the willingness and courage to go beyond the “digital veneer,” adopt new KPIs, develop new capabilities to empower customers, redesign many of their core processes to become more transparent and collaborative and ultimately find new ways to drastically create more value for their customers. This remains a high stake game with very high rewards for the organizations that are determined to become a digital business.