If we assume digital transformation means (actual) transformation - in short using technology to enact and create a complete change in the way a business engages with its customers, suppliers, the markets it operates in and the products and services it delivers – the implications are profound, writes Nigel Cain CDir of information technology company Seven-Winds.
Moving a business into the Cloud is not digital transformation. Though services with the Cloud can provide the foundation and basis for such a change, doing so doesn’t result in transformation, neither is upgrading to the latest technology products and services. These activities can help the business improve the bottom line, perform existing tasks faster or more efficiently, help drive improvements to existing products and services and/or even provide the foundation for the introduction of new products to the market, but the emphasis is on building a better business not in fundamentally transforming or changing the very nature of the business and how it interacts with its market and customers.
Based on his experiences, Nigel will discuss the role of the board through the different stages of digital transformation, consider board room composition - fundamentally does the board have the right people on it to drive what is a significant change through the organisation – and review what can and should happen after transformation occurs:
The pursuit of “competitive advantage” drives digital transformation
One of the main duties of the board is to assess the future of the business, review options and decide and build an appropriate strategy. Though the topic of digital transformation seems to appear in a lot of articles and publications, is not something that the board just decides to do – despite what the media suggests. The need for business transformation of any type is prompted by and should be a direct response to a change or likely change in the conditions and environment in which the organisation operates. In this case, the emergence of new technologies which provide new options, new capabilities and potentially new (and very different) ways to reach markets and engage with customers some of which – if realised and fully adopted – could take an organisation in a completely different direction. I would argue then, that the real point for the board to consider is not “do we need digital transformation?” but rather what do the new tools, technologies and capabilities that are now available in the environment allow the business to do that it could not before, what are the new opportunities to serve and deliver better value to customers, how can they help the organisation reach and serve new markets, acquire new customers and retain existing ones and what new products and services need to be created to serve these markets.
In short, the emergence of technologies like AI and Machine Learning, BlockChain, Data Analytics, IoT and the continued and rapid innovation and deployment of new services in the Cloud all serve to provide [potential] capabilities for the organisation to exploit. As a result, a better question for the board to address is “how can and should the organisation take advantage of these (new) capabilities to build sustainable competitive advantage?” The answer to this fundamental question informing the long-term direction of the organisation and providing the basis for a decision to undertake [digital] transformation.
Transformation and the need to “perform and transform”
With a clear understanding of how an organisation could potentially exploit new digital technologies, the board can begin to review and assess the potential impact and implications of a decision to move forward on the existing business model and the current vision, mission, strategy and internal structure. To achieve the desired outcome, a very different type of organisation may be needed from what currently exists today – and the key questions for the board centre around what this really means, what would need to happen (and by when), and the set of key resources, skills and capabilities that will be needed to make this vision into a reality.
In common with any other strategic choice, the board needs to take multiple issues into account and assess the relative merits, challenges and the likely return on investment and the long-term future and viability of the organisation before making a call to proceed – in this case with what is likely to be a very costly and time-consuming process of [digitally] transforming the business into something new. The temptation for the board to act and act now can be very real especially given the hype around digital transformation that exists in the market today. But as is always the case at a strategy level, just because it's possible, doesn't mean it's necessary.
Here are three possible scenarios:
- Though it seems counter intuitive in today’s world, “doing nothing” is always a strategic option - in this case, it represents the board’s intention to invest in building and developing the existing business, evolving products and services and making the current business more efficient, effective and profitable. No bad outcome.
- A decision to proceed but to delay or follow a “wait and see” approach may delay market entry and give competitors and start-ups first mover advantage in new markets and in reaching new customers. However this can provide the board with an opportunity to assess and study market trends, to test and try out different ways in which transformation can and should occur, and may even open up opportunity for acquisitions and strategic partnerships.
- Even assuming the board decides to move forward with transformation, it doesn’t mean that the entire organisation needs to transform, will transform at the same time and/or that the existing business as it stands to date and the markets that it serves will cease to exist.
Questions also need to be asked about the impact and potential disruption to the business. The process of transformation is highly likely to take resources away from existing operations and will require significant management focus, input and attention and the board needs to understand the implications and how to mitigate. The key challenge for the board is to understand how and whether the current business will be able to perform and transform at the same time - especially true given that profit from current operations, customers and markets are what will enable the transformation to occur in the first place.
The Journey forward
Digital transformation is a journey – not a destination – and the pace of change, rapid innovation in technology and changes to the market and demands of our customers means that there will always be opportunity to transform.
To find out more about sharing your insights and experiences with the Chartered Director community, please get in touch with us at [email protected]