Misunderstanding ‘digital transformation’ can lead to business failure

Misunderstanding what “Digital Transformation” means, coupled with poor internal alignment, is often why digital efforts fail.

Digital transformation (DX) encompasses how organizations employ technology to re-imagine and re-invent their processes and offerings to achieve a competitive advantage across the business.

However, over the years, digital transformation has been used as a catchall term that encompasses not only transformation but also the integration of digital technologies that automate manual processes and addresses operational inefficiencies within an organization, as well as the optimization of the suite of digital systems that an organization uses.

A lack of alignment in articulating and defining these need-states and required solutions—especially within senior management—can lead to suboptimal outcomes when engaging internal stakeholders about the need for digital investment and support. This is often the reason why digital efforts fail. It is no wonder that 70% of organizational digital journeys hit roadblocks and fail, according to research by McKinsey.

By carefully mapping out and clarifying the nature of the digital journey required—whether it is DX, digital integration, or optimization—will help key stakeholders understand how and where resources are best placed, enabling their buy-in. Overlooking these distinctions may result in misplaced and squandered resources, and possible failure or delays.

Pure examples of DX

 Digital transformation is the evolution of new business operations, outputs and outcomes. It employs technology to help a business anticipate new market requirements. In its finest form, digital transformation has the power to create new market leaders and disrupt industries.

Think about how Netflix has redefined the way we access entertainment, and about the impact it has had on the global industry, from cinemas to movie rental stores. Think about how ride-sharing apps have negated the need to stand by the roadside to flag a taxi and how it has improved personal safety through tracking. Think about how video-meeting applications have removed the need for people to be in the same physical space to conduct a discussion.

The oft-misunderstood digital journey

When the term DX is used, what businesses actually frequently require is digital integration—that is, assessing an organization’s existing workflows and determining whether greater efficiencies can be achieved through the use of technologies.

Digital integration encompasses the concepts of ‘digitization’ (making analog data digital) and ‘digitalization’ (using technology to enhance and augment formerly analogue processes). In its more common uses, digital integration involves the use of analytics to improve the profiling of customer segments, then using this data to improve customer experience through better digital user interface design, for instance.

Take the example of a Singapore enterprise in a traditional industry such as marine bunkering, in need of digital integration. Two years ago, a family-run marine bunkering services provider that supplies fuel for ships (and logistics management for fuel loading and distribution in storage tanks) sought help as it was managing most work processes with pen and paper. Many smaller players in the industry were in the same situation despite Singapore being the world’s largest hub for marine fuels and running a sector that comprises 7% of its GDP.

So when the next generation of the family joined the business, the executive director decided that operational efficiencies could be achieved by integrating technologies. He shared: “With the advent of the recent digitalization wave, and improvements in technological infrastructure, we relooked at our processes and felt that there was an opportunity to be more cost effective, as well as to increase the transparency of our business.”

To achieve this despite limited tech know-how, they sought this writer’s help, and our firm helped with the structuring and training of their in-house team, also equipping them with the appropriate digital skillsets to modernize and digitize a portion of their business processes and workflows.

A looming iceberg on the radar

One term that is less often seen is Digital Optimization, which means tackling an increasingly-common problem: Digital Bloat. The latter occurs when different teams across the organization use many digital tools, some with overlapping functionalities and many with incompatibilities that, in turn, create costly silos, double-handling, and frustration.

A business that has too many fragmented digital systems can end up with inefficiencies and process roadblocks. Thus, a digital optimization process can take stock of all the disparate digital tools that an organization currently uses, identify overlaps and conflicts, and also find potential opportunities for the consolidation of data, systems and processes.

Ensuring digital journey success

A digital journey is exactly that: a process and not a one-off project. It is deep and affects many, if not all, aspects of a business; it requires dedicated resources and time investment.

However, while digital journeys are strategic and long-term endeavors, we must not lose sight of measurements, progress, and adjustments. Strategies for DX, digital integration, and optimization should be implemented and improved upon in phases to ensure success.

Given the pervasive nature and results that may be incremental or realized in the long-term, it is also important to obtain senior management buy-in and support for the long haul, and to keep the lines of communication open with regard to progress. That is why digital initiatives should have success metrics that are well-defined and structured in a way that can be easily understood by the entire organization and not just the IT team.

Having a sharp and deep understanding of the business problems or the opportunities that organizations wish to address is the most important first step. With a clearly-defined purpose, the business can then decide which digital path should be taken to reach their goals: transformation, integration, optimization, or even a hybrid—while putting together a digital taskforce that includes internal stakeholders, teams, and trusted external specialists.

Keeping a ‘beta’ mindset

In digital journeys, it is highly advised to start small, stay humble, test and learn.

Approaching it with a ‘beta’ mindset will mean that organizations can remain nimble, listen to feedback, course-correct along the way and ultimately, achieve the objectives initially set out.

Against the backdrop of the global pandemic and potentially-lower level of business activities, now is the time for businesses to rethink what digital initiatives they might need to implement presently to stay relevant and competitive for the next decade.