The five most valuable companies in the world are digital: Alphabet (Google), Apple, Amazon, Facebook, and Microsoft. So what does this mean for the rest of us; companies that do something other than selling technology, such as construction and teaching? Well, in case you haven't heard of it, let me introduce you to the word 'digital transformation'.
What does digital transformation mean for me and my business?
Digital transformation doesn't mean stop what you're doing, move to Silicon Valley and launch a tech startup. It's the process of modernising and digitalising your current business processes. This means different things for different businesses. Take Microsoft as an example. A highly successful tech company that is constantly innovating has recognised a need to evolve. In the summer of 2015, CEO Satya Nadella sent a company-wide email to all employees stating, "today, we live in mobile-first, cloud first world". Committing to that philosophy of modernisation has led to the company's stock rising to an all-time high.
The digital mindset
Even if you're running a company in a historically non-technical industry, it doesn't mean you can't adopt a digital mindset. You don't need to be a software company to think like one. Consider which processes can be digitalised and whether this would save your business time and money. There's also value in considering what your customers prefer. If they currently need to phone the business to place an order, would customer satisfaction improve if the same result could be achieved through a web application instead?
The terminology of digital transformation
Before we continue, let's recap our glossary of key terms.
- Digital is signals or data expressed as a series of 0s and 1s (digits). Computers communicate and store data digitally.
- Digitisation is the process of converting information from a physical format into a digital one. Such as scanning an old photo and saving a copy to your hard drive.
- Digitalisation is what this process is called when leveraged to improve business processes. Such as sharing that old photo of your grand opening in 1900 for Instagram likes.
- Digital transformation is what we call the results of digitalisation.
Digital transformation process
Although digital transformation is usually traced back to a mindset or a strategy, there are tools to help you action that strategy. Forbes advocates a five-step process called PIVOT.
- Pinpoint: Your beliefs about value and technology, and where you are on the digital journey;
- Inventory: All your tangible and intangible assets;
- Visualise: Your new platform and network business model and the path you must travel to put digital at the centre of the firm;
- Operate: Your existing product and service centre business model while you nurture and grow your new platform and network business; and
- Track: Your progress and performance towards your digital future by implementing new metrics for the digital age.
Considering 84% of companies fail at digital transformation, it's important the transformation has company-wide support. Without CEOs leading the charge, companies will struggle to effectively implement digital transformation. CEOs need to ensure that employees familiarise themselves with the new digital solution instead of reverting back to what feels comfortable.
Digital transformation doesn't need to happen all at once. There's nothing wrong with making incremental changes. But don't let it get in the way of doing something bigger. Digital transformation is about changing from a caterpillar into a butterfly. It should make you faster, more agile, and closer to your customers.
Digital transformation is more of a result (and goal) than a specific path all business can follow. There are no 6 easy steps to becoming a digitally transformed global business. Rather, digital transformation is an outcome achieved in steps. But every step in the right direction is better than one going backwards.
In business, everyone talks about their value proposition. It's a way to differentiate your business from the thousands of others in the same industry. Problems start arising when your value proposition is an idea. Ideas don't scale (and may even be copied). Software does. Forrester's Nigel Fenwick asserts that by 2020 all companies will be either digital predator or digital prey. In other words, companies that have digitalised their processes wherever and whenever possible will be leaner and meaner than companies still relying on traditional methods of doing business. These digitally transformed businesses will prey on their laggard competitors, seizing market share.