Digital transformation is all about business transformation enabled by digitalization. Digital transformation, which is today provided by many digital transformation services providers, is a little bit of a misnomer because digital transformation itself means changing business processes enabled or forced by digitalization technologies.
Digitizing or digitization, on the other hand, refers to digital representation of physical objects or attributes. It is all about converting something non-digital into a digital representation or artifact.
Today, if your company is very busy “digitizing,” then your company is not the only one. Digital efforts have been growing increasingly for years as companies are striving to catch up with technological innovation.
Covid-19 has massively accelerated the pace, as people have been doing most of their basic activities, from grocery shopping to ‘traveling to work’ online. But this accelerated wave of digital initiatives must not be confused with the real business transformation which is very much essential for success in this digital age.
The former is mostly about allowing to do business as usual and “staying in the game” while the latter is about developing real, long-term competitive advantage to succeed.
Despite putting so much energy, effort, and investment into digitization, executives are expressing their concern that they are actually falling behind in making some important choices that lead to differentiation.
What they are worried about is right, because winning in the post-covid world not only requires you to imagine how you work but also what you must do to create value in this digital world.
It doesn’t matter how many digital initiatives you implement, you can’t expect to win by being the same as your competitors – as they too are doing similar things, all at different speeds.
So, what companies can do is just step back and fundamentally reconceive how they create value. Organizations need to rethink their position in the world and should rethink how they can create value through ecosystems and transform their business to enable new models of value creation.
The main thing is that companies need to reshape their own future, they must recognize that the world has moved on a very basic level and that they should track down their purpose in it.
If they are unable to find answers to the question “why they are here?” or on the other hand what unique they are adding to their clients? Then they are likely best at staying in the game.
We have done research on more than a dozen companies that have been working hard to transform in this way before Covid-19 struck the world.
These companies have been doing good business amidst the worst recession and public health crises of our lifetime, and their aggregate experiences balance obviously with those companies that focused simply on digitizing what they already do.
Let’s take the following 3 examples of Philips, Komatsu, and Microsoft, and look at how they managed to do good business amidst the worst recession during the Covid-19 period.
Exhibit one is Philips, which during the pre-Covid period had looked at the future and decided to change itself from a multi-industry, manufacturing-centric conglomerate to a company that focused on health technology services and solutions.
Philips dropped from its foundational business of making electric bulbs and other important electric equipment also, advanced from manufacturing and distributing products at scale, to uniting together, hardware, software, clinical skill, and AI-empowered experiences to help the conveyance of the best quality and lower-cost health care products.
When Covid-19 struck the world, Philips, not only designed and supplied new ventilators in mass quantity but also complimented them with biosensors that fed patient information into a remote monitoring platform to empower the protected consideration of exceptionally infectious Covid-19 patients.
Philips even deployed an online portal to help doctors in Dutch medical clinics share related patient information. In spite of Philips’ business being challenged by the demand crash post-Covid, its new model of doing business has supported finding solutions that contributed to the company ending the year with stable revenue growth.
The construction business is popularly known as, a traditionally heavy and non-tech industry, but Komatsu, a well-known manufacturer of construction, mining, and industrial equipment, has been involved from selling construction equipment to become a leader in digitally enabled smart construction solutions.
In this way, the company is helping its clients decisively further develop efficiency and worth acknowledgment in an industry that has encountered basically zero efficiency expansion over the last recent 20 years.
Komatsu in the beginning launched construction machinery that uses GPS, digital mapping, sensors, and IoT connections to allow customers to use Komatsu equipment more efficiently.
The company has now gone further and opened up its Landlog platform and data that allows customers, competitors, and other companies that are in the construction ecosystem to better coordinate their activities and improve efficiency across a development project.
These pre-Covid business model advancements have since permitted Komatsu to grow up with new sources of revenue via managed services and automated platforms. It further even helped the company to accelerate the rollout of new offerings after Covid hit, despite the slump in construction activity.
The last example is of tech giant Microsoft, which over the past 5 years has been transforming itself from the world’s largest software company to offering technology-enabled solutions including hardware, software, what’s more, cloud computing, assists B2B and B2C clients with working on their tasks and experience of daily living.
Microsoft totally reinvented its legacy organization, it shifted its focus on pushing products into the mass market, to client solution-oriented teams who would bring together the cross-functional skills needed to tailor services to specific customer needs.
Now, Microsoft was able to “act as digital-first responders to the world’s first responders,” when the Covid-19 hit. The software giant achieved historic levels of cloud revenue growth from solutions such as by supporting universities to shift their complete business online.
This degree of speed and responsiveness to exceptional client needs had been slacking at Microsoft 10 years ago, in spite of its tradition of digital leadership.
So, what we have learned from the above three examples of companies are those pioneers who need to get their association’s future absolute requirement:
Rethink your position on the planet, rather than putting the focus on digitizing what they have already been doing. Companies that change for progress in the digital age characterize their reason for being as far as the strong worth they make for their clients, and why.
They take advantage of technology simply not to copy what others have been doing, yet to propel their own missions by putting resources into the separating abilities that permit them to follow through on their purpose.
Filling their new place on the planet with life requires them to drop off their old business models, resources, and convictions about value creation.
Make value through ecosystems, instead of attempting to do it all alone. Successful companies, today in the digital age, have recognized that to remain relevant comes from working together with an ecosystem of players, so as to deliver the ambitious value propositions that customers want, and immediately enhance and scale up the incredible necessary capacities.
Working in this manner expects leaders to contemplate esteem creation all the more strikingly, question what their association should really claim, and get prepared to face competitors and give up traditional sources of income to address the absolute most fundamental customer needs.
Re-imagine your company to enable a new model of value creation, rather than asking people to work in new ways within the enclosure of the old organizational model.
Winners today in this digital era break up old power structures so that new ideas and capabilities can be reached more collaboratively. They hire outcome-oriented teams tasked with collaborating across the company and working with their ecosystem partners to deliver the differentiating capabilities they need to win.
Leaders must face important questions like “how much change they should take on?”, “how fast their existing businesses may be disrupted?”, and “how to best manage the transformation?”
However, these questions should not be used as excuses for staying with current business models. Without more fundamental business change, digitization on its own is a road to nowhere.
So, now is the time for executive teams to step up, disrupt themselves, and become leaders in the digital age.