Digital Transformation and Business Agility
- November 7, 2022
- Posted by: mealone
- Category: Uncategorized
Digital Transformation and Business Agility
How can we effectively describe digital transformation? But, first, we must recognize these three fundamental truths:
- One must expect a digital revolution. Change is a constant fact, whether we recognize it or not. One would either choose to respond proactively or suffer the consequences of reactivity in the face of change.
- The concept of digital transformation goes beyond technology. It is also about strategy, process, culture, behaviours, and people, as we shall go into great detail about in this article.
- Digital transformation entails extensive and profound change.
Digital transformation is the reimagining of how a business operates. Clay Christensen defines three key categories to help determine an organization’s capabilities (what it can and cannot do):
- Resources (physical and intangible),
- Priorities (the general agreement on what is appropriate to accomplish, values, and strategy), and
- Processes (work order).
This categorization is helpful because, as Christensen asserts, these elements are mutually exclusive—a portion of a business cannot fall into more than one category—and collectively exhaustive—when the three categories are combined, they encompass the entirety of the firm. Digital transformation is crucial in each of these three domains.
The business and digital consultant Altimeter characterized digital transformation in 2014 as:
The restructuring of technology and business structures, or new Investment in these areas, to more effectively engage digital customers
more effectively at the critical touchpoints in the customer experience lifecycle.
This concept recognizes the need for change in business practices, consumer experiences, and technology. However, it might not stress enough how procedures, working methods, and culture have changed.
So, keeping in mind Clay Christensen’s method of condensing the entirety of an organization’s capabilities, this is our attempt to sum it up in a single definition: the transformation and reinvention of a company’s resources, priorities, and processes to be suitable for use in a world empowered by digital technology.
What Digital Transformation is NOT:
Digital transformation involves more than just pursuing cutting-edge technologies. The study done by Cap Gemini and MIT Sloan has a valuable lesson. Research conducted to evaluate the effect of digital technology and how those organizations were addressing these difficulties revealed a curious truth about digital transformation. The study titled: The Digital Advantage: How Digital Leaders Outperform Their Peers in Every Industry examined more than 400 multinational companies over two years.
While digital activities engaged most businesses, the survey revealed that few reap actual commercial benefits. Two distinct but connected factors contributing to digital maturity are Investment in technology-enabled efforts to alter how the business runs, characterized as digital intensity.
This aspect covers interactions with clients, internal processes, and business models. The focus of transformation management intensity was on developing the leadership skills necessary to propel digital transformation, including the vision, governance, participation in the change process, and business or IT partnerships to support it. On a two-by-two matrix, these two dimensions represented four distinct levels of digital maturity:
- Beginners: Companies that use modern digital capabilities sparingly are less aware of their potential.
- Conservative businesses prioritize caution above innovation and have a cohesive strategy but are dubious about the benefits of digital developments.
- Fashionistas: they adopt the newest digital trends and applications but lack a clear strategy for their company’s digital transformation.
- Digirati: Those who thoroughly understand how to alter their company’s operations for the digital age. In other words, they invest in innovation and continual development of people, processes, and technology while merging transformational vision and governance with those three factors.
These more technologically advanced businesses, often known as “digirati,” were able to balance a focus on technological development with parallel attention to change management, people, process, and culture. According to the study, these later firms were on average 26% more profitable, had a 12% higher market capitalization, and generated 9% more income from their current assets. This benefit applied to a variety of sectors.
However, the study also found that businesses that chased after flashy new technology but lacked the underlying strategies, procedures, team structures, and cultures to capitalize on them (the “fashionistas”) hurt their economic performance and were 11% less lucrative than the norm. The research discovered that while digital transformation creates genuine competitive advantage, pursuing cutting-edge technology (also known as “the digital magpie syndrome”) without paying attention to all the supporting behaviours, skills, cultures, visions, and leadership is detrimental to business.
ACHIEVING DIGITAL TRANSFORMING: REVIEW OF MODELS FOR CHANGE
An example of a change maturity model would be good. Therefore, we have created a maturity model for what excellent looks like to more accurately describe and condense many of the significant changes that we will be discussing in the following chapters. This concept outlines three crucial developmental phases:
- Legacy: The situation in which old ways of thinking and acting still predominate before an organization starts its path toward digital transformation.
- Enabled: The company is making the necessary changes to its mentality, strategy, processes, resources, and culture. Businesses should make efforts to completely embed, expand, and realize the total potential value of these new components.
- Native: The company is used to the fluid, quickly evolving environment in which it operates, evident throughout the whole organization in the culture and operational methods. We are not discussing a transition with a beginning, middle, and end, which is a crucial distinction. Instead, it should be an organization that can function in a perpetual state of flux and continually adjust to new difficulties and opportunities. We have defined stages of maturity across many dimensions, including customers (the business’s orientation), planning and procedures, resources, strategy, vision, and culture, to give the model some structure.
- Legacy – multichannel, not omnichannel, business prioritizes efficiency over its clients’ needs.
- Enabled: Organizations that focus on the needs of their customers have joined-up processes and data that result in a high-quality, compelling, and consistent customer experience.
- Native – seamless, quick consumer feedback loops drive innovation, continual improvement, and initiatives.
Processes and planning
- Legacy: rigorous waterfall project management techniques, inflexible planning methodologies, irregular release cycles, and centralized control.
- Enabled: SCRUM, agile development, test-and-learn, rapid prototyping deployment, digital operations enabled, solid governance, measurement frameworks.
- Native: cross-functional, small, agile teams, acceptance of uncertainty, latitude for failure, quick test and learn incorporated, lean approaches, embedded digital operations, data-driven and adaptable processes.
- Legacy: functional silos in organizational structures, rigid structures that do not adjust to opportunity, siloed data sources, minimal analytical tools, descriptive analytics, technological limitations, legacy platforms, isolated knowledge, vertical skillsets, insufficient training, and isolated knowledge.
- Enabled: A collaborative environment, integrated digital and online/offline, software-as-a-service, integrated technology stack, flexible partnerships, data joining, direct modeling, predictive analytics, a digital centre of excellence, specialists and generalists, tech skills, and more fluid organizational structures are all examples of enabled.
- Native: customer-centric structures and resource allocation, ongoing resource reconfiguration, adaptable, flexible systems, organizing around opportunities, joined-up data/tech, prescriptive analytics, empowered frontline staff, customized dashboards, scalability of the cloud, actionable modeling, real-time decisions, T-shaped, deep knowledge, human layer over technology, and free flow of information.
- Legacy – clinging to competitive advantage from the past, episodic innovation, and a short-term outlook. Digital capabilities development is not crucial to organizational strategy or KPIs.
- Enabled – increased flexibility in strategy and planning, innovation accounting, and a methodically organized innovation process.
- Native – is flexible and adaptive, encourages systematic and embedded experimentation, and has a long-term perspective.
- Legacy- presume retention of current advantage and a lack of clarity around organizational direction or goal in practice.
- Enabled – great alignment between the vision and corporate goals and KPIs, strict implementation of the vision
- Native – clear corporate purpose and vision lived through leadership and operations, reflected in overt and covert behaviours, and executed flexibly.
- Legacy – is precise, slow, limiting, and geared toward efficiency and incremental progress, yet it is also entirely discursive.
- Enabled: teamwork, customer focus, data-driven, talent focus, norm-challenging, ownership attitude, increased autonomy, and learning from mistakes and triumphs.
- Native: people have a highly fluid and collaborative culture, agile, “quick and approximately correct,” entrepreneurial, with empowered teams, distributed authority, a propensity toward action, and a networked, embedded learning culture.
If Agile had a Formula…
As extensive change necessitates an equally thorough response, our concept of organizational agility includes the following three crucial components:
- Velocity: Velocity is the accelerated pace and development through widespread and expert adoption and application of digital-native processes, such as design thinking, agile, and lean, continuous experimentation, and a culture that supports constant testing and learning, combined with a thorough, customer-centric innovation process that enables quick idea genesis, validation, and commercialization.
- Focus: is building organizational momentum through an enabling, agile, and adaptive strategy with solid ties to execution, linked to an interested, outward-looking viewpoint, and with a distinct vision and mission.
- Flexibility: Establishing the right culture, environment, and structures to move quickly through agile facilities, small, multidisciplinary teams, increased agility in governance and decision-making, productive and collaborative environments, and a culture that is motivating and inspiring and autonomous, mastery-driven, and purposeful. Each component is necessary for developing true agility. Without speed, we lack momentum; without concentration, we lack direction and governance; and without adaptability, we lack the supportive environment required for success. In turn, we will discuss each of these components to help establish the framework and logic of our arguments. We may express our formula for the agile business as follows because these three elements work together in enabling change:
(Velocity x Focus x Flexibility) = Agility.
The last portion of this article will put these components together to create a roadmap for becoming an agile business. Each Part of this article will have a series of brief discourses that together form a blueprint for transformation.