What is digital transformation? And how is it accomplished?
Definition:
Digital transformation refers to an ongoing process of change triggered by digital technologies and affecting companies, individuals and communities, science and politics. Companies, in particular, can benefit from this change by realigning their business models. This is then referred to as digital business transformation. Digitalization is made possible by technologies, so-called enablers. These include infrastructures (e.g. cloud computing, block chain, mobile internet and end devices), applications (e.g. mobile apps) and the resulting business potential:
The combination of these and other technologies creates a variety of new digital business models and digital value-creating networks. The decisive factor for the selection and use of digital technologies for further or new development of a business model is what benefits will be created for users through the change.
Accenture Studie “Digital Factory: Cracking the code to success” (2016):
The 2011 study “Digital Transformation: Road Map for Billion-Dollar Organizations” identifies three building blocks of digital transformation:
Prof. Dr. Key Pousttchi describes the impact of digital transformation on companies in three dimensions:
All three building blocks require a foundation in the form of digital skills. These include unified data and processes, analytical skills, business and IT integration and solution delivery. According to the study, digital transformation only works if management provides both the initiative and a compelling vision (top down) and if in the design more emphasis is placed on the “how” rather than the on the “what.”
It’s especially challenging for large companies to find a new orientation for providing services. A process-oriented, holistic reorganization is required with the goal of increasing productivity in terms of costs-time-quality (the magic triangle). To take on this task, the appointment of a Chief Digital Officer (CDO) is becoming increasingly common. This person is responsible for the operational impelementation of the digitalization strategy at the C-level.
These aren’t synonyms, although they’re often mistakenly used as such.
Digitalization
Digitalizing existing processes, products and business models, thus adapting them to modified customer behavior caused by prevailing technologies. There is no way around this if you want to stay in the market.
Digital Transformation
Using new technologies to generate or support new business models. The transformation is prompted by a change in customer behavior. These behavioral changes lead to different or new needs, which are usually no longer satisfied by the company’s current value proposition. Accordingly, the company has to change itself or what it offers.
Disruption
Instead of an evolution in what already exists, a paradigm shift in the form of a completely new business model takes place for solving customer problems. “Disruption” is competitively advantageous for the disrupters of the existing business models. Disruptive innovation succeeds in start-ups because established companies have a hard time changing their business models from the ground up.
Adaptation to technological change and new customer behavior will always be necessary. The cycle creating demand for transformation will likely continue to speed up. The inventor of the Digital Transformation Model, Alain Veuve, proposes “perpetual disruption” as a new term for change. “Perpetual” makes it clear that the change process never stops. “Disruption” describes a radical, profound dimension. This is the defining feature of future business challenges.
1. Technological development
2. Adaptation of the technology by customers
3. Adaptation curve of average companies
4. Adaptation curve of moribund companies
5. Social digital transformation
6. Digital business transformation
Oliver Gassmann, Professor of Technology Management at the University of St. Gallen, found that over 90 percent of all innovation in business models involves recombinations, refinements or adaptations of 55 existing business model patterns. This means that only about 10 percent of business model innovations examined were really new (e.g. freemium, long tail or hidden revenue). Companies often succeed in innovating by creatively imitating business models from other industries. Gassmann summarized all the models from the study in the St. Gallen Business Model Navigator.
A business model answers four questions from the Navigator. An innovation in a business model modifies at least two of these four dimensions.
Gassmann recommends four steps for the realignment of a business model:
However, according to Gassmann’s analysis, over 70% of change project fail due to mismanagement. Mistakes can be avoided by following these points:
How does IoT influence business models?
The Internet of Things is slowly dissolving the separation between the physical and the digital world. Here the connection between these two worlds is no longer only created by humans, but also by things. This results in hybrid objects, suchas sneakers that measure calorie usage and speed. In addition to their local functions (for example, protecting the feet), objects have digital services (collecting data) that can be used beyond the local situation and often at a low cost. This connection between a physical object and the internet generates value in the form of digital services. Such products are sometimes called Digitally Charged Products. Suppliers of physical goods are being increasingly challenged to develop complete services from their product range.
From a business perspective, smart objects are particularly interesting for digitally capturing additional information about the condition of objects and processes. The precise measurability of business activities enables so-called High Resolution Management. Management tasks such as planning, leadership and controlling are supported by automated data acquisition. As a result, the questions from the business model can be answered even more precisely.
What’s the best way to create change in an organization? Is there a method? Yes. Business Analysis is the process of making change possible for an organization by analyzing and defining needs (problems or opportunities) and recommending beneficial solutions to stakeholers accordingly. Since industry and internet culture are becoming increasingly intertwined in companies, business analysts also play an important mediating role between specialist departments and IT.
The Business Analysis Core Concept Model (BACCM™) depicts the defining concepts of a business model. The interdependencies between the individual elements show how procedures and evaluations of results influence each other. The six core concepts are:
Business analysts use these six core concepts to check the completeness and quality of their work. Questioning each of the components is important and especially necessary when one of the concepts changes. Each part of this foundation must be stable in order to build up a valid analysis.
Markets are more dynamic than ever before. VUKA (volatility, uncertainty, complexity, and ambiguity) must also be dealt with in digital transformation projects. Value creation is no longer a linear progression. Circumstances, stakeholders, needs and contexts (for example, interfaces and regulations) change much too quickly. This has an effect on needs and the resulting complex web of requirements. For these reasons, you need to be able to react quickly and flexibly to volatility. Here an agile approach is indispensible. It works with iterations and increments. Minimum Viable Products (MVPs) are created in short cycles and rigorously tested by real and potential users to determine their value and benefits. Today, this is the only way to create real innovation.
But how do you become agile? Follow these insights from veteran agilists:
