It seems to exist, a lot of money is invested in it, but few people understand what it is and what threatens business. The situation is like in the famous video: “We invented some kind of strange wire. Why is it needed? We’ve been working on it for five years.”
So let’s talk about why it is necessary to distinguish between digital transformation and digital optimization. And also about why you have to destroy the existing business model in order to create new value for your users.
What we called digital transformation 15 years ago was the usual digitization of data. Now digital transformation has a different context, but not everyone understands it correctly. Some people think they are digitally transforming their business, but they are actually doing digital optimization.
Digital transformation specialist of the early 2000s
Let’s say you have implemented machine learning, which is fashionable today, which analyzes contracts and looks for risky places in them. Now lawyers are less engaged in routine, and they spend their free time on solving intellectual problems. This is what is called digital optimization: you left the contract negotiation business process the same, but made it faster and more efficient.
We get the definition of digital optimization – the modernization of systems and processes using digital tools. The benefit is that employees work better, and you spend less, because now you need not ten employees, but, for example, only five for the same range of tasks. Typically, digital optimization is applied pointwise: for complex business processes, products or services.
It did not “introduced a new technology, and now robots do some of the work instead of people,” but “created a new product that radically changes the user experience.” And this is no longer machine learning, which somewhere quietly rustles and helps only your lawyers (programmers, accountants, operators, etc.). After digital transformation, users will consume and perceive your products and services in a completely different way.
The easiest way to talk about digital transformation is through real success stories. Take Netflix: At first, the company was in the business of selling and renting movies on DVD. Then she left only the rental, and sent the discs by mail. Some time later, she launched a streaming service and a recommendation platform that, with a high probability, guesses which movie or show the user will like. For the past six years, Netflix has been successfully producing its own films and series.
Another example of a successful digital transformation is the story of the Financial Times newspaper, which abandoned the print version and now exists only on the web and mobile application. But the company Kodak, which until the last held on to the usual model of work, is not doing very well: if you google this name, then on the first page of the issue you will see headlines like: “Why Kodak died”
Get ready to think several moves ahead. It is not necessary to radically change all processes, but you need to imagine what you will do next, what difficulties await. Perhaps digital transformation is not needed, digital optimization is enough?
No one knows what you will face in the process of digital transformation
It is normal to have doubts in this situation. If digital transformation were that easy, everyone would have done it a long time ago. But this is a complex process, where you first have to destroy the established business model and build it anew. You need to consciously destroy your business before someone else does.
Okay, Netflix did it. How do you succeed in digital transformation? To begin with, we propose to change something that is not entirely obvious: corporate culture.
In many companies, a lack of corporate culture is holding back digital transformation. Organizations often have closed formations, which are called “silos” or “bunkers”. Employees with a bunker mentality perform their tasks and have no idea what value their work, and after it, the products and services of the business bring to the end consumer. As a result, the quality of services falls, but this is of no interest to anyone.
If you get rid of the high walls between departments, you can take a big step forward. But you will have to “pump” the corporate culture at the level of top management – C-level – and only then enlist the support of managers at all levels in all departments of the company.