Five elements for a successful digital transformation

The pace of digital change is disrupting businesses worldwide. We’ve identified five areas to focus on for a successful digital transformation.

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Since 2008, there’s been a global explosion of smartphones, tablets, social networking, cloud and mobile computing, big data and the internet of things. The pace of change in the digital space is frighteningly fast – today, consumer technology can reach a critical mass of 50 million users in fewer than 35 days.

So what are the implications for businesses, and how should they respond?

One of the biggest surprises is that, through this period of technology-driven change, in many organizations, the budget of the chief information officer (CIO) has remained static. Yet CIOs face the challenge of maintaining legacy systems while simultaneously introducing new technologies to adapt to the new data-driven age. The IT department simply doesn’t have the bandwidth to take on digital projects.

This is part of a trend across sectors: on average, just over one-third of total technology spend now takes place outside the CIO’s lines of report. And as more IT spend occurs outside the CIO’s control, the risks are rising.

So, what should businesses do to improve the effectiveness of their use of digital?


1) Establish clear ownership of digital

This could be by establishing a chief digital officer or a dedicated digital business unit – how you structure it is less important than how you implement it. Today, the impact of digital is felt in every single part of the business: it has implications for the business model, the customer experience, the workforce, technology, operations, risk management, cybersecurity, data privacy and so on. A cross-functional group must be involved and provide input.


2) Co-develop products with customers

The focus of digital must start and end with the customer. “Smart, connected products need to first help a customer complete the job they are trying to complete faster, cheaper, better OR by creating significant new value,” says EY’s Laurence Buchanan.

This is why, before mobile phone company giffgaff had a product, it launched an online forum to ask consumers, “What do you like and dislike about the telecommunications industry?” giffgaff then co-created products with consumers. Over 95% of its marketing, sales and service is peer-to-peer (consumer-to-consumer) rather than company to consumer.

It’s an approach that works: in just one year, giffgaff attracted 405,000 new members to the network, and revenues rose 74%, while its sales costs rose only 10%.


3) Open up patents

Tesla Motors offers open access to all its patents to spur development and adoption of electric vehicles. And GE released thousands of patents to collaborate with entrepreneurs. This can help you to build stronger partnerships, and learn from a far wider data set than simply your own customer base, as well as building a stronger demand base by encouraging wider appreciation and adoption of new technologies, creating whole new markets.


4) Establish cybersecurity by design

Hackers will target the weakest “connected” part of your IT to access your core systems, whether a mobile app, a connected device or a noncritical business system. This can expose your customers to financial loss, your firm to serious reputational damage and, increasingly, to fines from regulators. Investing in robust cybersecurity and developing response protocols is money well spent in the long run.


5) Get employees up to speed with digital

There is an unfortunate tendency to punish employees for getting it wrong, instead of rewarding them for doing it right and encouraging them to spread their digital expertise. Burberry used “upward mentoring” to spread digital know-how in the company. It matched internal digital advocates — enthusiastic users of new digital channels, regardless of age or seniority — with those (often at an executive level) who were less comfortable with digital. The brand believes its digital transformation has been the key to tripling its revenues since 2006.

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Getting it right across the business

Digital provides organizations with an amazing opportunity to secure customers’ hearts, minds and wallets. There’s no question that it will require cross-functional leadership to get it right – the head of marketing and strategy, CIO, legal, risk and cybersecurity. And it will take everyone in the organization to regard digital as the job they must succeed in.

“The impact of digital on an organization is top to bottom – from strategy to customer engagement, operations, risk and tax,” says Buchanan. “Digital should therefore be everyone’s job. If the role of the chief digital officer is to incubate and infuse digital thinking and new ways of working across the company, then the mark of success should be when the role is no longer needed.”

In essence, digital transformation is about uniting technology around a shared vision — one that is built from the bottom up, embraced by everyone and protected by everyone. There’s no room for silo mentalities anymore.


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