It seems that the whole business world is talking about digital transformation these days. Just look at the search trends for the term:
But while more people are talking more about digital transformation, it’s pretty clear that most are missing the point.
As sexy as it is to speculate about new technologies such as AI, robots, and the internet of things (IoT), the focus on technology can steer the conversation in a dangerous direction. Because when it comes to digital transformation, digital is not the answer. Transformation is.
Technology doesn’t provide value to a business. It never has (except for technology in products). Instead, technology’s value comes from doing business differently because technology makes it possible. E-commerce is not about the internet — it’s about selling differently. Analytics is not about databases and machine language algorithms — it’s about understanding customers better, or optimizing maintenance processes, or helping doctors diagnose cancer more accurately. IoT is not about RFID tags — it’s about radically synchronizing operations or changing business models.
In the digital world, a strategic focus on digital sends the wrong message. Creating a “digital strategy” can focus the organization in ways that don’t capture the true value of digital transformation. You don’t need a digital strategy. You need a better strategy, enabled by digital.
Better Strategy, Enabled by Digital: Real World Examples
This idea of focusing on transformation instead of technology extends to industries ranging from food to mining. Here are some industry-specific examples of what I mean:
- In the paint industry, Asian Paints Ltd. transformed itself from a maker of coatings in 13 regions of India to a provider of coatings, painting services, design services, and home renovations in 17 countries. The technology the company’s leaders used wasn’t rocket science. The organization’s transformation was powered by Enterprise Resource Planning (ERP) software, call centers, mobile phones and tablets, analytics, and some machine learning and autonomous manufacturing. More important was strong leadership that reimagined how the company worked and continuously drove for new business opportunities.
- In the banking industry, many companies are using chatbots — voice-activated software that is capable of engaging in conversation — to make customer service more efficient. Executives at DBS Bank Ltd. did something different. After improving the company’s processes, profitability, and customer satisfaction in high-cost Singapore, these leaders turned their focus to low-cost markets. Building on the knowledge and systems in Singapore, plus chatbots and other technologies, DBS has now entered India with a mobile phone-based banking model that requires no human intervention. This model can make money from small accounts that other banks would never find profitable enough to accept. While thinking about chatbots led many bankers to focus on reducing costs in existing channels, DBS’s focus on developing a model for low-cost new markets made chatbots, along with other technologies and significant organizational rethinking, into a much greater opportunity.
- In the shipbuilding industry, while many companies use virtual reality (VR) technology to help designers envision complex product designs, leaders at Newport News Shipbuilding, a division of Huntington Ingalls Industries Inc., used the technology in other strategic ways. In an effort to speed the development of large U.S. Navy aircraft carriers, the Virginia-based manufacturer had invested in digital design tools and new product designs. But coordinating and motivating thousands of workers remained a challenge. It was tough for employees to understand how their work fit into the broader story of building a giant aircraft carrier or recognize how their work interacted with that of others. VR became a useful tool in the company’s broader effort to transform the work process: Now workers can don VR glasses to see what is behind a wall they are drilling or how a new bracket should look when mounted. They get warnings when a part is too heavy to lift without special equipment, and instructions on the correct sequence for installing components. And they can always see where their part of the work fits into the bigger project that they are collectively building.
VR by itself is an interesting digital tool. VR as part of a broader work transformation strategy is much more powerful.