It seems that most organisations these days are undergoing some form of digital transformation, and this is only going to become more commonplace as 2016 is marked the beginning of the first ‘digital decade’. Increasingly, business leaders around the world are viewing digital innovation and continual digital development as key factors to future success. But with so much excitement surrounding digital, it’s become somewhat of a hyped word. What is actually meant by digital?
Breaking down digital
The Guardian defines digital in its broadest sense as “any technology that connects people and machines with each other or with information”. The four technologies at the heart of today’s digitally connected world are what make up the social media, mobile, analytics and cloud (commonly referred to as SMAC). Together, they form a decent basis for describing what digital is when it comes to the commercial realities of how to introduce it into the business.
Building on this, McKinsey & Co believe that digital is about “unlocking growth now”, and should be seen less as a thing and more a way of doing things. For instance, it’s a way of establishing new connections with customers, strengthening business models, generating new revenue streams, cutting costs, increasing profitability, and creating new market streams. In order to create a more concrete definition, McKinsey & Co break digital down into three attributes:
- Creating value at the new frontiers of the business world – Being open to re-examining your entire way of doing business and understanding where the new frontiers of value are. For some companies, this could mean developing entirely new businesses in adjacent categories, while for others it could mean identifying and pursuing new value pools in existing sectors.
- Creating value in the processes that execute a vision of customer experiences – Rethinking how to use new capabilities to improve how customers are served. This requires an understanding each step of a ‘the buyer’s journey’ – regardless of channel – and thinking about how digital capabilities can design and deliver the best possible experience, across all parts of the business.
- Building foundational capabilities that support the entire structure – The technological and organisational processes that allow an enterprise to be agile and fast.
In a recent blog, we discussed the eight traits that digitally-enabled organisations share. We’re rewinding a little bit now, to look at how to become digitally-enabled in the first place. As it turns out, there are two ways – an organisation is either inherently digital (‘digital native’) or they adopt digital (‘digital adopter). These are outlined below:
- Digital natives
These are digital organisations that actively disrupt the traditional interactions customers have had with products or services; they disrupt traditional business models. Disruption is normally between the customer and the product or service they’re trying to consume. Not only do they disrupt value but also the supply chain with how that traditional product or service was delivered. Examples include Uber and Amazon.
- Digital adopters
These are much more common and involve established organisations actively disrupting their own business models and business processes in order to generate new revenue streams or generate existing revenues in more profitable ways. For example, many banks are having to transform their existing business models in response to changing capital requirements. Traditionally, banks grew top line revenues whilst growing bottom line costs. With new capital requirements, this isn’t feasible, and they’re having to grow top line revenues and manage bottom line costs in a better way, such as by moving online or introducing mobile apps.
Whether they are natively digital or adopting digital, successful digital organisations are those that have harnessed apps, data, new working practices and new digital platforms (their own internal platforms or through cloud adoption) to deliver transformation. As Logicalis Europe Chief Digital Officer, Chris Gabriel, stated in a recent presentation, “It’s not just about putting up a website and hoping for the best – there is some sort of internal transformation that needs to take place that enables the native or the more traditional organisation to adopt digital, and that is founded on digital technologies”.
As part of our 2015 Global CIO Survey, we looked into the drivers of this digital decade and the rate of adoption of SMAC, Business Intelligence and software defined technologies. Download the full report here to read about the results.