What do industry disruptors do differently? Looking carefully at companies that have added value and been wildly successful, a few commonalities become apparent.
Mainly, four essential factors have come into play for companies that have developed a successful digital transformation strategy to disrupt industries:
- Telemechanics – automation controlled at a distance by wireless connectivity
- Digitization – replacing physical processes and hardware with virtual ones
- Restructuring of the supply chain – elimination of hand-off intermediaries and expansion of sourcing
- Diversity – by prioritizing diversity as a value, companies can establish a more incredible runway and generate more innovation, ultimately increasing capital.
When it’s laid out like that, it’s easier to see the difference between digital transformation and digital optimization. Moreover, this is not a problem of vagueness in terminology but a reluctance to think deeply enough about the scope of change.
In this order, George Westerman at MIT Sloan’s Initiative on the Digital Economy suggested, “Digital transformation is when companies use technology to change the performance or reach of an enterprise radically.” Optimization makes existing processes more efficient. Transformation sets off waves of disruption to drive value and spark entirely new industries.
The First Trap: Underestimating the Problem
Oracle research found that while strategic leaders at nine out of 10 companies say they have a digital strategy, only 14 percent (one in seven) have the technology and IT talent they need to make it real.
Indeed, that’s the first trap: heading into digital transformation without the necessary infrastructure to give it a chance at success. As much as the tools and the talent are out there, acquiring and using them has changed forever. A combination of efficiency improvements in the sharing economy alongside massively influential distributed processing hubs has generated new market forces that favor networks and dynamic marketplaces over traditional firms with privately controlled assets.
In addition, an example of how this plays out in the real world is atomic pricing, which refers to buying incremental cloud-based infrastructure by the microsecond. This concept has redefined the possibility for small businesses and tech-based firms. Dr. Shez Partovi, Chief Digital Officer at Dignity Health, told CIO magazine that understanding this cultural shift changed everything for them.
“We’re willing to invest even more because our investment goes further since we’re only paying for our atomic demand…. I don’t need to purchase legacy infrastructure and support it while we wait to scale. Leveraging economics in cloud infrastructure is, unquestionably, a big part of my digital strategy.”Dr. Shez Partovi, Chief Digital Officer at Dignity Health
The Second Trap: Preferencing Plans Over Planning
Secondly, the trap companies tend to fall into when pursuing digital transformation is to set their goals around specific technologies—like chatbots, AI, and IoT—instead of starting from a map of customer expectations. Furthermore, Digital transformation will look unique for each company based on their innovation potential and the end goals of the customer base.
In a panel discussion by Econsultancy, digital transformation experts concluded that four essential ingredients are present in successful initiatives:
- Breaking down assumptions – The entire organization got involved in rethinking talent, technology, go-to-market strategy, and established processes to meet a competitive threat.
- The plan was highly detailed – Companies knew the following before they began a digital transformation initiative: a vision for the results, the talent they would need to access, team member incentives to make the necessary changes, and the concrete steps they would take.
- Digital incorporated into strategy – Digital transformation is not an end in itself; it’s a pathway to establishing an enhanced market position. Successful companies outlined what competitive advantages and new business lines would be opened up by the project.
- People came first – The most advanced AI cannot match humans’ flexibility, ingenuity, and innovative thinking. Digital transformation works best when companies equip their teams with training and strategic goals, then allow them to determine the best way to execute the change.
The Third Trap: Shallow Thinking
On balance, the third most common trap is giving up too soon. Often this stems from a failure of imagination or rushing into an initiative without adequate brainstorming. Remember that every pain point could be a potential epicenter for disruption, but not everyone is equally worth pursuing. In reality, there are millions of fissures in the global economy where there’s a hard disconnect between supply and demand or markets where buyers are unhappy with their limited options. As a result, there is no shortage of great ideas. The complexity enters into the equation in matching problems to companies with innovative capital to resolve those problems.
In a single sentence, the takeaway is that intelligent digital transformation is the foundation of disruptive change that can restructure markets. The pressure is on companies to brainstorm digital ways to keep ahead of competitors and craft a better future for their customers. Seeing that, the more significant global trend in collaborative consumption has turbocharged productivity, giving companies original ways to profit from idle assets and providing smaller companies with access to enterprise-level data center processing by the microsecond.
Disruption requires more than an incremental tech upgrade. It calls for new market logic that rewards innovative resourcefulness. Consequently, perhaps the most significant need should be for unconventional thinkers in a world increasingly determined by automation, AI, and robotics.