The pressure on companies to transform before its too late is powerful and imminent.
Digital transformation is now essential for corporate survival,” according to Bruce Rogers, Chief Insights Officer at Forbes Media.
So where is this pressure coming from?
The pressure comes from increased customer expectations. Today’s super-empowered and demanding customers have rapidly evolving needs and preferences. They want their needs anticipated and then met with delightful and entirely frictionless experiences that blend seamlessly into their day-to-day digital lives. And these experiences can increasingly only be served up by digital technologies.
Baby Boomers vs. Millennials
Not only are expectations increasing exponentially, but there is increased competition – tough competition – to meet those expectations.
Especially vulnerable are the “digital immigrants” or “incumbents.” These large, successful companies – think “baby boomer” businesses like GM, McDonalds, or IBM – predate the digital revolution and their business models, capabilities, internal ops, customer experiences are aging rapidly.
These baby boomers are “being ‘hunted’ from all sides, with hundreds of startups attacking traditional markets, thanks to the democratization of technology, increased access to funds, and a rising entrepreneurial culture” according to a 2016 report from World Economic Forum (WEC) and Accenture.
On the other hand, the “digital natives” – think “millennial businesses” like the FANG gang (Facebook, Amazon, Netflix, Google), Uber, Tesla, Airbnb, Waze – don’t even recall a world before the internet. “Now” and digital are all they know – these are their natural states, which makes it easier for them to thrive in the increasingly digital world.
This worthy competition does not mean “game over” for the incumbents. Like actual baby boomers, they may lack modernity, but their relationships and network, bankroll, wisdom, and industry knowledge are incredible sources of strength. But it does mean they need to shore up their weaknesses to compete with the leaner, cutting-edge generation.
And, like many transformative changes that have come before, digital transformation will separate the laggards from the winners.
The WEC report illustrates the “cautionary tale of Kodak’s bankruptcy, brought on by its failure to react quickly to the disruptive impact of digital photography” and highlights the successes of transformers such as Lego, IBM, and Michelin.
And to win at the game of digital transformation is to win big, as the spoils of war aren’t simply marginal growth, but a thriving enterprise of tomorrow. In fact, research from Capgemini and MIT Sloan found that companies with stronger transformation are more profitable (26% more profitable), command higher valuations (12% higher), and outpace their peers on revenue generation.
So What is Digital Transformation?
Digital transformation (aka “DX”) sounds like so many other trends and buzzwords (see “big data” or “analytics”) …ambiguous, complex, conceptual.
So it’s no wonder that it feels difficult, if not out-of-reach, for those who want and need to make it a reality.
There’s what it’s not. It’s not tech for tech’s sake. It’s also not blindly copying digital natives’ business models.
It’s a means to an end. It seeks to drive real change and outcomes in the company and experiences.
It’s rising to meet the challenge of today and tomorrow’s customer – the empowered and demanding customer – by reshaping itself with the only tool that will do the trick – digital technologies.
Its primary outcome is about growth, through improved customer experience (this is the top driver of digital transformation), new business models, and revenue generation. While it also addresses operational and efficiency improvements, the focus on cost-reduction – which has been the emphasis of previous waves of digital integration — is secondary to growth
The next 2 years will be pivotal.
A 2016 report from Forbes and Hitachi shows that about half of all companies are just beginning the digital transformation, while the other half are pretty far down on the path to digital maturity, and what happens over the next two years may “reinforce the current division between companies in terms of digital maturity.”
How ready are you?