The Power of Digital Transformation

The Power of Digital Transformation

DOI: 10.4018/978-1-7998-2036-9.ch002
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In the previous chapter, the authors discussed the four industrial revolutions that are part of our economic history. Although each one of them had different innovations as driver, we can conclude that change—and the ability to sustain it—is what makes them successful. In this perspective, managers and leaders in general are required to embrace change and pursue it in the way they perceive strategy, goals, and innovative contribution. In this chapter, they discuss how to define digital transformation, the theories behind it, and more specifically, the kind of skills required to successfully master a digital transformation project. They also have the chance to interview a renowned professional in the field of digital transformation and see what experts suggest.
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Digital Transformation: The Basics

According to IDC, digital transformation can be defined as “a continuous process by which enterprises adapt to or drive disruptive changes in their customers and markets (external ecosystem) by leveraging digital competencies to create new business models, products, and services”1.

Therefore, we can say that digital transformation projects have at their core the enhancement of the customer experience, as well as lowering operational costs, through the integration of the physical and the digital realms of the business. New technologies are key enablers of this process, in particular the use of artificial intelligence to enhance business performance and efficiency, as well as prioritise customer experiences.

According to the experts (DeNisco Rayome, 2017), spending for digital transformation initiatives will hit $1.7 trillion globally by 2019, which will mean investments will rise up to 42% from 2017. This is in line with Gartner’s position, who in 2015 surveyed CEOs and found they were expecting revenues coming from digital products, marketing and sales to double in 2017 the average 21% of 2014 (Raskino & Gartner, 2015).

But how exactly does a digital transformation initiative work? The main objective here is to maximise the use of data, as created, collected and analysed in relation to customers and organisational operations in order to improve the processes. In order to achieve such goal, you must understand the business model you operate within, and avoid the perspective most use that digital transformation is only about using some technologies or develop an app2. The process is far more complex than this. Roger Liew perfectly summarised the feeling of confusion that pervades businessmen around the world when it comes to such topic. According to Liew, the modern environment “is brutally competitive. One of the challenges is that you don’t know where the competitors are going to come from. In a fairly short span of time, Airbnb is on everybody’s radar. The reason it’s so competitive is because there’s not a lot of switching costs for online customers. If you don’t satisfy their demands today, it’s fairly easy for them to switch to a competitor. That’s what compels us to build something that is world class. If you stop focusing on that it puts you just a step behind” (as reported in Raskino & Gartner, 2015, p. 65). Similarly, Levy points out that “everyone is starting to worry about being ‘Ubered’. It’s the idea that you suddenly wake up to find your legacy business gone… clients have never been so confused or concerned about their brands or their business model” (Thompson, 2014).

Before going deeper into the practical aspects of the topic, it might be interesting to point out that digital disruption occurs at three level. First of all, there is a need for advancements in technology, without which most of the newest innovations will not be possible. The second level we need to take into account is culture, which we can here summarise as the people’s ability to feel comfortable enough with the innovation to fully embrace it. Once people are ready for change, then the change needs to be implemented and go under regulation. We might as well provide an example to better understand these three levels, and as such we can mention the not so recent trend of buying clothes online. From a technological perspective, we needed Internet to make it work; then we needed women to feel comfortable enough to consider buying their clothes online, and finally we needed distance selling regulations to ensure the same consumer’s rights as in traditional shopping methods, to make it convenient to switch from a brick-and-mortar shop to a digital one.

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