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Is Digital Transformation Hype or Reality - Part 2 of 4

February 26, 2017

In the first part of my blog series about Digital Transformation, I put up those 4 key questions for debate, and answered the first:

  1. Why do we need to innovate by transforming our business at all?

  2. Where (in which areas) does it make most sense to start the transformation process?

  3. Which technologies are most promising for effective transformation ?

  4. How to implement digital business transformation?

Now it’s time to answer the next question.

 

Where to start the transformation process?

 

Some companies are discouraged by the belief that they need to transform their whole business at once and this means dealing with new technologies they don’t master or investing money they don’t have!

 

But if you split it into smaller chunks and implement them selectively and gradually using technologies hosted and managed by others (Cloud), then you not only reduce the risks associated with digital transformation, but also increase the motivation of seeing early successes.

In order to pinpoint the area to focus on, let’s first divide a business into its value chain components to see which functional area can benefit most:

  • Support Activities (HR, Finance)

  • R&D (Product development)

  • Inbound Logistics

  • Manufacturing /Operations (Product realization)

  • Outbound Logistics

  • Marketing

  • Sales

  • Service (Customer support & technical professional services)

 

Additionally we can use the 7P-components of an extended marketing mix:

 

A third and more strategic way of dividing into different areas for digitization, would be to use Michael Treacy and Fred Wiersma’s three strategies for competitive advantage from their book “The Discipline of Market Leaders (1997)”, namely:

  • Customer intimacy (or Customer experience*)

  • Operational excellence (or Operations*)

  • Product leadership (or Business model*)

* as being used by Cap Gemini Consulting in their book Leading Digital (2014)

 

Depending on the industry segment a business is active in, some areas are more suitable to digitize than others. For example if you are in the manufacturing industry, then digitizing and automating the production process – also known as Industry 4.0 – makes sense. In that case you “digitalize”/rationalize blue-collar workers (People) by automation and robotics, which brings up the issue of ethics and socio-political implications such transformations brings along.

 

Some industry segments like financial services might benefit from digitizing their Products or Business Models. But most industry segments can benefit from digitizing and innovating Marketing (Promotion), Sales (Place) and Service. According to Cap Gemini Consulting, a high abundance of digital masters are found in High tech, Banking, Insurance and Travel & hospitality industries, whereas Manufacturing & Pharmaceuticals are lagging behind.

 

Innovating and digitizing marketing & sales are low-hanging fruits representing a first step in the digital transformation process yielding quick wins. Here you can analyze the complete customer journey to better understand customer behavior, expectations and experiences and then optimize the different touchpoints using digital technologies and data analytics. This gives your marketing activities a scientific and quantitative background (data-driven decision making) and opens new service opportunities like preventive maintenance of products you are constantly connected to & monitoring. Some isolated digitization areas, which are already being used are:

 

 

  1. Digital Marketing: Inbound-, Content- & Social Media Marketing Automation (e.g. HubSpot, Marketo, GoEssential)

  2. Digital Sales: E-commerce (web shop) & digital Selling** (e.g. digital marketplace ecosystem like ticksa)

** Watch out for my upcoming blog article, which will cover the new Digital Selling trend – how to use digital platforms and the crowd to “sell” virally on your behalf - in detail.

 

In part 3, I will tackle the most promising digital technologies influencing the Digital Transformation. So watch out for blog updates by simply following me on twitter...