1.7 billion Facebook users, 300 million smartphones in 2010 versus estimated 1.76 billion in 2020: these figures illustrate how new technologies influence our economy. A Capgemini study in cooperation with the Massachusetts Institute of Technology (MIT) shows that Digital Masters outperform their competitors in revenue, profitability and market value. However, Digital Masters only account for about 7% of all organizations operating worldwide. Consequently, the question of how to successfully execute digital transformation is essential. Companies can propel this transformation with three so-called digital capabilities:
- Creating a best-in-class customer experience
- Driving operational excellence
- Adjusting or even reinventing their business model.
Digital technologies change customer interaction. Via social media companies are able to listen to the voices of their customers, while the customer on the other hand benefits from mobile computing by experiencing brands on the go. Geographical localization services let companies know where their customers are at any given point in time. A structured prediction of gathered purchasing behavior enables a differentiated sales approach. For example, by leveraging digital technologies at every customer touch point, Burberry was able to create an innovative shopping experience that meets the high expectations of the Generation Y. Nonetheless, the digitization reaches its limits because it is not possible to depict all customer experiences digitally. For instance, the test drive prior to purchasing a car is essential in order to experience the driving behavior, test the handling of the car as well as to get a feeling of the technological developments.
Successful transformation requires a stable technological backbone that allows the company to integrate new processes. Solid operations and processes are the prerequisite for an extraordinary customer experience. Digital leaders see digital technologies as opportunities to break free from their limitations. For example, Asian Paints centralized its order management in a call center allowing the sales team to focus on customer relationship management, which ultimately led to an increase in the company’s sales figures. Air France demonstrated the reconciliation of process control and process innovation as one of the first airlines and implemented the paperless documentation of its flight operations, which saved a significant amount of time for its employees.
Digitalization requires to rethink the business model as well. Together with the MIT, Capgemini invent identified five types of disrupting business models:
- Type 1: Reconsider industry standards – i.e. the use of new electronic communication platforms as defined by the shared economy such as Car2go
- Type 2: Substitute existing products and services – i.e. the substitution of mainstream blockbuster movies through the distribution of streaming-services, e.g. as provided by Netflix
- Type 3: Create new digital products – i.e. the creation of new products or services through the connection of client data via wearables with smartphones and apps such as Nike+
- Type 4: Redesign delivery models – i.e. the facilitation of direct client contacts via Connected Car Services
- Type 5: Reconsider the performance bond – i.e. the offering of flexible, short notice insurances such as provided by the accident insurance Tokio Marine or pay-per-use for navigation services of Mercedes Me
However, experience shows that digital transformation cannot be done by investing solely in the alteration of the business model. During the course of the transformation, the ‘how’ is essential and secures Digital Masters the crucial head start!
When asking themselves how to transform their business to exploit the benefits of digitalization, companies should strive for a consistent and attractive target picture, a clear governance focusing digital investments, leadership skills and employee engagement.
- The consistent and attractive target picture of Digital Masters can be characterized as follows: Built on the organizations’ core competencies, the digital ambition inspires employees; originally initiated and promoted by the top management, the digital ambition is developing over time, and integrated into the daily business piece by piece by the employees.
- Governance for digital follows two main objectives: coordination and allocation. Coordination ensures the prioritization, synchronization and adjustment of initiatives within the company. The allocation includes the appropriate utilization of different resources, including employees, technologies and data. Companies must integrate mechanisms like digital governance committees, new leadership roles and digital business units into their operating models.
- Leadership skills apply in particular to the collaboration of IT and business resulting in more transparency. This comprises for example the mutual generation of digital platforms or social networks.
- Employee engagement is driven by closely and continuously involving the workforce into the transformation. Employees must be included in the process of finding the solutions. A connected organization allows dialogue and ensures the success of a transformation project with a high employee acceptance.
Change management as significant success factor of a digital transformation
Every strategy is only as good as the people behind it. Therefore, it is not surprising that the MIT/ Capgemini studies also prove that especially “people” related topics are key for the success of digital leaders: The “right” leadership team, building of digital capabilities as well as a supporting company culture.
But what should the leadership team be capable of? Open interaction in digital networks is crucial. Digital leaders demonstrate agility and realize the potential of digitization. The digital capabilities that a (digital) leader should possess, comprise an understanding of new technologies, co-designing skills and competence in managing complexity. Even though 87% of the companies that were surveyed by MIT and Capgemini believe that digital transformation offers a competitive advantage, 90% of them have not qualified their employees sufficiently and only 46% are really investing into the development of their skills. Social, mobile and analytical skills are core competencies that play a vital role in digitization and therefore, need to be encouraged.
Consequently, the company culture must be actively developed. Culture adds personality to an organization and shapes internal processes. But the culture does not change through a CEO message, it evolves and develops over time. Progressing digitization requires flexibility, self-organization, agility, innovation, cross-functional integration and a test-and-learn environment. The development of culture requires a structured change process. Throughout this process, the advantages of the transformation are communicated properly to all employees. Anchoring the digital transformation requires a monitoring for continuous improvement of the change process and making achievements measurable.
We are just at the beginning: The digital revolution does not spare any industry. Companies that continue with their “well deserved” traditional approaches will not be able to stay competitive. In contrast, the ones that exploit the potentials of the digital transformation through initiating a change process will become even stronger than before. A modern change management supports both employees and the organization in handling the challenges of the digital world. Change management really is the key for a successful digital transformation.
About People and Organization
Capgemini invent’s People and Organization practice prepares and supports organizations, their leadership and their people for the transition into the digital age, focusing on different stakeholder groups as well as a conducive organizational setup and culture – enabled by our new approach to change management.
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