Sometimes, you can have too much of a good thing, as one retailer found out the hard way.
It embraced the new digital world with enthusiasm, but ended up introducing nine applications, with 12 functionalities, using five different technologies. These applications, each with multiple functionalities, resulted in inconsistent, uncoordinated service offerings that not only confused customers but eventually led to increased costs, breached security policies and a damaged brand image.
You can draw a number of lessons from this example, but what is striking is that the retailer had no governance structure for its digital initiatives. This can be a glaring omission in a digital world where initiatives can come from so many different directions. One senior executive from Pfizer accurately summed up this environment when he said, “We have many different brands in many markets, so when it comes to digital opportunities, we can have one thousand flowers blooming – and that’s not really scalable to any of our stakeholders.”
Digital innovations are critical cogs in an organization’s growth. But if left to mushroom without guidance or prioritization, they could lead to inefficiencies and negate the original objective of digital transformation. Our research into Digital Transformation with the MIT Center for Digital Business indicates that digital leaders invest heavily in governance mechanisms, and this directly impacts their performance. We found that while only 35% of beginners—a category of companies doing very little with advanced digital capabilities —had a digital unit, over 55% of digital leaders (who we christened the “Digirati”) had one.
One way to establish governance is by setting up a DSU or a Digital Services Unit. A DSU functions as an overarching unit that interfaces with various functions in the organization, establishes a digital roadmap and oversees its effective implementation throughout the organization.
Our research and experience tells us that there appears to be a limited perception about a DSU’s role. Almost 80% of firms believe that a key role of a Digital Services Unit (DSU) is to establish standards and policies.While this is certainly a pivotal role, DSUs are, in fact, multifaceted and have many different roles to play in the success of an organization’s digital transformation – roles so varied, in fact, that there are six different ways to tap into a DSU’s true potential.
- Driving Digital Strategy A DSU analyzes customer requirements, corporate strategy, competitive landscape, and operational competencies to create a defined roadmap, followed by coordinated alignment across local and global digital strategies.
- Creating the Digital Factory A DSU functions as a centralized control unit that facilitates dialogue between digital units and internal clients, while also leveraging data mining techniques to provide brands with valuable consumer information.
- Encouraging Innovation DSUs encourage the usage of digital technologies, such as crowd sourcing, open-source platforms, and social media networks, to foster innovation. Given the fact that digital technologies make geographical location redundant, seamless ideation and subsequent innovation becomes possible even across large, distributed organizations.
- Enhancing Digital Skills DSUs are responsible for driving organization-wide trainings and knowledge-sharing sessions that enhance digital skills across employees and functions. As an umbrella unit that oversees digital capabilities across functions, the DSU can collate and recommend specific digital skill sets, based on the requirement.
- Monetizing Opportunities DSUs help local business units expand their business reach by helping them identify asset monetization avenues within the digital space. These avenues could be as wide-ranging as selling digital content, to leveraging paid advertisements, to e-commerce agreements with third parties, to even community management initiatives.
- Creating Digital Businesses Digital technologies such as virtual prototyping, 3-D renditions modeling, Big Data analytics, and business intelligence present potential opportunities for organizations to develop new business offerings that can turn into business ventures, which can then be autonomously managed by the DSU.
Although the DSU’s end objective is digital transformation, there are several tangible benefits realized along the journey – process transparency and automation, improved inter-divisional collaboration within the organization, accelerated time to market, and improved customer satisfaction scores. These benefits represent just the tip of the iceberg. You can read more about this issue in our paper: Accelerating Digital Transformation: Understanding and Setting Up a Digital Services Unit