How do you define Digital Transformation? Depending on where you are coming from, the definition can be vastly different… with vastly different consequences.

Define it too narrowly, then opportunity is lost. Define it too widely, then nothing gets done. From our perspective, the definition of Digital Transformation starts at strategy… but perhaps not exactly how you might expect.

In the olden days, an organization’s strategy was set, followed by various functional areas setting their strategies (eg HR strategy, Operations strategy, Marketing strategy, Technology strategy, etc) to enable the overall strategy to be executed.

The difference today, particularly in the area of technology, is that tech execution is not just an enabler of organizational strategy, but it is an important input into it. Some examples:

• AI and machine learning that can both improve efficiencies, but also allow open completely new markets (and disrupt existing ones).
• Cloud computing and Software-as-a-Service now allows capability to spin up instantly, at ultra low-cost.
• Mobile tech and apps mean that the phone isn’t just a phone, but literally a portal into significant always-connected functionality.
• Social Media has created vast networked connections between people, a vastly different advertising infrastructure, and new engagement mechanisms.
• Direct-to-Consumer brands have been re-making traditional distribution channels.
• New ecommerce and payment processing players that are available at the enterprise level, for small businesses, and for individuals.
• Online marketplaces and auctions that have effectively disintermediated traditional players.
• Nascent “metaverse” functionality, currently available in the gaming arena.

All of these technologies have opened the doors to new competitors from other geographies, new “platform” players, and nimble niche players who provide a sliver of capability exceptionally well.

While this list is only a fraction of the vast change in the last decade, too often, we see tech vendors and consultants who have a very myopic, and decidedly unstrategic, view of Digital Transformation:

• “Let’s move your accounting system to the cloud.”
• “Let’s migrate your mail list to a Marketing Automation and CRM system.”
• “Let’s connect your web, Social Media, and eCommerce systems.”
• “Let’s buy Google Adwords and Facebook ads instead of a yellow-pages ad.” (Remember those?)
• “Let’s get rid of our landlines, and give everyone a mobile phone.”
• “Let’s connect your ecommerce site with your ERP.”
• “We have a module for that…”
• “Our system is AI-based…” (Is it really?)
• And back in the days of COVID, “We can help fast-forward your remote work capabilities – pronto!”

With the exception of the last item, each of these “Digital Transformations” is cart-before-the-horse wrong. They are all solutions to problems. But what problem are they solving? And might there be better solutions than the one on offer?

Perhaps even more importantly for leaders today: At a strategic level, leaders must be concerned with problems, not solutions. So are there better problems that should be solved? The answer is an unequivocal yes.

A sidebar, first: yes, if you are still advertising in the yellow pages, it probably makes sense to stop. And yes, by all means explore virtual PBX systems and cell phones instead of landlines. And yes, your website should be connected to ecommerce and social media. But don’t call these “Digital Transformation”. Call them what they are: important tech or marketing optimization projects that exist in the context of the day-to-day running of the organization.

Any Digital Transformation should first start with the word Transformation. And this “transformation conversation” will then provide input into meatier strategic challenges.

Here are some of the questions that can start the process:

• What tech start-ups are beginning to gain traction in our market, and why?
• Given your knowledge of the industry, where is there an opportunity for disruption? And who is taking advantage of this? How are they doing it?
• How might AI affect the structure and the value chain within the industry? How might your supply chain, partners, and clients be using it?
• What parts of our organization are really commodities, and which have sustainable competitive advantage? Can anything digital be used to reduce cost of operations for the commodity side of the business, or build higher barriers to entry for the advantaged side of the business?
• How might digital be used to streamline our operations: robotics, digital “bots”, self-service, enhanced support, etc? Can this self-service be used to grow wallet share at the same time? And more particularly, if we had to start from a blank page, would we “build out” to exactly what we have now?
• How might digital be used to open new geographies? Or reduce the cost of service in existing marginal ones?
• How might big data be used to improve innovation, marketing effectiveness, and service quality?
• Who has technology that we can partner with (or acquire) that will help us move faster, open a new market, deliver more to existing markets, etc?

There are countless more questions, but the answers you get by answering the questions above (and others like them) will yield far more substantive answers than “Let’s do a new website”…

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