Part 1 of the Digital transformation philosophy identified motivations for digital transformation, the need for a well-planned transformation process, and, the required knowledge and considerations essential to start the transformation journey. Part 2 discussed the first three considerations and this article (Part 3) will focus on the last three considerations: limiting factors, digital mechanisms, and, digital plan and process.
THE FACTORS LIMITING THE SUCCESS OF A DIGITAL TRANSFORMATION JOURNEY
Certain operational characteristics can limit the success of digital transformation.
1. Operational complexity
Operational complexity is characterised by unpredictability and can result in unintended outcomes during transformation.
Examples of the causes of operational complexity in legacy operational systems are:
- Immature, informal and unstructured operations
- Operational silos
Legacy organisations tend to operate in silos which usually duplicate functional components, each with their own processes, people, systems and data and controls.
Goals for digitalisation include agility, achieved through operational standardisation and the ability to have single views of the information used within operations, which is difficult to achieve in siloed environments. It is therefore clear that operational silos will exacerbate the amount of work required to build a digitalised organisation and will therefore add complexity to the digitalisation journey. Many organisations will therefore have to consider restructuring their operating models as part of the transformation process.
- Uncoordinated change implementations
Functional changes are often done without consideration of impact on the larger operational system. As changes in one component always impact the behaviour of connected components, it is necessary to start planning all changes multilaterally.
- Legacy components
Legacy components can exist in both the business model (such as products used only by a select few legacy customers) and in the operating model (such as legacy applications). These are no longer full contributors to the operational performance of the organisation and their maintenance adds a level of complexity not ideal within a digital system.
It is therefore imperative to constantly monitor the current, and changed, “complexity state” of operations. If during the digital transformation journey it becomes apparent that the complexity state of the operational system has increased, changes to the transformation plan should be considered.
2. A limited understanding of the strengths and weaknesses of the operational capability
It is impossible to plan a digital transformation if the strengths and weaknesses, and related root causes of the operational system are not understood.
As a partner to our philosophy, Zeta has introduced its DNA Health Criteria framework in figure 2 below, which is used to identify the strengths and weaknesses within the organisation. These strengths and weaknesses don’t refer to the specific functional requirements of a particular organisation, but rather to the alignments and enablement’s that need to exist within an operational system.
3. Significant Changes in the External Environment
It is very important for organisations to identify any changes in their external environment. The following changes are very important considerations for digital transformation planning:
- Changes in customers’ requirements
- Disrupted B2B customers and/or suppliers. If the businesses of customers or suppliers no longer operate as previously, the relationships with these parties will have to change
- Disruption from competitors. When an organisation is threatened by a disruptive competitor, it has one of two options: it can either defend its current position by withdrawing to niche markets where the competitor can’t compete, or by using its own economic and brand strength to hamper the competitor’s ability to establish trade agreements; or, it can disrupt the disrupting competitor by creating partnerships with the disruptor or other organisations that will provide a competitive advantage, or, by creating its own innovative solutions to the customer’s value requirements.
DIGITAL TRANSFORMATION MECHANISMS
Digital transformation mechanisms refer to tactics or tools that can be used to facilitate digital transformation.
The main reasons for digital transformation are upgrading the business, operating and resourcing models to the requirements of the digital economy, while at the same time achieving a state of resilience and agility in the organisation.
1. Business model mechanisms
These mechanisms aim to strengthen the business model.
- Product / Service Catalogue type mechanisms
- Simplification of the product / services portfolio by removing legacy and non-performing options
- Updating product / service definitions to include unique and customisable features
- Changing pricing structures to include limited or free use options.
- Customer service & channel type mechanisms
- Customer insights – a single view of customer behaviour across the organisation, supplemented by other internal and external data
- Improving sale and distribution options – including the use of online sales and support channels, augmented by the use of the customer’s data
- Aligning all customer journeys across all sales channels.
2. Operating model mechanisms
These mechanisms aim to improve both the operational efficiencies, and, the agility and scalability attributes of the operational environment.
- Functional improvement type mechanisms
- Functional structure simplification with capacity analysis and alignment – as in the removal of operational silos
- Process re-engineering and control requirement optimisation
- Technology type mechanisms
- Collaboration platforms
- Data augmentation (with external unstructured data), consolidation and alignment of internal data sources, warehousing /creation of data lakes for the storage of both structured and unstructured data, and modelling of data for decision making purposes
- Augment organizational insights with machine learning and artificial intelligence capabilities
- Process automation – accompanied by integrations to business- and technology fit technology solutions
- Removal of legacy and complexity in the technology architecture landscape
- Use of SaaS components to standardise and align to best practice functionality
- Use of system integration for data and processing capability sharing across the technology architectural landscape
- Real-time operational monitoring capabilities implemented through the use of operational technology (OT) solutions
- Event monitoring tools for risk management purposes.
3. Resourcing model mechanisms
These mechanisms aim to optimise the use of resourcing throughout the organisation.
- Financial type mechanisms
- Redefinition of funder models
- Consolidation of financial data to ensure detailed operational consequence traceability through to root causes
- Renegotiation of customer and supplier terms to optimise cash flow management.
- Infrastructure ownership mechanisms
- Disintermediation to reduce costs and improve efficiencies
- Establishing partnerships with customers to increase the size and reach of the sales force
- Establishing partnerships with competitors or suppliers to create disruption in the market.
- Optimise resource capacity requirement calculations, such as office space requirements relevant to work-from-home policies
- Use of externally-owned infrastructure to reduce the cost of owning, maintaining and upgrading of such infrastructure
- Review of critical suppliers and key customer dependencies, to remove consolidation risk in times of adverse economic situations.
Therefore, when creating the single digital transformation plan all mechanisms should be considered as potential solutions for digital transformation.
THE DIGITAL TRANSFORMATION ROADMAP (PLAN AND PROCESS)
A phased transformation process is suggested, the phases of which would depend on the current strengths and weaknesses within the organisation, and, the level of disruption experienced by the organisation. It is very important to fully understand the starting point or baseline, the desired endpoint, and the mechanisms to be used for the transformation. The transformation roadmap will constitute the journey of mechanism implementation with a good understanding of the impacts of, and dependencies between, changes.
Achievements throughout the process can be a huge motivation for employees. It may serve as an opportunity to embed new ways of work before more changes are applied and provide a valuable progress reporting mechanism for the management teams. The transformation roadmap must therefore be broken into phases. It may also be possible to consider different scenarios as the solution for a particular issue. In such instances it is prudent to use a single phase for evaluation purposes, and to get buy-in from all participants before moving onto the next phase.
After each phase the successes and failures can be evaluated and used to restructure future roadmap phases for more efficient and successful delivery.
FOR ENQUIRIES PLEASE CONTACT:
Organisation Optimisation Architect & Digital Strategist
+27 84 777 9916