1. Look at digital through a business lens
When we begin the digital conversation with business executives, we often find that they are looking at the issue through either a functional or technology lens. This means that they see digital through its application in particular functional silos or in terms of the different software or hardware solutions they are currently considering. However, both these lenses give only a blinkered view of digital, missing the broad impact it is having on their business. As a result, companies tend to pursue only fragmented and partial digital initiatives.
By replacing the functional or technology lens with a business lens, companies can begin to visualise digital's full implications for their business and start asking the critical strategic questions. Once the power of this perspective has been understood, we have found that leaders quickly shift from discussing which software solution to implement next, and instead start asking how digital might impact their firm's strategy and business model.
2. Create firm-wide awareness and understanding about digital
With the company's leadership looking at digital through the right lens, the next action is to create a similar level of awareness and understanding across the organisation. Until there is a shared view of digital's understanding and importance, it is difficult to bring about the necessary cultural change that will enable the long-term process of digital transformation.
An effective way to begin is through conducting digital workshops with leaders from across business divisions. This exercise makes everyone aware of the scope of digital's impact on their industry, it's criticality to the business' future and its importance to how they perform their role.
In our experience, once a common understanding has been developed, subsequent digital initiatives achieve far greater buy-in across the organisation. Which, in turn, helps stimulate bottom-up ideas and innovations that are crucial to creating a truly digital culture.
3. Scan your market to identify digital opportunities and threats
Once the importance and scope of digital are understood, it is essential for companies to scan their market to identify the range of opportunities and threats it poses. These can emerge as a result of the entry of digitally enabled start-ups, the launch of new products and services by digital natives, or digital innovations by traditional competitors.
When conducting the market scan, it is essential that the activity is not limited to traditional definitions of an industry's boundaries. Digital is rapidly eroding existing industry boundaries by transforming the capabilities and resources required to successfully serve customers. By focussing instead on the customer need rather than existing competitive set, the scan is more likely to identify new or emerging threats and opportunities.
For example, when we scanned the digital opportunities and threats for a leading Indian food company, we identified that their current advantage in procurement could soon be eroded by the emergence of wholesale e-marketplaces. By making sourcing easier, these marketplaces would reduce market entry barriers for new players while also shifting pricing power toward producers by giving them access to a wider range of buyers.
4. Prioritise the highest potential initiatives
After identifying the digital opportunities and threats, the next step is to design and build initiatives that help you seize or counter them. Given the speed and scale of digital innovation, it is vital that companies prioritise among the many potential initiatives and adopt a test-and-learn approach to bring the necessary adaptivity to this fast-evolving area.
Consumer companies may tend to see the immediate priorities in areas of customer experience, e-commerce, and digital and social media. Whereas manufacturers may prioritise Internet of Things, robotics or 3D printing. However, across all businesses, data and analytics will be at the core of the digital effort. Therefore identifying opportunities to capture data across your value chain and gain insights through machine learning should be high on the agenda.
As well as focusing resources where they can deliver the greatest impact for their business, prioritisation also helps identify initiatives that can bring about quick wins and create a sense of momentum behind the transformation process.
5. Build an enabling structure and governance system
As part of implementing your digital initiatives, it is important that clear roles and responsibilities are identified to lead them and that a governance mechanism is put in place to spot and escalate any gaps in implementation. Without this enabling structure, there is a high risk that digital initiatives will slide back into silos where they will quickly drop down the agenda of functional leaders busy balancing the demands of their day-to-day workload.
We have found that by appointing a board-level digital champion with a clear mandate and committed resources, companies can provide sustained impetus and support to the process of digital transformation.
Furthermore, a regular process of strategic review on digital can flag roadblocks and direct actions and resources to resolve them. At the same time, the review process can ensure activities remain aligned with the organisation's digital vision.
For example, one industrial goods company put up a cross-functional team to connect all its digital initiatives and integrated the review of digital initiatives with the firm's strategic review. This not only ensured that digital initiatives were tracked and acted upon, but linked them with the firm's overall business strategy.
By following these five steps Indian companies can drive forward the process of digital transformation in an effective and coordinated manner.