POWER TALK

Emerging
Businesses Challenges
DIGITIZATION & DIGITALIZATION
Digital transformation is the most talked about buzzword in
today’s world. The hype around the word has accelerated
with the COVID pandemic taking over the world
unannounced.
What is digital transformation?
For the layman, the definition by Salesforce, describes it
best.
“Digital transformation is the process of using digital
technologies to create new — or modify existing —
business processes, culture, and customer experiences to
meet changing business and market requirements. This
reimagining of business in the digital age is digital
transformation.”
Like the traditional business transformation, success rate of
digital transformations is very elusive. A 2018 McKinsey
study has shown that success rate is as low as 16% compared
to a 30% success rate for business transformations. The
McKinsey study shows that even digitally savvy industries,
such as high tech, media, and telecom, are struggling. Among
these industries, the success rate does not exceed 26
percent. But in more traditional industries, such as oil and
gas, automotive, infrastructure, and pharmaceuticals, digital
transformations are even more challenging: success rates fall
between 4 and 11 percent
What are key pillars of digital transformation?
What are the first things that comes to mind when you hear
digital transformation? It is important to make the
differentiation between digitalization and digitization. Most
transformations have elements of both and to varying
degrees.
Digitization is simply moving from analog to digital. The
simplest example is that of an analog wristwatch and a digital
one. Both serve the same purpose of showing time however
the fundamental technologies are different. Or think about
the camera – do you even remember the analog cameras?
Most businesses have moved from paper record keeping to
digital records. There are several examples of digitization in
our daily lives that we may not even realize – postal letters to
email, from in person sales to e-commerce, newspapers to
news online, books to e-books.
Digitalization has a broader dimension. When information is
available in digitized format because of digitization, how and
what you do with the information to make a task or service
simpler is digitalization. As data capturing became easier with
advance in technologies, so did data storage and computing
speed & power
This paved the way not only for converting old ways into
new ways but also creating new ways of doing business.
Digital transformation of today focuses more on
disruptive ways of doing things rather than a mere move
from old to new.
What makes digital transformations hard?
Organizations are a collection of people meaning they
exhibit human behavior when it comes to change. And by
essence human behavior throws up the challenge
associated with any change transformation. Let us look at
the elements of digital transformation. most companies
want to protect their core and hence digital
transformation always starts with the core. What's the
challenge then associated with starting at the
core?
The 2 challenges that most organizations grapple with
well starting at the core is dealing with an unknown
diversification strategy and dealing with a skill set that is
based on the core trying to address the unknown and noncore.
A recent study by McKinsey showed that most
incumbents say they would only about 30% of their
available resources to non-core diversification.
While focusing completely on non-core may not be the
most viable way forward, focusing on protecting the core
while trying to diversify the non-core with minimal
resources is what eventually leads to the failure of digital
transformation. An ideal way forward would be to split
the core and non core in an ideal ratio of 50:50
The second and the most important challenge in any digital
transformation journey is fixing the leadership skills. As is
with traditional business transformation one of the
challenges associated with digital transformation is also to
stop doing what companies are generally good at doing.
Another dimension to the challenge is that most leaders
have typically grown within the organization and hence
have competences that led the organization to the current
successful stage ,this makes it more difficult to let go of
these competencies.
For true digital transformation to happen there must be an
attacking and not a defensive strategy. This also means not
only that decisions have to be taken around what needs to
be done but also strong and hard decisions around what
should be stopped doing at the organization. In this context
communication cannot be overstressed. leadership
approach that has delivered digital transformations are also
the ones that have consistently communicated both the
strategy as well as the desired outcome of the
transformation that an organization undergoes. It may be
worthwhile to note that even in communication when an
organization is undergoing
a digital transformation or
embarking on digital transformation it may be wise to move
away from traditional means of communication such as
emails, newsletters or even one way webinars to start a two
way communication from and to the leadership .