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Organizations are spending enormous resources on “digital transformation”. Do we understand what digital transformation means and how this enables innovation?
This blog is an attempt to create clarity on the topic.
Gartner provides a good definition for multiple terms when it comes to anything related to digital
Digitization is the process of digital enablement or converting analog (paper based) into a digital format. This could be data and forms as well as process. ERP is probably the best example of digitization most organizations implement, but could also be other things like performance management, employee related process, sales process etc.
Digitalization is the next step in the use of digital technologies to enable new revenue and value producing opportunities. Usually this results in the creation / adoption of a new business model.
And then the more complex creations exists such as Digital Optimization, which is about using digital technologies to optimize existing process and business model.
Digital Transformation came to be bandied about first by government and public sector organization (and subsequently by others) to describe any efforts that involve IT, from digitization of paperwork, workflows, online portals that enables services or selling the product to creating new business models.
Digital business transformation though refers to the process of using digital technologies with the objective of developing a robust new digital business model.
Unfortunately, there is a tendency to classify all digital efforts as innovation. Converting an existing business to a digital business model might be the right thing to do, but might just be the sort of thing every competitor has done. We have Croma adopt a digital business model, just like Reliance digital, just like Amazon, Flipkart or multiple others. This is not in anyways innovation, but is just digitalization of business.
All such “metoo” digital transformation efforts are characterized by one factor; it’s worked in other organization and each of them use a different variant of it. However, the fact remains that these efforts perpetuate the red oceans that the organization operate in. There efforts are easily copied by others and you have no advantages.
Innovation using digital technology can’t be a standard solution you buy from someone; you need to explore how you could uniquely use digital solutions to come up with new offer, either in a new market or in your existing market. This of course assumes that you aren’t interested in simply copying what others do.
Such innovation requires organization to explore future scenario’s of how digital technologies can impact three key elements
Customer experience and needs
Product performance and product systems
Configuration of offer creation system
The process for digital enabled innovation should consider the following steps
Gathering intelligence about the future: This step is about exploring how emerging and new digital technologies can impact the way customer uses / experiences the product in the future, how the product performance and product system can be impacted/enhanced and how the system of delivering the product is likely impacted (process of production, value chain, partner networks and profit model)
Exploring the dynamics of change: This step is about mapping the drivers of change and how they interact, as well as identify uncertainties and extremes.
Describing the future: This step is about developing scenarios, SWOT analysis and vision for the future
Developing and testing strategy: This step is about developing a robust innovation strategy process, preparing a road map, resourcing plan and developing a runway for the innovation execution.
While digitization is a worthwhile exercise and unavoidable for organizations, for digital technologies to enable innovation, you need to look beyond what others are doing and develop your own roadmap.
Do reach out to me for help in building a sustainable innovative organization.
Krishnan Naganathan
Krishnan is a leading innovation consultant and focuses on helping people and organizations innovate and build capabilities for innovation. He brings over 25 years of experience in the industry and consulting. You can reach him by phone / WhatsApp: +919791033967 or email: krishnan@thinkhorizonconsulting.com
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