The enterprise digital transformation: Why start one?
This article explores what an enterprise digital transformation is, gives guidance on how to go about starting one, and highlights the benefits for your company.
The arrival of new technologies has transformed our lives and, at the same time, it also changed the ways in which organisations do business. While the corporate world is perpetually in the throes of change, digital transformation has pushed organisations to adapt to new realities at breakneck speed. Whilst digital transformation presents significant benefits to the ways that large enterprises operate, it still raises many questions, and there are numerous hurdles to overcome.
A survey by Tech Pro shows that 70% of companies have already developed, or are working on developing, a digital transformation strategy.1 This percentage is even higher for enterprises. According to research conducted by Innosight, the days in which large enterprises remain static for decades are over.2 This study shows that, historically, S&P 500 companies stayed at the same level for 30 years. This decreased to 24 years by 2016, and is predicted to drop to 12 years by 2027. This demonstrates the increasing rate of change amongst the world’s largest enterprises.
In face of rapid change, enterprises must adapt quickly and offer viable solutions to match the evolving needs of the market. But how can they do this?
This article, illustrated with examples, explores what an enterprise digital transformation is, gives guidance on how to go about starting one, and highlights the benefits for your company.
What is an enterprise digital transformation?
The advent of digital transformation has changed consumer behaviour and expectations: there is higher demand for personalised products and services, and an increased expectation in terms of the speed and ease of execution. These expectations have led companies to reorganise and rethink the ways in which they operate.
Compared to previous approaches, where innovation was driven through new projects, the latest approaches differ entirely. Today, enterprises use new technologies, new solutions, and data to innovate and meet customer expectations. Enterprise digital transformation supports the changes that enterprises put in place to deliver a better customer experience.
For an enterprise digital transformation to be successful, companies need to affect total change to their organisation, operations, and mindset. To reach the desired results, enterprises also need to develop a clear digital strategy and a multi-year plan.
For most enterprises, change occurs at two levels:
- On the revenue level - changes which directly impact the company's income: markets, propositions, brands, and customers.
- On the cost level - changes which directly impact the company's expenses: core business processes, operational infrastructure and technology, structural organisation, management, risk control, employees, and culture.
The catchphrase that is on everyone's lips, and that sums up the importance of enterprise digital transformation, is: "Go digital or go home".3 Because, given the rapid changes of today's markets, making sure that everything - from systems to employees - runs efficiently is paramount. Needless to say, an enterprise digital transformation is a laborious, difficult, and risky endeavour. This is, however, a price worth paying: in the absence of enterprise digital transformation, your competitors will get ahead of you.
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How to go about starting an enterprise digital transformation?
Harvard Business Review identified three types of enterprise digital transformation:
- Operational transformation: that refers to changing the way businesses operate in order to be faster, better, and cheaper (also read more on digital transformation)
- Core transformation: that refers to changing the core of an enterprise and its activities
- Strategic transformation: that refers to radically changing the purpose of an enterprise4
To grasp better the types of enterprise digital transformation, let's take a look at three major enterprises that illustrate each of these types of transformation.
SEAT is an example of enterprise digital transformation at an operational level. The Spanish car manufacturer invested in a software development centre to improve its business and process efficiency through digitalisation for the development of new business models.
The next example illustrates a fundamental transformation. Lego was facing a decline in revenue, so it developed new business lines focused on digital. These included video games, films, applications, mobile games, and educational software. But the company did not stop at this point, it went beyond entertainment. The Danish company turned part of its energy towards its own education, too.
The final example shows a strategic transformation. The computer giant Apple has not always enjoyed success. In the crisis of the 1990s, Steve Jobs executed a strategic transformation. He focused its enterprise on the aesthetics of its products rather than mere functionality - a first in the IT sector.
Enterprise digital transformation allows large companies to deliver a better customer experience. What is more, by incorporating new technology and/or improving the old ones, enterprises are able to create new business opportunities in the markets in which they operate. The automation of processes and operations also adds to gains in efficiency.
Furthermore, by shaping enterprise digital transformations to match consumers' needs, enterprises build long-lasting relationships. Comprehensive solutions and approaches enable them to differentiate from competitors. Thus, becoming very difficult to substitute.
Some enterprises go as far as transform the core of their business based on data collected from customers. Decisions, innovations, products and services, and organisational matters can all be improved by using data. Also, with the burgeoning fourth industrial revolution, there is also scope for predictive analytics and artificial intelligence (AI) to unlock even more value from customer data.
Why is an enterprise transformation beneficial for your company?
All companies can benefit from an enterprise digital transformation. Even those enterprises that are not listed on the stock exchange market, or are not "digital-native".
At the beginning of 2020, Accenture published a report on enterprise digital transformation.5 The study, which includes more than 8,300 organisations and more than 800 CEOs, highlights a crucial point:
The choice of technology determines the success of an enterprise.
Accenture identified five decisions linked to enterprise digital transformation CEOs must take to optimise the management of their organisations:
1. Embed and promote new technologies
Technologies such as the Cloud or AI offer endless possibilities to reduce costs. Yet, research shows organisations have a tendency to not include new technologies uniformly in their organisational structure. This leads to missed opportunities. It is only by promoting and embedding innovation at all levels that organisations can take full advantage of technological advancements.
2. Adapt investments in tech according to constant change
Companies tend to upgrade their old IT systems, or move to the Cloud, without much thought on redesigning their infrastructure. Best practices show that the most suitable way to make the transition from the old systems is to do it in a gradual manner, through strategic, phased migrations.
3. Plan for enterprise transformation in a timely manner
In the planning phase, the first step is to identify the critical technologies that will be used mostly in the organisation. The next step is to decide on the timeframe, and the processes, required to adopt these technologies.
4. Improve performance with the help of technologies
Training teams on how to use new technologies is paramount. A good practice to do so is to adapt training techniques using new technologies. Another effective method is to personalise the training. This way, the teams will adopt and integrate new technologies faster and easier in their work.
5. Connect your business strategy to your IT strategy
Successful enterprise digital transformations rely on companies' ability to be agile. To accomplish this, large organisations should keep their business, people and IT unified. An essential step towards transformation is to analyse the organisations' current situation. Another step is to identify the technological investments suitable for the organisation. These should take into account the needs, culture, market position and other factors. A smart approach is also involving digital experts such as a Chief Digital Officer (CDO), or a Data Analyst.
Another important step is to also track progress with the help of KPIs. This way, you will be able to identify the effectiveness of your digital strategy at any point in time. Finally, your business strategy should link to the IT strategy. Digital transformation initiatives should benefit the entire organisation, and enable a swift adoption of digital to keep up to markets that are constantly evolving.
Enterprise digital transformation is no longer optional for large organisations. No matter their size or industry, enterprise transformation should be viewed as a survival skill. Many leaders have already understood this. While others, slow in reacting, are experiencing the consequences of their inaction. But catching up is not impossible.
Strategic planning, shifting towards a digital culture, and adopting an agile approach can help organisations get back on track. In the end, enterprise digital transformation is not only about the crossing the finish line, but about the journey to success.
1 '14 digital transformation statistics and why they matter to the enterprise', PTC, April, 2019.
2 '2018 corporate longevity forecast: creative destruction is accelerating', Innosight, 2018.
3 'Go digital or go home, and other thoughts from CISCO’s John Chambers', MIT Management Executive Education, September, 2017.
4 'What do you really mean by business “transformation”?, Harvard Business Review, February, 2016.
5 'Your legacy or your legend? A CEO’s guide to getting the most out of new technologies', Accenture, 2020.