What exactly is Digital Transformation, really??? - PART 2

As a recap, I have shared in my previous article about the definitions relating to the terms "digital", "digitization" and "digitalization". Through the definitions, we start to tease out the differences in application and that the journey towards digital transformation is much more.

Digital Transformation, sometimes referred as DX or DT in some circles, is a bit of a misnomer where people tend to focus on the word "digital" and infer that changes towards a digital setup, process, layout, operations etc would be considered as part of DX/DT.

Echoing what Tony Saldanha, former VP Global Business Services at Procter & Gamble wrote for AI & Automation Network, there is still a lot of confusion as to what should be considered as Digital Transformation:

“the biggest challenge in today’s world is the language related to digital transformation. The term has been co-opted by every IT marketing person selling anything from an email upgrade to artificial intelligence. It’s a mess, but it’s not unexpected.”

Image credit: Tom Fishburne (©marketoonist.com)

However, recall the previous article and the official definition of the word "digital" that as an adjective that describes something relating to electronic signals. This means that the digital transformation is more about TRANSFORMATION than it is about anything electronic.

The definition of Transformation (as shown in the online Cambridge dictionary) is as follows "the process of changing completely the character or appearance of something in order to improve it". Transformation is a journey undertaken towards major changes. We focus not on the pace of change, but rather to what extent the change magnitude involves.

Transforming a process... a business... a person

My own experience on transformation started with the customer: Through understanding the customer's requirements and what delights them, the initial feedback was that customers wanted to confirm the final delivery destination as late as possible. This is where the digital element starts to play a role, where different sets of data points were used to build a hypothesis - How do we maintain flexibility in our logistics and still optimize our supply footprint (and it's operating costs)?

The process of transformation then began with understanding the need for change. By re-thinking the way we look at customers and profitability for the business, the company changed the model by building a supply chain network in locations driven by the data analysis. The conventional logic was to optimize supply networks through consolidation, via hubs with good accessibility. The data however had highlighted a very different supply network, one that indicated smaller supply points in more remote destinations. The decision to make the change was supported after much deliberation.

The result of this change led to a change in profitability, where customer satisfaction led to higher monthly sales volumes at the remote locations. The initial hypothesis was proven wrong but instead led to a new revelation - Customers weren't really looking for flexibility in the final delivery destination, rather their business activities were growing at these remote destinations, and customers required our products and services at these locations. New data on spot sales showed a trend on a new set of customer profiles as well, none of which were ever picked up on traditional market research or analysis.

Fuelled by the initial success, the organization was encouraged to go further:

• Decisions were made to remove certain hubs, concurrently working to improve on the capabilities of the new remote supply nodes. The increase in overall total cost to supply was offset by the margin growth, justifying the investments made.
• Organizational changes were also made with a greater focus on data science and building a predictive model of identifying future customers that would their consumption pattern of goods & services would be a good fit with our supply network.
• Over time, Sales & Operations Planning (S&OP) was revised to incorporate discussions related to the models and improve the outcomes from the S&OP.

The organization today continues to post strong growth, even during COVID-19.

So... what is Digital Transformation?

The above example I've shared serves to highlight key elements of what Digital Transformation really is:

1. Digital Transformation is first and foremost a transformation. Digital technology is the enabler to facilitate the transformation. The example above showed the adoption of data analytics and prescriptive modelling to fuel changes to how business was conducted.
2. Digital Transformation is not about how much digitization or digitalization needs to happen, but how the digitization/digitalization efforts impacts the ways of working.
3. Digital Transformation is not just about using the latest technology, but about using the right technology and digital tools/platforms.
4. Results and the impact from Digital Transformation does not happen in a "big-bang" event, but rather a series of initiatives driven and supported with data, to create incremental impact and value to the organization.
5. Digital Transformation ties back with understanding customers' needs and what delights them. You can't start a transformation if you don't align your future state back to the very reason why your company exists - Delighting your customer.
6. Digital Transformation is a journey, not a project. The companies that I've worked for still continue on their transformation journeys, empowered by the revelation of what is possible with technology.

Thank you for reading this article, which concludes my 2-part introduction and hope that it provided some clarity of what Digital Transformation is.

Note: I'm certain that many people may hold different views of what Digital Transformation is and how it is like for their organizations. I would love to hear more from you and your experiences! Please leave a comment below or message me directly on LinkedIn.