Looking ahead, it’s clear that for a business to succeed in a rapidly changing world, undergoing a digital transformation is a requirement. Those who continue to rely on antiquated control systems simply won’t be able to keep up.
“Every industry is accelerating towards its digital future. The scale, scope, and speed differs, but sooner or later, every company will need to transform to effectively compete against born digital companies,” said N Venkat Venkatraman, Professor of Management at Boston University.
But digital transformation is more than just a technology challenge, and it can’t just be led by IT. Change must be driven by the business, and IT must be aligned with business goals to enable the change.
“Technology should be seen not as a cost center to minimize…, but as an investment center and growth center to drive the organization to… a very different future in which they can achieve both profitability and growth,” said Venkat Venkatraman, Professor of Management at Boston University Questrom School of Business.
What successful digitalization of businesses will look like
To stay ahead of the competition, drive better business outcomes, and advance their reputation, businesses need to invest in transformational initiatives that directly contribute to:
Although it’s impossible to predict the future, it’s a good bet that business disruptions will continue. To put themselves in a position to cope with those disruptions, companies should invest in developing the agility and resilience that will enable them to adapt to whatever the future brings.
But what is agility?
“Agility is the ability of an organization to renew itself, adapt, change quickly, and succeed in a rapidly changing, ambiguous, turbulent environment,” Aaron De Smet, a leader in organizational design at McKinsey, said in an interview. “Agility needs… a dynamic capability, the ability to move fast—speed, nimbleness, responsiveness. And agility requires stability, a stable foundation—a platform, if you will—of things that don’t change. It’s this stable backbone that becomes a springboard for the company, an anchor point that doesn’t change.”
Marc Engel, former Chief Supply Chain Officer at Unilever, highlighted this need considering current pressures on supply chains.
“You’re seeing shortages of everything, volatility in commodities, price hikes, and supply chains having to respond with a lot of agility and resilience much more than before,” Engel said. "All this volatility has absolutely confirmed our belief that our agility is far more important than accuracy. We call that agility trumps forecasting. And we've learned that investment in agility has probably had a 10x return over the investment in scenario planning.”
Digitization allows companies to break down the internal silos that may be hampering growth. By undergoing a digital transformation, companies can make real-time data available across the value chain, including their suppliers, partners, and other outsourcing companies outside the organization.
Through strategic technology investments, companies can enable seamless, secure collaboration with their supply chain partners to increase brand owner confidence that the end product will delight its consumers. Along with providing an end-to-end view of internal processes, suppliers, and other partners, the digitalization of business can provide companies with an end-to-end view of their customers and the customer journey.
Many companies have already moved through an initial set of transformations focused on customer-facing systems and productivity. Now they can expand their transformation efforts to drive innovation.
And as digital transformers leverage their digital skills to innovate faster and better, they’ll widen the gap between them and their competitors.
Although some companies are appointing a Chief Innovation Officer to synchronize their business strategy and innovation strategy, innovation cannot be accomplished by just one person or one team’s – job. The more efficient, agile, and data-driven the organization, the more likely it will be that innovation will emerge from the ground up rather than being driven from the top down.
“Companies need to develop more resiliency in anticipating these shocks and being prepared for them,” Venkatraman said. “And it’s in this…realm that the digital transformation becomes important: to be proactive and understand how agile and flexible and what kind of slack can be built into the supply chain.”
Finally, Venkatraman gave his perspective on what successful digital transformation looks like. “People ask me this question, ‘Have we successfully transformed compared to other companies?’ and I ask them to show me three areas in which they have reallocated their key resources.
One is finance. Have you reallocated your capital budget towards areas that are much more digital? Have you reallocated your operating budget from the way it was operating the last five to ten years to where you're going to be transforming in the future? The second bucket is people. Have you allocated your smart people to [work] on the problems of tomorrow rather than solving the problems of today? And the third one is management time. If the senior managers are not spending time trying to understand the role of digital in shaping tomorrow, they have simply implicitly allowed the company to believe that digital transformation is all about rectifying the problems of today.Subscribe