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The Future of Digitalization: A Path Forward for Businesses

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:

Increased agility

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.”

Streamlined operations

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.

Operationalized innovation

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. 

So to me, you have not really transformed if you have not reallocated your key resources in terms of money, people, and time."

Technology enablement for people and data  

The all-encompassing nature of digital transformation requires the involvement of all aspects of the enterprise. Enacting an agile, efficient, and innovative vision requires a focus on:

Leadership

Real change won’t happen without senior executive support. Professor Venkatraman maintains that “digital transformation is not a technology challenge but rather a senior management challenge because they have to figure out how to allocate the resources.” Each member of the C-Suite has a role to play, ensuring critical questions are addressed.

Culture

A robust change management system must be in place to drive that change and promote a culture of innovation.

Jeffrey Schaubschlager, Principal Consultant, 3pointsDIGITAL, points out that “The biggest hurdle [to digital transformation] isn’t the software or the process, it’s the people.”

But cultures don’t change overnight. They’re driven by behaviors, and behaviors are driven by incentives. That means metrics need to change.

Vinod Galani, Digital Transformation Strategist with JP Morgan, suggests business leaders ask themselves some specific questions.

“Are we measuring what really matters?” Galani says, “Are we measuring metrics that will drive the change in behavior we want to see?”

If organizations aren’t looking at the whole cycle – KPIs, incentives, behaviors, culture – their change efforts won’t be successful.

Data

Data is every business’ most valuable asset. Data-driven, real-time insights are critical to successful decision-making. Among other things, data can help organizations evaluate the success of new products and services, understand the short- and long-term implications of business disruptions, and better understand their customers.

And using data effectively requires the tools needed to provide an enterprise-level view of that data. Digitization enables agility by ensuring data is accessible to those who need it when they need it, both at a granular level and in aggregate.

“Most of the problems that we see in companies is not that they don’t have the data, but it’s all in different databases,” Venkatraman says.

Technology

Although many organizations begin their digital transformation by updating their technology, it means little if the people, processes, data, and metrics required to make efficient use of that technology aren’t already in place. Technology must be an enabler of digital transformation, not the end result.

Still, that’s not to say that choosing the right technology isn’t important. Transformation efforts can fail if the solutions you choose aren’t up to the task, leading to lost investment, frustrated employees, and disappointed leadership. Selecting a technology partner that understands your business and is committed to enabling your success is a critical step in the transformation process.

When it comes to cloud adoption, for example, security concerns can be easily addressed by working with leading cloud providers instead of relying on in-house solutions. Top cloud platforms are widely trusted precisely because they offer world-class security. They can recruit the best talent to solve the toughest security concerns, surpassing what individual companies can handle in-house for their on-premises systems.

How to get on the path forward

Embarking on the path to a digital transformation can be accomplished by following this roadmap. Awaiting at the destination are improved efficiencies, lower turnover, reduced risks, and easier regulatory compliance.

Design your vision

To start building your transformation vision, investigate and understand what digital transformation means in general, in your industry, and for your company specifically. Develop a granular understanding of your company’s competitive advantages and how a digital transformation can leverage these advantages to deliver new sources of revenue. Keep in mind that any transformation must be tied to business outcomes to be impactful.

Measure your digital transformation maturity

There are many proven frameworks available today to help your organization gauge digital maturity. Select one that best aligns with your vision, industry, and region. Be honest and realistic when assessing your place on the curve and fight the urge to take an unrealistically rosy view of your organization. Accept where you are.

Identify gaps

Identify the gaps in your people, processes, and technology based on your maturity and future vision. Evaluate why these gaps exist and understand what you hope to achieve by closing them before moving on to the next stage.

Identify use cases

Identify the use cases that must be addressed to close these gaps. Any use case that can help drive customer trust and loyalty – such as in the areas of quality, regulatory, and safety – can be a good place to start. Decide what can be measured, what aligns with your vision, and what is of the highest value to identify use cases that can provide proof of concept.

The phased approach to cloud adoption 

Once these use cases are identified, they can be tackled through a series of discrete, rapid pilot projects. Once the low-hanging fruit has been picked, scale up. If a project fails, know that you’re not investing much in the wrong areas, and you easily pivot to a different area. Either scenario is a learning experience that contributes to the transformation process.

This is also the stage when you may need to identify technology partners to assist on your journey. Carefully vet these potential partners to ensure alignment on goals, industry expertise, and a deep understanding of your business.

Cloud adoption is one element of the solution. And while the switch to the cloud can seem daunting, it does not have to happen overnight. Companies can modernize and transform, beginning with a hybrid solution of cloud and on-premises solutions, prioritizing cloud adoption when and where it will add the most value.

“Reinvention… is not achieved through one big transformation program,” Venkatraman says, “but through a portfolio of business experiments that are constantly fine-tuned and refined based on results and external shifts.”

Remember, though, that any transformational project requires a robust change management function. Companies must anticipate resistance to change and have a strategy in place to discourage disruption. Embedding “change instigators” and “change adopters” at every level – from leadership down – is critical to driving the cultural change needed to transform.

Ultimately, business transformation happens in two major phases:

Phase 1 - Working more efficiently

This phase is all about working smarter, not harder. Focus on process-driven and supply chain systems to gain efficiencies and operate more cost-effectively. At this stage, innovation is limited, and operational and revenue models stay relatively unchanged. Regardless, this is an important first step and sets a “good foundation” before Jeff Schaubschlager suggests asking, “How do I compete with the disrupters? Or how do I become a disruptor?”

Phase 2 - Radical change

Entire operating and business models will need to shift to compete with digital natives and other disrupters. Rather than predicting the future based on past activities and present realities, envision a future that solves customer needs. Then build new business capabilities rooted in a wide range of digital functionalities to help realize that future. Projects involving decisions involving rights, roles, and responsibilities that are designed to shape future business strategy rather than just support current business operations require coordination across the organization, so the entire executive team must be involved.

Think big, start small, and scale fast

Companies must develop a vision of their transformed future tailored to their organization, so they can map a route to that future based on an understanding of where they are today.

Typically, the path to the future begins with initiatives that enable the company to work more efficiently. The longer-term may entail radical change as companies transform their entire business to unlock the power and potential of data.

Think big. Start small. Scale fast.

For more information on how Veeva can help your organization with its digital transformation strategy, reach out to one of our experts.

Veeva Industries

Posted by Veeva Industries

Veeva builds industry cloud software to help consumer goods and chemical companies bring innovative, high quality products to market with more agility.