ÜberTech

Digital Transformation, Part 2: What makes it disruptive?

Summary:It's clear to see that technology is disruptive. This is precisely why we need to talk about digital transformation. Driven by the combination of ever-growing digitization and evolving consumer demands, digital transformation is the use of new technologies to drive significant business improvements. This includes capitalizing on new opportunities as well as effectively transforming existing business.

The smartphone has brought a deluge of disruption to our lives, changing and challenging one industry after another at a staggering pace.  It has not only changed the way we interact with games and media, it has even transformed experiences like customer engagement. 

Apple stores have done an impressive job of driving engagement with their customer-first focus. Their efforts embody the premise that customer engagement does not end once a product is paid for: Customers may return for help from the Genius Bar or learn how to use their device with online-scheduled workshops and one-on-one sessions.  Thanks to Apple's localization features, customers are greeted personally the moment they walk into a store, delivering an even more personalized experience.

Digital initiatives also improve customer engagement.  iPads, not paper, display helpful information and guides for products using video, not text.  With Easypay, customers can buy things using their iDevices and iTunes accounts – no wallets necessary. The future will certainly bring even more creative ways technology can enhance customer engagement.

But how do you get in on the trend? It's clear to see that technology is disruptive.  This is precisely why we need to talk about digital transformation.  Driven by the combination of ever-growing digitization and evolving consumer demands, digital transformation is the use of new technologies to drive significant business improvements. This includes capitalizing on new opportunities as well as effectively transforming existing business.

Let's take a look at the elements behind the disruption of digital transformation.

 Series on #DigitalTransformation (2) - What makes it disruptive?, by @SDenecken

 

Empowerment of the end user

More than ever, consumer expectations matter.  Don't like that app that you just downloaded?  Give it a bad review.  The developer will respond.  No response means lost customers, or worse, going out of business.  We live in an end-user-centered world and enterprises must recognize that their customers and even employees have higher and ever-evolving expectations.  What worked a couple of years ago won't fly today, nor will it continue to hold for the future.  If you’re wondering, “Well, I’m in the B2B space, so how does this apply to me?” then you’ve got it all wrong.  You are in B2B2C and must know your customer’s customers as well to survive in the “everything as a service” economy.

Let’s not forget that a couple of bright people can do for you today what you needed entire businesses for some years ago.

Users are now so accustomed to the streamlined, instantly responsive experience from Google or Amazon that they expect the same from all enterprises.  Providing instant value, mobile functionality, and a user-friendly interface is no longer a bonus value but a necessity.  When customers complain online, they expect their feedback to be seen and addressed quickly, no matter what channel they use.  There are no excuses for redundancy: Why should a customer see an advertisement for a product that they've already bought?  Businesses must act accordingly or themselves face disruption.

Digital proficiency

But how do we adapt personally to these changes? Can we or do we need to disrupt ourselves? And how do we deal with the known statistics about Millenials and their expectations?

Ray Wang from Constellation Research made the valuable point that we should not divide people digitally by age, but by proficiency.  Digital proficiency is a much more realistic way to approach the varying levels of ability when it comes to digital technologies.  Businesses must recognize this for both their employees and their customers. Check out Ray Wang's post here for more information.

Ray Wang's 5 levels of digital proficiency are defined as:

  1. Digital natives - grew up and comfortable with digital
  2. Digital immigrants - adopters of digital
  3. Digital voyeurs - cautiously recognize the digital shift
  4. Digital holdouts - resist and ignore digital
  5. Digital disengaged - give up on digital

 

Even though I am happy to state, “Lucky me, I’m in category 2,” I would like take this further with an additional "digitally balanced" category to describe those who understand and use technology but walk the middle ground between naysayers and instant adopters. 

Although digitally savvy, the "digitally balanced" evaluate the risks of technology, weighing the benefits and costs to decide in which direction their digital initiative should take them. 

It is important for businesses to have enough "digitally balanced" employees and the right mix of digital profiles, both in IT and in business.

Changing the way businesses work

Going digital also changes the way businesses work.  This could range from big efficiency gains that allow employees to refocus their efforts to implementing whole new businesses processes and ways of engaging customers and employees. 

Much work remains to be done on this front, so you’d better start soon before disruption hits you hard. This study from Capgemini Consulting and the MIT Center for Digital Business revealed that 70% of businesses use technology only as a substitute for previous analog processes.  In other words, many are only digitizing old processes without adapting to the new world.  Obviously, this unsophisticated approach hardly qualifies as using technology to its utmost advantage. 

Let's take a look at a business that has been using digital to expand and innovate the customer engagement: Porsche.

Porsche has taken customer engagement intelligence to an unprecedented level, bringing together real-time marketing and predictive analytics.  Recognizing that customer expectations are always changing, Porsche resolved to keep its processes and services agile to best respond to these changes.  For example, Porsche’s customer data is instantly accessible for use across the entire organization, thanks to a customer database with automatic and reproducible processes. 

How does this change things?  When a potential customer’s vehicle is configured at a dealer but he or she opts not to purchase, Porsche takes the customer's profile data to create a one-of-a-kind mailing piece (yes mailing) to be sent to the customer’s home – 100% automatically.  Even better, Porsche only does this for customers that are really in the market for a car.  Porsche targets these customers by calculating purchase ability with real time predictive analytics and real time segmentation to identify purchasing patterns. This personalized, smarter approach turns more potential customers into paying customers. You can learn more here; fast-forward to 12:30, after you have looked at the cool cars, of course.

New innovation possibilities

The advent of new technologies like real-time data and connectedness allows for new innovations.  SK Solutions in Dubai, for example, uses new technologies to make power its anti-collision system. SK Solutions harnesses the Internet of Things and real-time data to track cranes and other machinery to prevent potential collisions. This is a classic example of a company adopting the factors of digital transformation as described in Part 1 – see here .

Using the SK Asteroid platform solution, sensors on machinery capture and analyze big data to automatically make corrective adjustments to prevent collisions, even those that may happen a week from now.  Thanks to SK Solutions, the safety and efficiency across some of the most complex industry landscapes is boosted dramatically. You can find more details here.

Takeaway

Digital transformation is disruptive whatever the industry.  Even Apple, for all its digital savvy, is not safe.  Its very own iPod was disrupted by the iPhone… after the iPod had rendered most music players obsolete. 

But disruptions never stop, with new challengers like Spotify vying for a bigger piece of the music industry pie.  Apple’s solution?  Transform again and acquire Beats Electronics to leapfrog the digital disruption of its iTunes business model. Every business needs to wake up and realize the potential of digital transformation.  As SAP's former co-CEO Jim Hagemann Snabe put it, "Every company will become a software firm." 

Rather than only cautiously protecting an existing business, companies need to understand the end-user and adopt innovative technologies and business practices. There is a need to disrupt your own business early before someone else does. It's only a matter of time. 

Navigating the digital transformation is the way to success as the pace of disruption quickens in our technology-driven world. This is what impels us to use the co-innovation approach - a close collaboration between vendor and customer/partner - because it leads to validation and ultimately to fast outcomes with the ability to manage transformation in a sustainable way.

Up next: the building blocks of digital transformation

Follow us via @SAPCloud and @SDenecken.

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Digital Transformation, Part 4: The Role of Leadership

Digital Transformation, Part 3: The Building Blocks

Digital Transformation, Part 1: Rapid State of Change

 

Topics: Enterprise Software

About

Sven Denecken is Global Vice President of Strategy for Cloud Solutions at SAP. He collaborates closely with varied market constituents to supports the strategy of cloud and its alignment with the SAP field organization and ecosystem. Also follow him at @SDenecken.

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