Managing Digital Transformation in Business
Successfully managing your digital transformation is vital to the survival of your business in an increasingly digital landscape. This article will discuss the main digital transformation methods and how the advantages of digital transformation, overall, far outweigh the challenges you might face in the implementation of your strategy.
In years gone by, companies created an asset (such as a machine, a workforce, a piece of intellectual property). They created a set of repeatable, predictable processes to exploit that asset to deliver returns and growth to shareholders. Typically companies worked in large time scales and would expect to be able to use their key asset to dominate a market for many years (or even decades).
Financial assets were used to build large infrastructures that were perceived as barriers to entry for newcomers to a market. For example, a supermarket chain would develop a nationwide set of stores and supply chains that would be very expensive for another company to replicate and then exploit those stores and the supply chains for maximum profit. Then along came the Internet, followed by globalisation, mobile phone Apps, smartwatches, Amazon Alexa and the Internet Of Things. As a result, the development of huge new markets began, and lots of new competitors emerged alongside. The advantages of digital transformation are ever clear in this new, competitive landscape.
The Digital Debate
The reduced cost of digital technology and increased digital educations has radically changed the competitive landscape of the modern world. Think for a moment about your own company. If all of the software were suddenly removed from your business, what would be left? The window cleaner would not be able to advertise on Facebook or Google. The accountant would go back to manual ledgers. You would no longer have direct contact with your customers via Twitter. In short, most businesses of any size would collapse.
Your business is a software business. Without your software, your business would cease to be a competitive force in the marketplace. Therefore, successfully managing digital transformation is vital to your business survival.
The Pace Of Change
As software has become more and more core to businesses, the pace of a digital workplace transformation has accelerated. Software is perceived to be more quickly and easily changed than other components of a business. Large manufacturing machines are frequently hard to change, but their software allows them to be reconfigured to perform a variety of new tasks.
Corporate culture is famously sluggish to change, but the four digital transformation methods mean that you can roll out new digital tools for real-time collaboration very quickly. Your customers’ expectations are also increasing more rapidly than in the past. More and more customers expect their products to be connected in some way to the Internet and their mobile phone, for example. One of the main advantages of digital transformation is that you can change how your customers interact with you and transform their experience with your company by digitising their customer journey and personalising it just for them.
Digital transformation is hard enough without all the jargon terms that get thrown around. Before you read any further, here is a quick review of the top digital transformation terms, including:
- Digital transformation
- Software as a service
- Platform as a service
- Digital platforms
Software Development Terminology
Digital transformation is used to describe the innovative and practical use of modern computer technology and modern management practices to improve the competitive standing of a company in the marketplace. As the world has moved faster in the 21st century, competition has become more fierce due to globalisation and customers have become more demanding, the old economies of scale business practices are no longer enough for companies to remain competitive.
Digital transformation allows companies to unleash the hidden information from within and utilise it in new ways. Often this is to modernise their systems to meet radically shifting marketing demands. Equally, companies are improving the experience that their customers have when interacting with the company by presenting complete, accurate and up to date information by exposing information through modern APIs (Application Programming Interfaces) and Software As A Service (SaaS).
The software industry has enthusiastically adopted more lean and Agile ways of working over the last twenty years and spreading those more rapid and responsive management techniques to harness the advantages of digital transformation company-wide.
Software as a Service (SaaS)
Software as a Service (SaaS) is a way of building a distributing software (usually over the Internet) where the software provider hosts the software on behalf of the end-user. This hosting is usually a cloud-based platform such as Microsoft Azure. In the good old days, we would have described this as a “turn-key” type of solution! In the modern world, this is a key part of a digital transformation.
Typically this software is provided for a monthly license fee rather than a large, single upfront perpetual license cost. SaaS has been popular as it allows customers to reduce the burden of providing an IT infrastructure to run the software. Often Software as a Service is provided on flexible terms allowing customers to temporarily deactivate their accounts and reduce costs when those accounts are not in use. Popular examples of SaaS include Microsoft Office 365, Toggl, Jira, Box and many more.
Platform as a Service (PaaS)
Platform as a Service (PaaS) is an approach to creating cloud-based software that allows others to develop, run and manage software Apps. The use of the cloud allows companies to reduce their IT infrastructure management overhead and focus instead on creating an innovative Digital Platform as part of their digital transformation. There are many interpretations of the term Platform as a Service. At its simplest level, an example would be the Microsoft Azure cloud platform or the Amazon Web Services (AWS) platform. These platforms allow programmers, DevOps teams and other IT professionals to create, deliver and run applications on the Internet via on-demand databases, application frameworks, communications tools etc.
Microservices is an evolution of the slightly older Service-Oriented Architecture approach to software development in which software developers create small, fine-grained services to perform highly focused individual functions with few or no external dependencies. Many see Microservices as another enactment of Conway’s Law which states that “all systems developed by an organisation are a mirror of the structure of that organisation”. In other words, as software teams have become smaller, cross-functional and more focussed, so have their software products. The key benefits of Microservices are that they allow small amounts of code to be independently built, tested and deployed rapidly, thus avoiding the “big bang” release strategy of yesteryear.
Microservices are a popular method of creating Software as a Service. An example of a Popular Platform as a Service mechanism for building Microservices is Microsoft Azure Function Apps.
A Digital Platform is a modern, incremental approach to managing digital transformation and creating a new information communication system within a company. Typically, companies have a large number of disparate legacy systems before a digital transformation. The key challenge is to allow those systems to interoperate and to be able to aggregate and consolidate that information for presentation to the world in a Software as a Service manner.
A Digital Platform typically decouples these systems and allows communication through a system-neutral mechanism such as an Enterprise Service Bus. Digital Platforms allow a “plug and play” approach to be taken to system development. Initially, Digital Adapters are created to allow legacy systems to communicate with the Enterprise Service Bus and response to updates and requests for information. Over time, the legacy systems can be progressively replaced with more modern systems that better match business needs. Dues to the decoupled nature of the Digital Platform (all communication is via the Enterprise Service Bus), this can be done with minimum impact on the rest of the IT ecosystem. Find our expert guide to using Digital Platforms over on our blog.
What are Digital Transformation Strategies?
A digital transformation strategy describes the process of a company repositioning itself in the digital economy, performing a digital transformation within the business. There are four main digital transformation methods, and each must be addressed to provide value to your industry:
- Business process
Digitalisation means access to data, analytics and new technologies in real-time. By managing digital transformation right, these insights can be extremely valuable to your business, allowing you to understand your customer behaviour and monitor KPIs better, so you can change and adapt your strategy appropriately. Overall, digitisation can lower costs and increase the quality of your output.
- Business model process
How does your business deliver value to your industry? This digital transformation method requires a reinvention of how you give value to your industry and customers, changing your strategy to create a real ‘game-changer’ and open up new growth opportunities.
- Domain process
The Domain digital transformation method realises the necessity of adapting to new technologies, and redefining one’s products and services to compete with innovative companies outside your industry or niche.
- Cultural and organisation process
Businesses need to adapt to the pace of change, just as consumer habits and preferences change over time. Redefining your organisation’s mindset, processes and capabilities to adapt to new technologies are often combined with prioritising Agile workflows and reliance on the wider business ecosystem.
What are the Challenges of Digital Transformation?
The innovation of business models and processes are vital to leverage emerging technologies and remain a viable competitor, as well as overcome some of the common challenges of digital transformation that businesses face. Listed below are some common challenges faced by businesses and suggestions on how to overcome them.
- Limited Budget
Managing digital transformation can be expensive without long-term planning. Reduce your costs by consulting with an agency, like McKenna Consultants, who aid with business decision-making and make sure you’re making informed and beneficial decisions. Adopting an Agile approach and having a contingency plan are watertight ways to achieving successful digital transformation methods.
- Employee Pushback
Be transparent throughout the process of your digital transformation. The likelihood is that you will have to undertake a partial or full organisational re-shuffle, upon which you may experience employee resistance. To combat this, make sure that you empower and engage your employees at every step of your business transformation.
- A lack of expertise
Industry knowledge, talent and technology are integral to managing digital transformation. McKenna Consultants are digital transformation experts and could be the missing ingredient to your successful transformation. Check out our case studies to see how we have helped our clients succeed, from building bespoke Digital Platforms or Apps and advising on Agile solutions to benefit your business.
- Optimise internal operations and customer experience
Without structural changes on your end, you won’t be able to provide a fully optimised customer experience to your market. Ensure that the changes you make are aligned with your business vision and goals, and involve your whole team in your strategy.
Advantages of Digital Transformation
As all these changes are happening in the competitive environment of business, businesses are responding by aggressively beginning digital transformation programmes. Instead of shying away from the new digital world, businesses are embracing the digital world of commerce to become more competitive.
There are many elements to a successful digital transformation, including:
- New product and service opportunities
- Breathing life into old products
- New product or service development methods
- Gathering and analysing data on a large scale
- New methods of interacting with customers
- A new approach to management
- Increased profits
- Increased Agility and innovation
New Product and Service Opportunities
The digital world opens up many new opportunities for creating new products that your company would not have dreamt of ten years ago. For example, a golf club manufacturer may have expertise in perfecting a golf swing and choose to sell a new mobile phone App that studies the form of a player’s swing. The App could measure motion and processing video information to suggest improvements to the player’s game.
New products of this kind require the confluence of two worlds: digital expertise and domain expertise. The domain expert here provides knowledge of golf and the digital expert provides the know-how of how to build Apps. If you are interested in McKenna Consultants being your digital partner in developing your new App or for other digital transformation services, please fill in the contact form below for your free consultation.
Breathing Life into Old Products
Many companies have found that they can breathe new life into an older product by introducing a digital component or digital accessories. Take a look at the award-winning ventilation product from EnviroVent, that was enhanced with a new digital mobile App (iOS and Android). This new App allowed EnvironVent to maintain its market-leading position in the ventilation industry.
Your digital enhancement idea doesn’t have to be big, complex or expensive. Maybe your company could start with a simple web portal that allows easier access to information or provides a simpler mechanism for reporting problems. Perhaps you could build an App that provides real-time video to connect your customers directly with your technical support or engineering teams.
New Product or Service Development Methods
Developing digital products may require a rethink of your product development methods. Most companies have long, cumbersome, slow new product development processes that are (allegedly) designed to reduce risk and ensure a great product is built. Often these processes fail in this goal and create lukewarm products that are easy to manufacture on a large scale.
Digital products are different in that they can be developed much more experimentally. McKenna Consultants help their clients build the smallest possible digital product that could be of benefit to their customers. We call this the Minimum Viable Product (MVP).
Instead of building a software product with every imaginable feature stuffed in (including the kitchen sink), modern digital companies focus on delivering a small piece of software that they believe their customers will find valuable. This is called an experiment! We can do this in the digital realm because the software has a very low cost of change compared to physical artefacts. It is easy to roll out a change to millions of users for your web portal because you only have to roll out the software change to a single server.
The idea of building and releasing software as an experiment often runs counter to years of long, slow, de-risking development processes. This experimental approach works well in a rapidly changing competitive environment in which we can never be sure what our customers will value the most. We create a small experimental, release it, and if our customers like it, we do more of it. If they don’t like it, we do less of it.
This approach also has the benefit of allowing us to respond to competitive changes rapidly and is key to managing digital transformation. Suppose a competitor suddenly makes an unexpected innovation. In that case, we can rapidly change our plans and match or beat their innovation because we only ever plan small, incremental releases of our digital software product.
Gathering and Analysing Data on a Large Scale
A great many businesses have failed due to taking risks relating to a lack of information, or sometimes an ability to sift through very large amounts of information. For this reason, the advantages of digital transformation can have a hugely positive impact on your business processes. A business that has been through a digital transformation typically takes advantage of modern Cloud computing technology to store and analyse vast quantities of data. With digital transformation, you can track metrics and analyse data from your marketing efforts to increase the efficiency of your business and meet your goals.
The data collected could be information on the usage of their products and services or marketing and sales data or other internal operational information. When you better understand your customers and their needs, you can use these data-driven customer insights to create a customer-centric business strategy. The insights gleaned easily form modern software can provide valuable steering information on where the market that a business service is heading in the future. Using this data allows a digital company to provide relevant and Agile content to customers and steal a march on competitors.
New Methods of Interacting with Customers
The Internet has created great new opportunities for interacting with your customers in real-time. For some companies (for example, those that sell their products through third-party retailers) the Internet has created their first real opportunity to interact with their customers directly on a large scale. Creating an App for your business, for example, may provide a better overall customer experience, allowing for on-demand shopping and communications that you can take advantage of.
Customer communication patterns are rapidly shifting, and many people take to Twitter, Facebook and LinkedIn to raise complaints rather than following a company’s old-fashioned complaints procedure. The real-time communication is pushing companies to become much more customer-focused and much less internally focused.
A New Approach To Management
Managing digital transformation requires a different management style from that of the 20th century. The 20th century was the century of economies of scale and delivering mediocre products and services on a large scale. The increased competitiveness and pace of change in the 21st century mean that companies following that old pattern will not survive.
The art of modern management has become more about creating places where people can innovate and helping people remove barriers to rapidly delivering. The days of optimising efficiency and creating economies of scale are being replaced by being quick to market, innovative and delivering high-quality products and services.
In the 21st century, the most successful companies are the ones that can innovate rapidly and deliver those innovations rapidly before the world passes them by! To innovate in this way, companies need smarter people rather than more people. The days when the manager knew best are becoming a thing of the past.
In the modern world, digital workers know more than their bosses do. The challenge for managers then becomes “how do I manage people who know more than I do?”. The answer, of course, is that you don’t manage them. You lead them instead! If you are interested in learning about leadership in the modern world, have a look at our Management 3.0 training courses.
The economics of the digital worker is a little bit different from the economies of scale too. In most of the western world (and increasingly in the rest of the planet), there are more digital jobs than people to do them. This means that digital workers have the luxury of choosing their jobs rather than being stuck in a job. The scarcity of labour is pushing companies to create better working conditions for their staff.
It also means that companies are looking more and more to geographically distributed teams as their local labour pools dry up. Remote working presents huge cultural and brings challenges in managing digital transformation for companies, as they have no expertise in real remote working.
One of the main advantages of digital transformation is improved efficiency and profitability. Using data-driven customer insights, enhanced data collection and greater resource management, you have a wealth of valuable data and statistics to guide your business goals and promote informed decision-making. Transparency, better management and a digital workplace for employees to access from wherever they are will filter through each level of your business and improve productivity and profitability. Plus, by optimising your technology when you go digital, you might find savings in cost per transaction, too.
Increased Agility and Innovation
Legacy systems are becoming a thing of the past, and legacy system migration is now easier than ever. Moving to a cloud-based service, for example, can improve the performance and competitiveness of your business and keep you up to date with the latest technologies. When you’re able to improve your business operations continuously, you also update your employee skillset and knowledge. When combined with the increased data available, transforming your business in this way makes you more responsive to market trends and demands, allowing you to predict and innovate changes in your industry.
Managing Digital Transformation with McKenna Consultants
Suppose you are CTO or CIO of a medium or large company looking at implementing a digital transformation. In that case, you are probably contending with multiple legacy systems that are not designed to talk to each other. Over the years, many large companies have invested large amounts of money in license fees for proprietary systems integration products or build highly specialised point-to-point integrations to deal with this challenge. The result is a large operational expenditure where the company becomes trapped in ever-increasing license fees, just to keep the lights on!
McKenna Consultants’ UK software development team offer digital transformation services by building open, progressive Digital Platforms for companies like yours, undergoing a digital transformation. Crucially, the Intellectual Property for the Digital Platforms that we build for our clients is 100% owned by our clients. Our Digital Platforms are cloud-based (usually in the Microsoft Azure cloud). Our Agile, progressive approach to building your software means that we build the Digital Platform around your existing systems and integrate it into your existing legacy systems.
Our Digital Platforms are tailored to the unusual and specific array of a legacy system that forms the heart of your company’s current IT infrastructure. We meet the challenge of legacy systems by building bespoke “Digital Adapters” that understand your legacy systems and enable them to communicate with your new Digital Platform.
All this means is that our clients’ businesses benefit from a new Digital Platform in the following ways:
- Create new customer and business experiences by created modern APIs from legacy systems
- No license costs for the core platform
- You don’t have to abandon your existing legacy systems – we can leverage them in new ways
- You can incrementally replace your legacy systems in a “plug and play” manner
- Low risk, progressive “a bit at a time” strategy
- The open nature of the platform allows multiple vendors to work on and interact with the platform
- The cloud allows easy expansion of the platform over time with minimal infrastructure overhead
Interested in Learning More?
This blog post has been just a taster on digital transformation methods and the advantages of digital transformation for your business. The bottom line is that basic survival depends on managing digital transformation, and a great digital transformation can help ensure your increased competitiveness in your market.
If you are looking to develop your own Digital Platform, discuss digital transformation services, or you would like to get more out of your legacy systems and implement an incremental transformation, please fill in the form below and get in touch with us today.