Digital is the hottest buzzword in the business world right now. Individuals, enterprises and even countries want to transform themselves using digital technologies. Every business leader has some kind of digital transformation plan. However, if there was a poll of 100 business leaders about what do they understand by being digitally transformed, the chances are they you will get a hundred different interpretations and definitions. In fact, many leaders can’t even agree whether their digital plans are “digitization” or “digitalisation” and indeed these terms are used interchangeably.
Digital also means different things for different industries. For example, in the banking industry, it could be about the transformation of retail experience and making it frictionless without a need for any physical interaction. In the Oil and Gas industry, it could be about creating a digital twin of the offshore rig and maintaining it without having to travel to the rig.
However, irrespective of the industries, there are four broad themes or interpretations of what is meant by a digital enterprise.
(1) Leverage technology – This is about how a business leader exploits digital technologies in the Enterprise. This is fundamentally a technology led experimentation that could eventually lead into meaningful transformative business cases.
(2) Engage with eco-system – A broader meaningful theme is about how the enterprise engages with its customers and larger eco-system. The banking industry is an example which has built an omni-channel presence using digital platforms to engage with its customers.
(3) Creating incremental value streams – This is when an enterprise starts to derive significant value by transforming existing businesses and opening up incremental value steams. Online payment apps integrated with UPI enabling a wider portfolio of services is one example of this in the banking industry.
(4) Creating new value streams – Finally, the real transformative opportunity is when an enterprise is able to create entirely new ways of doing business and open up new value streams which wouldn’t have been possible without the use of these digital platforms. Again, in the banking industry, digital banks with no physical presence is a great example of an entirely new way of operating a business and transforming the customer experience.
However, these should not be viewed as a linear curve in the digital transformation of an enterprise. For one, an enterprise can exist at different points on this journey at the same time. While customer engagement may be enabled through mobile technologies, it is entirely possible that the business runs on traditional supply chains. Secondly, an enterprise may create entirely new businesses and value streams without ever having gone through some of the other preceding steps (e.g., new startups that are born digital).
Many enterprises and their leaders today look at their digital transformation journey as a series of steps on this linear curve in which they can take each step and eventually be able to create new value streams. This is a mistake. There is a fundamental difference in a leader trying to digitize his organization by adopting new technologies in the way he engages with his customers and eco-system, opening up incremental value streams compared to an enterprise transforming and creating new value streams that wouldn’t have been existed previously.
And therein lies the difference between an Enterprise “Doing Digital” or truly “Being Digital”. An Enterprise that is doing digital is exploiting technology to be more efficient, is engaging with its eco-system better and is creating new sources of revenue or margins but all of these are incremental benefits to the existing business and value streams in the enterprise. There are not new value streams that didn’t exist previously or couldn’t exist in a traditional enterprise.
In contrast, an enterprise that is truly being digital has been able to reinvent itself and created new business opportunities and value streams that simply didn’t exist or wouldn’t have been possible previously. There is a gap between the two that cannot be bridged by taking incremental steps along a linear curve, or by doing more Digital. In fact, it is almost never possible for an enterprise to incrementally achieve this. To be truly a digital enterprise is a reinvention and reimagining of the business in ways that was not possible earlier.
That said, this is a lot easier for enterprises who are born digital and exist on the basis of being digital, but it is extremely difficult for existing enterprises to reinvent and re-imagine themselves.
And therein lies the challenge and the opportunity for today’s enterprises and their business leaders.