Perhaps the most widely held misconception about Digital Transformation is this: Digital Transformation is the use of digital technologies to connect the people and systems within the organization to one another and to the appropriate people and systems outside the organization. This is a worthy goal, and one with great benefits for the organizations and their people.
But, it’s not Digital Transformation.
Digital Transformation is a fundamental rethinking of the underlying business model – both within the organization, and in the broader business ecosystems of which it is a part. To achieve true Digital Transformation, you must first understand the real value proposition. Then you design a purely digital system capable of delivering most, if not all, of that value proposition. Finally, and only as necessary, you incorporate the physical artifacts or facilities needed to complete the value delivery.
One of the best examples of Digital Transformation is the way in which Steve Jobs and Apple transformed the music industry. For a century, the real money in the music industry was in the manufacturing, distribution, and retailing of musical recordings – first vinyl records then eight-tracks and cassettes and finally CD’s and DVD’s. But, even though the sound on CD’s and DVD’s was recorded digitally, they did not represent a fundamental change in the business model.
Jobs realized that, once high quality recordings could be created digitally, they could also be managed and distributed digitally. To do so required rethinking the entire process. The old record stores and the distribution systems which supplied them were supplanted by iTunes and the Internet. Traditional audio playback devices such as turntables and CD players were replaced by internet enabled mobile devices.
Certainly, Apple and others in the new digital music ecosystem had to develop and implement new digital business processes. But this latter task was only a small piece of the overall Digital Transformation that has overtaken the music industry over the past decade or so. And the real value added for all of us who enjoy listening to music is not in the refined business process management systems, but in the Digital Transformation of the music ecosystem.
The opportunity for you and your organization is to apply the same concepts to digitally transforming your business and industry. This means starting with a fresh look at what it takes to deliver value to the end users or consumers of your product or service.
Perhaps the biggest challenge for real Digital Transformation is that you cannot achieve it incrementally. This does not mean you can’t breakdown its design and implementation into executable steps. It means that you can’t achieve Digital Transformation by starting with today’s business model and making incremental changes to it. You can’t get there from here.