Digital Transformation Strategy To Drive Innovation And Growth
Nowadays, digitization is at the core of every business across every industry. The pervasive influence of technology is inextricably linked to innovation. Businesses have little choice but to adopt digital technology and applications to advance existing business methods, promote workforce efficiency, augment customer experience and actualize new products.
Organizations can become obsolete if they don’t digitally innovate and leverage disruptive technology to face evolving customer needs and changing market conditions.
But new tech disruptions, ever-changing consumer behaviors and an evolving marketplace mean you’re aiming at a moving target. That’s why it’s important to create the right digital transformation strategy for your organization.
The Two Loops Behind Digital Disruption
Since digitization is still in its infancy, many business leaders assume they either have enough time to get their digital acts together or proceed cautiously. That assumption is dangerous since successful digital entrants have seized a significant share of revenue in the marketplace.
A McKinsey survey of C-suite executives about the state of digitization revealed an eye-opening insight. There are two loops behind digital disruption that can catch businesses off guard.
The first loop: Digital entrants challenge incumbents
Technological advancement has pulled every industry into new digital directions. At the same time, it’s given startups a significant advantage in reaping the benefits of the new models they’re creating. For instance, Chinese e-commerce behemoth Alibaba became the country’s biggest seller of money market funds in just seven months.
Globally, digital disruption is shaving 30% off incumbent revenue growth. But incumbents who are slow to respond are likely to suffer three times more than those embracing digital disruption.
The second loop: “Red Queen” competition
Most business leaders intuitively understand the problems digital entrants create for incumbents in the first loop of digitization. The McKinsey survey shows that the second loop – how legacy companies react to each other – can be just as painful.
Innovation gives way to imitation leading to Red Queen competition – a digital tit-for-tat. Incumbents engage in aggressive imitation, initially in response to digital-first startups and then in response to one another.
The State of Digital Transformation 2021
Digital strategies can take on many forms. Digital transformations could be focused on optimization and gaining efficiency or on disruption and boosting business agility.
Whatever the strategy, businesses are spending more on technology. Gartner forecasted that global technological spend will rise 9% globally.
Research vice president at Gartner John-David Lovelock says that businesses are “thinking past the digital sprints of 2020 and be more intentional in their digital transformation efforts in 2021. This means building technologies and services that don’t yet exist and further differentiating their organization in an already crowded market.”
What are the benefits organizations most want from digital transformation (DX)?
A survey from TEK Systems found what businesses are looking to gain from digital innovation:
Integration with other business systems/interoperability with other deployed technology and software
Analytics and business intelligence reporting
Virtual workspaces/remote work capabilities
Ability to customize
Device management capabilities (like remote management)
Platform management capabilities
What are the top business goals behind digital transformation?
The top business goals behind DX are:
Improve customer experience and engagement
Reduce operational inefficiency
Replace or upgrade legacy IT systems
Increase speed to market of existing products or services
Introduce new business models/revenue streams
Introduce new products or services
Improve talent retention/engagement
What are the top disruptive technologies driving digital transformation?
Top technologies accelerating intelligent transformation include:
Mobile internet technologies like 5G
Data and analytics
Internet of Things/edge computing
Artificial intelligence tools
Robotics (robotic process automation or RPA)
Advanced neural machine learning tools like deep learning
Augmented/virtual/mixed reality technologies
Additive manufacturing like 3D printing
Blockchain technology/distributed ledger
What are the top challenges of implementing digital transformation?
DX is proving to be an elusive concept for many businesses and only 50% have been able to gain substantial ROI from their endeavors. These are the top DX challenges:
Complexity of current environment/siloed mindset and behaviors
Security concerns and compliance constraints
Too many competing tech priorities
Economic uncertainty affecting budgets
Change management and implementation complications
High or unforeseen costs associated with digital transformation
Operating-model transformation complications (current business processes are too rigid)
Lack of internal alignment (digital vs. traditional business)
Lack of senior-level support
Lack of dedicated funding
How can digital transformation leaders ensure they get buy-in from employees?
In any organization, for digital innovation to come to fruition, employees must embrace the change and learn to leverage technologies like cloud, data analytics and AI. The cultural, behavioral and mindset shift required to make this happen is critical.
Digital leaders can facilitate this change in the following ways:
Establish new ways of working/collaborating with internal and external partners
Offer training and development programs focused on new behaviors/mindsets
Drive adoption of new tools and technologies
Focus on retaining, engaging and developing existing employees versus recruiting new employees
Quantify the gap between current and needed skills to deliver digital products/services
Train employees with digital skills across the organization
Identify skills required to deliver digital products and/or services in an organization’s portfolio
Include new behaviors in formal performance management systems
Gartner’s Lovelock emphasizes the importance of facilitating this organization-wide cultural change, “Digital transformation can no longer be purchased overnight.”
Platforms as the Fastest Way to Digital Transformation
Businesses are taking on various digital innovation initiatives, whether that’s switching from analog to digital or integrating a new technology strategy within their existing business ecosystem.
Implementing a platform-based business model is becoming the fastest way to speed ahead in their digital transformation journey. Consider Uber, the largest taxi company that doesn’t own any cabs or Airbnb, the largest accommodation provider that owns no real estate.
In the era of digital Darwinism, the platform business model is the ammunition against “disrupt or be disrupted.”
The Fast-Lane of The Platform Business Model
The platform-based business model is becoming an ideal way for organizations to explore new levels of competitiveness, profitability, innovation and customer satisfaction.
At a tactical level, creating a business application is no longer the purview of the IT department. Low/no-code platforms and as-a-service models mean that business users in domains from HR to marketing and any industries from finance to healthcare are capable of strategizing and creating their own applications.
The platform model enables that paradigm shift.
4 Pillars of Implementing the Platform-Based Business Model
Organizations are increasingly employing innovation labs and fast-tracking teams that act as incubators to fast-forward digitization. But speeding up end-to-end results, from cutting through business red tape to accelerating the delivery of digital initiatives mandates the right people, process, platform and portfolio.
A digital fast-track team should have people across functions with subject matter expertise alongside a strong IT team. Small, agile, highly-focused groups who can work together to find digital solutions to complex business problems.
Digital transformation warrants agile, iterative processes that can be continually improved to achieve the best-fit solution. This process will also enable the release of new digital functionality more frequently, show progress, collect more market feedback and make adjustments in the subsequent development sprints.
A platform model works best when it empowers multiple stakeholders and applications to carry out their functions seamlessly. The optimum platform should manage end-to-end business processes and entire application life cycles, such as program management, team collaboration, rapid application development and instant cloud deployment.
A business could choose to take on a single digital initiative or implement organization-wide digitization. A single, high-value initiative could help realize immediate success, whereas a broader organizational change could revamp relevant strategic initiatives.
How to Prioritize Your Digital Transformation Framework
Despite the urgent need to embrace digital transformation – and even if you have a slew of new ideas – it’s best to remember that the digital innovation journey can be difficult and focus on digital initiatives that will earn you the most ROI.
3 Top Areas To Focus Your Digital Initiatives
Customer, Partner or Supplier Engagement
In the digital ecosystem, people want to engage wherever and whenever it’s convenient. That’s why simplifying access to information and the way transactions are processed is critical. Applications like financial advisory tools, patient information databases, fact-finding assistance for employees and customer portals support easy access to information.
Product and Service Innovation
Digital innovation can be leveraged to augment existing products or create new ones. Innovating new products often involves shifting to digital-first (or only) products, enabling mobile services and offering personalized products.
Internal Systems Processing, Reporting or Access
A key component of digitization is internal processes. Digitizing an organization’s back office can improve efficiency, reduce the cost of service and support, and improve response times and customer satisfaction. Automating complex internal workflows will enable faster reporting and decision-making.
How Is Digital Disruption Changing Healthcare?
In March 2020, over 1.25 million people in the UK requested digital access to their medical prescriptions. At the same time, registration to use the NHS app increased by 111%. These figures signal the arrival of the digital health era.
Digital transformation in the healthcare industry is streamlining the healthcare provider’s work, optimizing systems, improving patient outcomes, reducing human error and lowering costs.
Telemedicine, AI-enabled medical devices and blockchain electronic health records are a few of the digital solutions reshaping healthcare, how consumers interact with health professionals, data is shared among providers and decisions about treatment plans and health outcomes.
Until 2020, the healthcare and pharmaceutical industries had lagged behind others in implementing digital strategies. The pandemic changed that. In 2020, the global digital health market was valued at $96.5 billion and it’s expected to grow at a CAGR of 15.1% until 2028.
Koa Health CEO Oliver Harrison says, “Technology is capable of playing a fundamental role [in healthcare], redefining the way in which we give care and making it fit for the 21st century. Of course, it’s hard to change the status quo, but doing so will result in effective and personalised treatments for everybody.”
The state of digital transformation in healthcare in 2021
Increased access to the internet and an upsurge in smartphone usage have paved the way for mobile health. Consumers are increasingly seeking healthcare whenever, wherever and on their terms.
Mobile health consumers are using the internet to research doctors, hospitals and medical facilities and book medical appointments.
Online marketplaces, such as Nomad Health, are also providing doctors and nurses with short-term work opportunities. This platform-based model is helping healthcare providers meet the challenges of on-demand healthcare.
Big data aggregates information from social media, ecommerce and online transactions to identify patterns. It’s being used to reduce medical error, facilitate preventive care and predict staffing needs.
In the pharmaceutical industry, drugmakers are using big data analytics to understand the market, determine drug iterations and set budgets based on current and future demands.
The global virtual and augmented reality healthcare market is expected to reach $5.1 billion by 2025.
Virtual reality is proving to be a powerful communication tool in healthcare. VR is being used to treat pain and reduce drug usage, anxiety, PTSD and stroke. Doctors are also using VR technology to plan out complex surgeries.
The global wearable healthcare devices market is projected to reach $46.6 billion by 2025. Devices like heart rate sensors, exercise trackers, sweat meters and oximeters are helping mhealth consumers gain more control over their health. But they also help insurers accurately assess patient risk and provide scope for gamification, such as following a diet or exercising.
Predictive analytics is being used in healthcare to not only analyze admission rates and staffing requirements, but also help predict what illnesses and diseases will become problems and how diseases like COVID-19 are spreading. This gives healthcare providers an opportunity to prepare for an emergency before it occurs.
Artificial intelligence isn’t just driving digital transformation in healthcare – it’s shaping the future of medicine. By 2026, AI is predicted to bring an annual savings (PDF) of $150 billion to the US healthcare industry.
Blockchain will continue to play an important role in preventing data breaches, improving the accuracy of medical records and cutting costs. This tech is also solving the problem of fragmented medical records.
The decentralized blockchain database can store all relevant patient information. A patient’s medical history, treatments, immunizations, diagnoses, test results can all be kept securely in one place – and only authorized people can access the files.
Patient medical data is considered the most prized in the black market, so storing that information on a decentralized, immutable and secure database is becoming a game-changer in the healthcare industry.
How Can Professionals Respond To Digital Disruption?
The influence of digital disruption is snowballing and many organizations are increasing their rate of investment to enable that disruption.
As these transformations unfold, professionals find themselves at a watershed moment in their careers. Unless business executives play a leading role in the disruptive changes shaking up the sector, they’ll be seen as inhibitors and will have little control over the changes. On the other hand, when leaders involve themselves early and help shape these transformations, they’ll be viewed as true leaders and catalysts for change.
Dennis Gannon, Vice President, Advisory at Gartner, says, “Becoming this catalyst for change will be one of the most important challenges for CFOs in the coming years. Yet, most are unprepared for it. The people- and technology-intensive nature of these changes has created brand-new investments with profoundly different and uncertain risk-reward profiles.”
Who are the leaders of digital transformation?
The unprecedented disruption caused by COVID-19 required businesses to stabilize and take advantage of new market opportunities. Digital leaders were better equipped than most to make that transition.
Digital leaders are those who can:
Leverage technologies to enable transformation in their business
Accept changes as they happen and turn them into opportunities for growth
Take bold action and adopt digital solutions that equip them to take on disruption
Business leaders of incumbent organizations need bold responses
“Companies that adopt bold offensive strategies in the face of industry digitization will come out winners,” says Jacques Bughin and Nicolas van Zeebroeck, professors of digital economics and transformation at Solvay Business School in Brussels.
According to the McKinsey survey, only 8% of companies had “both responded offensively and integrated their digital strategy fully into the corporate strategy.” Yet, a successful response to digital disruption entails bold and fully integrated digital strategies that can yield more revenue after digitization.
Digital disruption is inevitable and business leaders need to react accordingly. Those who take a half-hearted stance with their digital strategies put their companies on the pathway to revenue loss. Business executives need a bold digital strategy that fully integrates with their corporate strategy to generate profits from digital disruption.
Executive Education Courses for Your Digital Transformation Journey
Esme Learning Solutions brings you the best executive education courses to help expedite your digital transformation journey. Learn about disruptive technologies, the role of platform-based models in digital innovation and garner the skills needed to make the most of digital healthcare.
The Oxford Platforms and Digital Disruption Programme teaches you to evaluate the disruptions that technologies and platforms are bringing about in your industry and develop a strategic framework to respond to these disruptions.
The Leading Health Tech Innovation course teaches you how to facilitate digital technologies within your healthcare organization and provides you with the entrepreneurial toolkit to create new digital health products.