Responding to the Digital Transformation

November 6, 2018 admin

The reaction time and adaptation strategy of each company will define whether the digital transformation is an opportunity or a threat.

Adaptation is a rule for survival.

 

THE DIGITAL TRANSFORMATION: THREAT OR OPPORTUNITY?

Digitalization and Tech progress: are they a threat or an opportunity?
How close is your business in taking advantage of all the opportunities offered by new technologies?

 

Digital transformations are changing every area of the business world. In some industries the effects are notorious, while in others they seem minor. The appearance of new technologies generates a constant redefinition of the ground rules and opens new opportunities that challenge the continuity of established companies.

Such is the case of Kodak, that after inventing the world´s first digital camera in 1975, did not pursue that business and clung to the analog photography, which then offered greater profitability. This allowed its competitors to outrun them in the digital market, which eventually led to its bankruptcy in 2012. Nowadays Kodak is a worldwide example of the risk of not joining the digital game.

Retail industry also witnessed a considerable transformation in the last decade. Physical assets retailers such as Sears, J.C. Penney and Macy’s lost more than $10 billion in market value each, while new digital-based players like Amazon joined the game creating more than $300 billion in the same period. The trend is evident, and the retail segment is another global case of digitalization’s potential impact.

However, technological changes offer new and better tools to improve, grow and meet objectives, without altering the core of the business. Let’s see some examples:

  • Drinking technology? The commercialization of soft drinks has existed for many years. The flavor and packaging remain the same, advertising continues to reflect freshness and happiness, and the business continues to leverage its bottling and mass distribution. However, technology has strengthened the productivity and is massively optimizing the supply chain.
  • Running digital? Before shoes could transmit our running speed and heart rate to our personalized training app, weren’t we interested in knowing our health progress or athletics’ evolution? Thanks to technology, the shoes manufacturer can now receive, digest and feedback this information for our personal use, in a matter of seconds.

The evolution differs by industry, and may have greater or smaller effects, but in no case can they be ignored. The incorporation of technology, and consequently the business digitalization, can influence the whole chain, from products offered to customer relationships, from processes to industrialization, but above all it impacts its people. This phenomenon is reflected in the next graph, which indicates the current status by sector and its forecasted progress until 2020.


Bain calls the combination of digital and physical aspects Digical and claim it is an important new value source. Digical® is a registered trademark of Bain & Company, Inc.
Source: BAIN “Leading to Digical Transformation”

The evolution rate and its forecasted impact differ according to the industry. Nevertheless in all of them there is a long way ahead, which keeps growing each minute new technologies appear.

The reaction time and adaptation strategy of each company will define whether the digital transformation is an opportunity or a threat.

Adaptation is a rule for survival.

 

HOW MUCH DOES MY COMPANY HAVE TO ADAPT?

We got it now, there is a long way ahead on the digital transformation for all of us. Now, the next step is to identify what this means for each one, and what one must do to move forward.

Whether one is a pioneer, an adventurer, a conservative or a follower, the current level of digitalization depends not only of the industry, but also differs within the same industry by company, and within the same company by department. The questions flow naturally:

  • How close is my business to exploit all the opportunities that technology would allow me to?
  • How digital is my business with respect to my competitors?
  • Am I ready to compete within the digital ecosystem?
  • How to turn the unknown into something simple and natural?
  • How to identify if it’s worth it, and where to start?
  • Understanding the current situation, measuring the challenge and developing a strategy to convert potential threats into value opportunities are key elements to achieve success on the digital path.

 

HOW TO FACE THE CHALLENGE?

The decision makers of the vast majority of companies agree on the importance of adapting and being part of technological changes. However, the main complexity lies in implementing them properly and consistently, without which the benefits are not seen nor reached.

Failures are often caused by directors who are surrounded by urgent problems to resolve, and indefinitely postpone digitalization; prevailing the urgent over the important. Even more, digital transformation demands an effort and knowledge that usually requires external help to be implemented to its full potential.

The need for digitalization must be analyzed from diverse perspectives. An external point of view and experienced eye would expand the vision that a company can have, in order to enhance the results, facilitate the execution and promote within the business´ culture.
There is no one-fits-all solution. Each case will be different according to the digital status and technology implementation would depend on the people who interact with it. It has to be part of the company culture.

To address the change, the analysis starts by understanding the ecosystem of each industry and company, assessing it both externally and internally. As Bain points out in Leading to Digical Transformation: “The challenge for any company is to analyze each part of the value chain of its industry and determine which points are best suited for innovation”. A method must be used to identify the points on which to work, establish priorities and measure their evolution.

 

THE DIGITALIZATION FACTOR

Our proprietary methodology for evaluation and digital transformation is based on the Digitalization Factor, thanks to which we can adapt and customize each solution for each particular case.

The Digitalization Factor measures the digital situation of each business and guides the change.

Based on the metrics of each of the areas, processes and products and their digital immersion, this tool allows us to define and compare the different alternatives, studying how each solution adds value.

The study of the variables of the Digitalization Factor and its continuous measurement allows us to monitor the evolution and analyze the results achieved.

The calculation of the Digitalization Factor follows the following steps:

  1. We define the component vectors of the digitalization factor
    • We evaluate the main operating vectors: Product or Service, Processes, Production, Sales, Marketing and Administration, and the business itself.
  2. We define the scales of each vector and the weight that will be associated
    • We assign a scale of digital competence to each of them that depends on your company and industry. The weight indicates the relative importance that one area has with respect to the others. Scales and weight are defined with the intensive use of statistics that provide similar business and analysis of the business in particular.
  3. We evaluate the stage of each vector
    • Once the particular scales of each business have been defined, we evaluate the position that your company has within that scale, which compares its situation with the highest degree of digitalization possible at the time of the analysis. Their location within these scales will depend on the new technologies that emerge and when they reach maturity, so we will periodically review the vector and, consequently, recalculate the factor.
  4. We calculate the value of the Digitalization Factor
    • From the results found in the previous points we calculate the value of the Digitalization Factor obtaining a result from 0% to 100%. The results can be observed in a single indicator, or broken down in each vector.
  5. We calculate the impact of an incremental change in the value of the Digitalization Factor
    • We study the value added, both for current and future business, by the differential increase of each vector.

In this way, the Digitalization Factor is individual for each business and allows defining the current stage of it and, more importantly, the possibilities of evolution. A metric without analysis is a wasted metric.

The analysis of the Digitalization Factor (DF) of your company is the basis for an integral development proposal, so:

Based on this methodology, our proposal have the greatest impact in each business, to make it grow, accelerate its evolution and differentiate it to develop its full potential.

Based on the intensive analysis of the initial situation, we leverage digital services in the physical elements that your business already has.

 

LOOKING AHEAD

All industries will go through the digital transformation process. Strategically combining digital evolution with the values of the physical world will help to convert the possible threats into opportunities.

The speed of change has been so fast that the transformation seems very advanced and many companies feel left behind. This is an error, the transformation is just beginning. As an example, eCommerce only accounts for less than 10% of retail sales, although it feels bigger.

It is not too late. The digital transformation is happening and it is the right time to join. How you adapt will make it either a threat or an opportunity.

As your partner, we can collaborate on helping you take the right decisions and maximize the power that those opportunities can give to your business.

 

 

 

13406 Moscow Trl
Austin TX (78729)
hello@newcombin.com
For more information, visit www.NewCombin.com

 

You can also download the pdf here.

CONTACT

hello@newcombin.com