The transformation of digital transformation.
- From the perspective of Jens Mortier, Managing Partner.
The digital transformation or digitization wave is an already long lasting phenomenon making companies focus on digitizing their own processes, information and decisions. Enabling efficiency through automation has been the main goal for most digitization initiatives.
Digital transformation 1.0
More recently, the “data is gold” movement has put an accelerator on digitization. Gathering meaningful data and transforming these into insights helps companies and organizations to move to more data-driven decision making. However the use cases realized in these forms of digital transformation could be very innovative, I refer to these initiatives as digital transformation 1.0. The constant throughout these transformations is the focus on the organization’s own processes and operations.
Digital transformation 2.0
Nowadays, more and more companies focus on bringing digital capabilities to their value proposition, aiming to work out digital solutions for their customers’ processes. In other words, they help their customers digitize the areas in which they are experienced. Besides the fact this has a serious impact on their business model, they also build a much more intimate and long standing relationship with their customers. That’s what I call digital transformation 2.0.
In the logistics and distribution industry, we see a similar trend. This industry has been highly transformed within the digital transformation 1.0 wave, mostly for exchanging information and integrating processes. Today, more and more service providers in this industry are looking at how they can enable the digital transformation 1.0 of their customers. On top of that, a vast amount of EU-driven digitalization initiatives, such as eFTI, urge for more digital transformation 2.0 moves.
Digital transformation 2.0 seems to be a different game, requiring different organisational structures, processes and skills.
Most companies have organized themselves - their IT departments - to deliver digital transformation 1.0 projects and initiatives. Ranging from waterfall to agile driven delivery paradigms, they mostly succeed in implementing systems like ERP, WMS, TMS, CRM… and integrating them with each other.
However, digital transformation 2.0 seems to be a different game, requiring different organizational structures, processes and skills. More specifically, a closer way of interacting and collaborating with other business functions is paramount. That’s why in this article I cover three important conversations you need within your organization before you can start moving towards digital transformation 2.0.
- Discuss with your CxO peers what the digital ambition of your organisation should be.
- Identify which business and IT capabilities you need to develop to deliver 2.0 transformations.
- Determine what you need in order to establish the leading dream team.
3 key elements in digital transformation 2.0
#1 Set a clear digital ambition
If it’s your first time, defining a digital ambition is never easy. Especially because most IT business plans show how they are going to support the run of the business operations at the lowest cost possible, but don’t come with strategic objectives from a digital nature. Therefore, the ideal starting point for articulating a digital ambition are the organization’s objectives.
If, for example, revenue growth is an important objective, bringing a digital product solving a customers’ digitization need, provides access to a new customer market and thus plays a strategic role in achieving that growth. Another example comes from the data sphere. As most logistics companies gather a lot of customer related data, they can translate it into insights providing new value to customers which in turn can enable new business models.
Companies with some experience in integrating digital into their strategy and value proposition can also look at emerging trends in the digital world, spread the inspiration and translate it to their own value proposition. An extra attention point here is to not only watch digital trends within your own, but also within your customers’ industry.
Starting from the ideas, a clear digital ambition statement should contain the following elements:
- What new kind of value do you aim to bring to new or existing customers? Which hypotheses did you make?
- How does this tie into your existing business model and objectives?
- How does this tie into your organization’s mission and vision?
#2 Develop the right capabilities for digital transformation 2.0
Digital transformation 2.0 boils down to implementing a value stream for digital value delivery.
Being able to deliver (new) customer value through digital transformation 2.0 boils down to implementing a value stream for digital value delivery. This value stream covers the entire journey from defining strategic digital objectives to delivering solutions to the market. It includes all key activities such as designing, implementing, and launching digital solutions. Although it seems quite similar to a traditional or digital transformation 1.0 IT value stream, it’s not.
Next, you can create a capability map that maps for each vertical in the value stream, the capabilities that are needed in order to be able to carry out that activity. From this capability map, you can assess which capabilities are already available within the organization and if they are fit for purpose. The capabilities not yet represented, need to be developed. The final result is a set of initiatives to improve or develop the identified capabilities in terms of people, processes, organizational structures and technology. A typical capability that most companies moving to digital transformation 2.0 need to develop is customer research and customer validation testing.
Mostly, developing these capabilities happens in parallel with the effective realization of digital offerings, products and platforms for customer digitalization. It should as well be built upon the digital landscape that already exists within the organization. Therefore, a typical initiative in the 2.0 transformations is to open-up the existing landscape - as we did for Schoenen Torfs. In these situations, following API-led or event-driven architectures makes sure new products and platforms can build upon these capabilities.
#3 Think like a start-up: build your digital 2.0 dream team
As a part of developing the right capabilities in order to deliver 2.0 value, you need the right people and skills to carry out the new value stream. A common pitfall is the traditional IT value stream that is refurbished to match this new value stream. We see that these traditional processes tend to lack “entrepreneurial spirit”, which is actually key for delivering 2.0 transformations.
In order to counter this, we compare this dream team to a typical start-up. In a typical startup, you find the following profiles or responsibilities:
- The founder / CEO who has a unique dream or vision (s)he wants to bring to life.
- The customer expert who analyzes customer needs and translates them into clear and MVP style solutions.
- The marketeer who is exceptionally talented in crafting go-to-market strategies and driving customer adoption.
- The finance wizard who is able to co-develop the revenue model with the marketeer, creates a matching cost structure and discusses investments with the overarching organization.
- The engineer who translates customer wishes into working solutions.
Make sure that every role (or responsibility) is covered in the team. Of course, it’s your choice how much you need from each of them to reach your goals. However, keep in mind that at the beginning of the transformation, you want to keep it lean and mean. In this phase we see that the most successful companies determine returns in terms of learnings, not in short term revenue or profits.
Finally, don’t forget to design a stakeholder structure, reflecting the shareholder or investor structure from the startup analogy. Important is that the relationship between the stakeholders and the initial transformation team matches the organization’s culture and structure.
Digital transformation 2.0 is about more than just adopting new technologies. It requires a shift in how we think about customer value, organizational design, and collaboration.
What to remember?
For logistics players aiming to take this step - digital transformation 2.0 -, it’s not just about improving internal systems. It's about creating digital value for their customers. It starts with a clear digital ambition, the right capabilities, and a team that dares to build what doesn’t exist yet. Those taking this step today will help define the standard of tomorrow.