How to Achieve an Efficient Digital Transformation

ISSUE #61 – VISEO is a global IT consulting firm specialised in assisting clients in their IT and digital transformation. Its mission is to either optimise their existing business and information systems processes or to initiate new business improvements.

 

Last May, McKinsey revealed that companies can increase gross operational results by up to 40% with a successful digital transition. But how might one go about addressing and managing this digital transformation?

WHAT EXACTLY IS DIGITAL TRANSFORMATION?

Many companies hope to turn digital by launching projects like eCommerce platforms, mobile apps, omni-channel services, CRM, etc. But a digital project (even if successful) or myriad digital projects do not result in a digital shift. Such initiatives are necessary, but not sufficient. Why? Because meaningful and sustainable digital transformation requires two deep changes, in

  • the way your company creates value, i.e. your business model; and
  • the way you deliver this value, i.e. your operations.
ALL ABOUT RENEWING YOUR BUSINESS MODEL

A business model can be split into nine key components on a canvas, starting by first asking who you target (“customers”), how you get in touch with them (“points of contact”), what you provide them with (“value proposition”), and so on. Each of these components generate costs and revenues. More pertinently, they create value, either directly (P&L, stock price, market cap), or indirectly (brand value, employer brand). The digital medium holds a powerful key that can unlock and amplify this value and it does so when it renews each component.

Let’s take the revenues component. Amazon is a pioneer in digital-driven revenue diversification. Started as an online bookseller in 1994, they have been consistently growing by not only expanding their core retail business (to include new product categories and country markets), but also by entering new businesses (Technology with Amazon Web Services, Shipping with Fulfillment by Amazon). This has been made possible by their strong and complete adoption of the digital space.

At VISEO, we estimate that they have created eight new revenue streams on top of their core retail stream. That accounts for 33% of the top line, but with a key difference: a vastly improved operating margin, which is remarkable especially once we consider the relatively low profitability in eCommerce (even for a worldwide leader, due to low pricing, fierce competition, etc).

Direct value is proven by Amazon’s remarkable market cap (around US$350 billion), despite late profitability (in 2009). But equally important is the indirect value that Amazon has generated — in its Employer brand for instance. Indeed, Amazon has become one of the preferred companies digital talents want to work for. And if you recruit only the best, you will be better positioned to continuously renew your business cycle. It’s a virtuous cycle.

 

The digital medium holds a powerful key that can unlock and amplify value.

 

TWO PATHS ON THIS ROAD TO DIGITAL TRANSFORMATION

A company can choose two paths:

  • Digital catching, i.e. optimisation of the current model to catch-up with consumers, competitors or employees who have already gone digital; or
  • Digital leapfrog, i.e. proactive renewal of your business model by implementing multiple innovations and a system of continuous “test and learn.”

Digital leapfrog is not just for the GAFAs (Google, Apple, Facebook, and Amazon) or pure players. Let’s take the example of SoLocal (a European player that provides services similar to SingPost’s). Five years ago, they were stuck in traditional publishing and paper directories. Today, they have managed to transform their digital revenues from 20% to 80%, on a sum of total revenues that has been growing, and they have done so by leapfrogging to a web agency model, specialising in digital services in particular for local businesses and traders.

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GOING DIGITAL: NOT ONLY FOR THE IT DEPARTMENTS AND CDOs

Moving to new businesses requires new skills and jobs

You may consider “data scientist” and “growth hacker” buzzwords but 15 years ago, “app developer” was a buzzword whereas, today, it is evident that this role is a relatively important one. 65% of children in kindergarten today will occupy positions that do not yet exist!

New jobs require renewed organisations

Less hierarchical, with simplified decision-making processes. Such organisations are often called “agile”, and for three reasons: firstly, they consist of autonomous multidisciplinary teams (marketing, IT, commercial roles are mixed); secondly, they use new approaches (design thinking, lean start-up) to solve problems; thirdly, they test new methods to collaborate (innovation games) or to deliver projects (agility).

Renewed organisations require new roles

Here we have the new notable Chief Digital Officer or Chief Experience Officer. They also call for renewed roles: if you believe in the importance of eReputation, do you not think it should be part of a renewed HR assignment?

Finally, all these changes ask for renewed governance. At VISEO, we identify at least four such models, from the shared service centres available to BUs (L’Oréal) to the dedicated digital BU (La Poste).

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HOW TO ORGANISE DIGITAL SHIFT?

There is no single right answer to such a strategic question. But we tailor solutions around your specific needs and try to find an answer that fits your organisation. VISEO has developed solutions to support the digital transformation of companies and has accrued 15 years of experience through collaborations with both international groups (Accor, L’Oréal, LVMH) and SMEs. The digital strategy to implement will depend on the level of digital maturity you occupy and the path you seek:

  • Vision: Defining your target and a concrete plan to reach it (strategic vision, specified roadmap, renewed skills and governance, etc);
  • Operations: Ensuring the success of your key projects (marketplace, digital points of sale, CRM, etc);
  • Innovation: Ideating and prototyping new products and services (IoT, Conversational bots, etc);
  • Acculturation: Transforming the mindset and working methods of your organisation, through personalised training programmes (individualised coaching, digital days, innovation week, etc).

 

Article by Rémy Lacombe, New Business Director, Novedia (VISEO’s digital agency)

 

Article published in the FOCUS Magazine “Principles of Productivity” – Issue #3 2016