Digital Transformation of Business

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Digital Transformation of Business

Digital technologies are transforming business. According to a new survey of 4,800 executives and managers across 27 industries by MIT Sloan Management Review and Deloitte, 76 percent say that digital technologies are disrupting their industries.1

The good news is that, according to a different research study by Forrester, 74 percent of executives report that their companies have created a digital strategy.2 Unfortunately, the term digital strategy is open to interpretation.

A “bolt-on” digital strategy means that the company is simply opening new digital channels to give customers additional ways to connect to the company. Typically, this means adding social media and mobile platforms. For example, a fast-food retailer might encourage customers to “like” their brand on Facebook in exchange for a coupon, or enable them to place orders from their smartphones.

By contrast, a full-scale “digital transformation” strategy entails redesigning the entire business model to take advantage of digital opportunities. Rather than merely offering customers a new app as a “bolt-on” strategy would dictate, digital transformation involves rethinking the business entirely.

So, how can your business devise a business strategy to exploit digital technologies?

First, before you can begin, you have to accept the reality that the key word in “digital business strategy” is strategy, not digital. Just as in previous technology revolutions, the technology must be used in the service of the strategy, not the other way around. Whether your aim is to exploit the Internet of Things, social media, the Cloud, or Big Data, the power of these technologies does not reside in the technologies themselves, but in how effectively the company uses them to transform its business and gain a competitive advantage.

Second, the digital strategy has to be led from the top. For the MIT Sloan Management Review (SMR) survey, the researchers asked executives to “imagine an ideal organization transformed by digital technologies and capabilities that improve processes, engage talent across the organization, and drive new value-generating business models.” Then the respondents were asked to rank their company against that ideal on a scale of 1 to 10. The results were sorted into three categories:3

  • 26 percent were “early” companies, rated 1 to 4
  • 45 percent were “developing” companies, rated 4 to 6
  • 29 percent were “maturing” companies, rated 7 to 10

Maturing companies are almost twice as likely as less digitally mature firms to have a single person or group leading the effort...

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