Strategic Digital Transformation

A Results-Driven Approach

Alex Fenton, Gordon Fletcher, Marie Griffiths, Alex Fenton, Gordon Fletcher, Marie Griffiths

• Publisher: Routledge
• Year: 2019
• ISBN:
  9780429670374
• Edition: 1
• Topic: Negocios y empresa
• Subtopic: Negocios en general

Emerging technologies are having a profound impact upon business as individuals and organisations increasingly embrace the benefits of the 'always on' attitude that digital technologies produce. The use of the web, apps, cloud storage, GPS and Internet-connected devices has transformed the way we live, learn, play and interact – yet how a business can fully benefit from this transformation is not always clear. In response, this book enables students and business leaders to take a strategic and sustainable approach to realising the value of digital technologies. It offers results-driven solutions that successfully transform organisations into data-driven, people-focused businesses capable of sustainably competing at a global level.

Split across four key parts, the material moves through understanding digital business to planning, implementing and assessing digital transformation. The current challenges facing all small organisations, including limited resources, financial pressures and the lack of dedicated IT departments, are explored. The authors consider the ways in which innovation can increase competitive advantage, how innovative business models can create new opportunities and how a data-driven perspective can release embedded value within the organisation. Contemporary international case studies and examples throughout each chapter bridge theory with practical application and systematically document the patterns of activities that enable success.

This textbook is a vital resource for postgraduate and undergraduate students of digital business, innovation and transformation. By showing how to initiate digital transformation across an organisation, it will prepare business owners, directors and management of small- and medium-sized businesses to take strategic advantage of new and emerging technologies to stay ahead of their competition.

Part I
Understanding the digital in business

1
Why do strategic digital transformation?

Gordon Fletcher, Alex Fenton and Marie Griffiths

Preface

Many organisations and their leaders are currently struggling to understand the threats and opportunities for digital transformation. As individual consumers we have all developed high expectations of digital technology that heavily influences our perceptions of technology within the organisation. This creates a very real risk for organisations, including public and third-sector institutions. Ignoring the pace of overall technological change brings the prospect of negative – or even fatal – impact on an organisation’s very existence. This chapter highlights how all organisations can benefit from digital transformation. However, in order to realise these benefits, they need to adopt a strategic approach to digital transformation that embeds dynamic, innovative and even entrepreneurial ways of leading, managing and thinking. Throughout this book, we draw upon digital transformation examples of micro, small, medium and large organisations to demonstrate the value of improved organisational efficiency as well as internal cultural and behavioural change that fully engages customers and consumers. The ultimate goal of digital transformation is to create innovative working environments and business models that support a data-driven and people-focused organisation.

1.1 Businesses are struggling to adapt

A former Cisco CEO made the claim in 2015 that “at least 40% of all businesses will die in the next 10 years … if they don’t figure out how to change their entire company to accommodate new technologies” (Ross 2015). As frightening as this prospect of imminent doom sounds, there are many tangible benefits to be discovered by those organisations ready to commit to strategic digital transformation.

As a starting point we draw upon changes in the retail consumer experience as familiar examples to both students and business owners. Consumer digital technologies are also heavily used as examples in the first section of this book, as these represent some of the most visible and heavily referenced examples of digital transformation.

Recent high-profile failures of household brand names in the UK High Street (Main Street in the US) hallmark the degree to which organisations are struggling to adapt to the challenge of digital transformation. The cause for these failures vary in their details, but two key interrelated themes are particularly visible. In each case the retailer blamed wholly, or in part, competition from online retailers who are not burdened with large and expensive high-profile real estate or complex supply chains. Reading between the lines, these statements are a diplomatic placing of blame on the power of e-commerce including Amazon and Alibaba.

A cause of failure less commonly acknowledged by retailers has been an inability to overcome their own legacy. Physical retailers have large and complex organisational structures that often employ thousands of staff who interact with multiple suppliers and intermediaries across many locations. Managing this complexity has resulted in a range of disparate locations, processes, practices and communications that – in their totality – prove very difficult to change or even understand. Attempts at creating organisational leanness and agility quickly stall when confronted by such scale of legacy.

Reports in the UK of 200 shopping centres under risk of failure in a twelve-month period (Harby 2018) combined with 5,855 shops closing in one year alone all document the scale of change. The reduction in the physical retail offering coupled with a 3% overall loss of footfall in the High Street year-on-year (BIDS 2018) hints at an unstoppable spiral of decline. The reassuring enclosed environments of shopping centres were once an attractive safe space in contrast to the more chaotic traditional High Street (Staeheli & Mitchell 2006). However, the challenge of online retail has now stripped away even this advantage to leave a heavy financial burden that has proven to be an insurmountable legacy for many retailers. The fate of High Street retail shows how difficult it is to overcome organisational legacy in the pursuit of a digital transformation.

Although the UK High Street is a visible indicator of the rapidly changing organisational environment, the challenge of overcoming legacy is found in all sectors. Those sectors traditionally tied to physical infrastructure, such as construction, still tend to dismiss the organisational benefits of digital technologies as something primarily confined to the office environment or “IT” functions.

With the largest technology companies moving into the real estate sector (Garfield 2018) as investors and developers, it will only be a matter of time until “technology” companies also begin to disrupt the construction sector. When construction is reconsidered as primarily a data problem, the most consciously data-driven organisations will become real competitors that are capable of building to specifications, timeframes and budgets in ways not previously experienced. The barriers to entry for a data-driven organisation that is challenging traditional business models in the physical domain have been reduced even further as robotics, artificial intelligence and machine learning all become suitable for mainstream use. In the construction industry, the bricklaying robot is already available (Construction Index 2018) and capable of output equivalent to five humans. As data is given the arms and legs to interact, physical work will no longer be the exclusive domain of people’s direct labour.

In other sectors, data-driven change will similarly disrupt existing legacy processes and whole sectors. The development of autonomous goods vehicles threatens the transport and haulage sector. It is not only the threat to 3.5 million truck-driving jobs in the US alone (US Special Delivery 2017), but with an estimated 9% of these drivers reported as owner-operators this is also a direct threat to over 300,000 small businesses in the sector. Extending the risk still further, autonomous vehicles will also bring about the demise of traditional ancillary services such as service stations and independent garages. Eventually, this transport technology also reduces the need for sole direct ownership of vehicles by consumers. The ripple effect of these changes will have major consequence across all developed economies.

The lessons from all these examples, admittedly a cliché, is that change is inevitable. Extending this observation further, continuous change should now be the expectation in all organisational planning and operations. To complicate this situation even further, political and economic volatility, uncertainty, complexity and ambiguity have become increasingly commonplace, making traditional forms of business analysis of the external environment difficult. Change in the external environment now a) is facilitated by consumer and organisational digital technologies, b) is unexpected and c) regularly comes from outside any of a sector’s current competitors. Organisations will struggle to respond to change when burdened by a legacy of processes, systems and their people’s current skills.

Figure 1.1 Current business environment challenges

The broader external changes that now bear down on all organisations offer a third reason why so many organisations struggle to adapt (Figure 1.1). Vision and mission statements can no longer be vague or variable marketing straplines but must be an inherent part of how the organisations collectively thinks and functions. The value of persisting and remaining focused on a genuine vision also explains the rediscovery of iconic retail heritage brands such as Doctor Martens and Burberry in the UK. Genuinely shared organisational beliefs and vision provide certainty against the backdrop of changeable markets, can be adapted for application within new sectors and assists in strengthening the loyalty of brand advocates.

In effect, overcoming the challenges of the current organisational environment requires strategic digital transformation to

• Emphasise the vision of the organisation
• Address the legacy of systems, processes and people’s skills
• Create and evolve an innovating organisational environment
• Constantly internalise external stimulus (from competitors and other sectors)
• Dynamically shift and introduce business models in response to new opportunities
• Proactively define the expectations for goods or services in the organisation’s chosen market.

Any one of these above points represent a significant challenge to an organisation and in total offers an explanation as to why organisations are struggling to adapt.

1.2 The risks of failing to adapt and potential responses

The origins of digital transformation can be traced back at least thirty years when roles in typing pools and typesetting were forever consigned to being backdrops in historical television dramas. These early victims to transformation were rapidly followed by the demise of printed encyclopaedias, photographic film companies and video rental stores. Now traditional banking outlets and post offices are also changing in response to the transforming business environment. Society and organisations have changed to such an extent in developed economies that people undertake their everyday lives oblivious to the necessary presence of digital technologies.

The most dramatic failures brought about by the transformational effects of digital technology are easy to identify with the benefit of hindsight. However, none of the directors at, for example, Kodak or Blockbuster would have been able to identify the beginning of the end for their own businesses. The collapse of these organisations occurred slowly through incremental changes in the external environment that were out of sync with the internal dynamics of the organisation. In defence of the directors of these specific examples, when the extent of their situation became clear, corrective actions were taken in an attempt to turn around what had become, as it ultimately transpired, an irrevocable decline.

Organisational failure resulting from transformational change in the external environment must be read instructively as a warning against inaction while also emphasising the need to avoid attempting to predict an inevitably indefinite future. Kodak could not, as a single organisation, have envisaged the full extent of the uptake of digital photography, that its primary device for delivery would be the mobile phone, or the pivotal importance of photography within social media. Rather than creating a complete plan for a particular future, organisations can only face what is coming by continuously evolving their structure and business models in ways that amplify their vision and mission.

The current state of the external environment can be described with the terms VUCA and the 4Vs. VUCA – Volatility, Uncertainty, Complexity and Ambiguity – describes the current state of developed economies (Bennett & Lemoine 2014) in which we find ourselves individually, collectively and organisationally. The state of VUCA is continuously accelerating and has largely been brought about by increasing adoption of consumer digital technology. However, it is equally important to recognise that accelerating VUCA has been occurring since the first Industrial Revolution (Bennis & Nanus 1985).

The 4Vs – Velocity, Volume, Variety and Veracity – describe the aspects of data that continue to increase in an accelerating VUCA world. Data is the primary focus for the 4Vs, and increasingly this is the way in which the world is understood and defined – as data points and data problems. This data-oriented view can be usefully applied in the widest possible sense. For example, lack of consideration to some or all of the 4Vs explains the recent failure of a number of High Street retailers. Toys R Us persisted with a business model based on the traditional supermarket long after the online retailers could respond more rapidly to changing demands for toys from consumers. This situation was a case of failing to adapt to an increased velocity in toy trends brought about by increasing consumer use of social media. Maplin Electronics lost sight of its origins in providing specialist electronics components to make way for toys and gift lines on the sales floor. Losing sight of mission and vision can be regarded as a veracity issue. However, in combination with the retailing of electronic components being better served through e-commerce the reality of the situation struck at the very heart of the business creating an unpalatable reality that the board was not prepared to address.

The 4Vs can be used to understand an organisation’s relationship with the external environment where the connections could be read as, for example, the “volume of goods available”, the “velocity of interaction”, the “variety of transactions”, the “veracity of communications” and other possible combinations. It is not always the case that the aim of understanding the 4Vs should be to increase each “V”. The value of the 4Vs are to systematically identify the relationships between the organisation and the changeable external environment. Any measurement of success is made through the fifth “V” – the value being created ...