Digitization Needs Direction – Rethinking Digital Transformation

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Greame Stanway Founding Partner VCI

Digitization – or more precisely the abundance of data through cheap sensing and the ability of advances in computational power and artificial intelligence to transform decision making – is one of the most disruptive forces that businesses have seen, particularly in relation to competitive business models.

But the term “digital” is applied so liberally that businesses risk becoming desensitised to the insightful transformational leadership that is necessary to position effectively for this trend. The terms digital mine, the digital oil-field of the future, the digital utility, digital twins and digital disruption all get thrown around a bit too often for them to have real meaning.

Part of the solution is for leaders to focus carefully on two key tasks:

1)     Defining and keeping focused on the competitive end game. That is, why they are digitising, what the value proposition is, and most importantly, how this will secure existing or build new competitive advantages.

2)     How they make the transformational shift. Businesses will become more data centric, use targeted analytics more extensively, be less centrally driven, be more integrated with partners, and have far more fluid and boundaries within organisations.

Without a clear strategy and persistence in these areas – which very importantly are not simply an extrapolation of past practices – businesses risk pursuing digital agendas that incur major expense and create major distraction, but ultimately do not deliver any competitive advantage. The ERP promise of the early 2000s is a cautionary note, given the unsatisfactory investment/return ratio over the last 15 years from many of these exercises.

Clarity of the end game is critical because:

–         The competitive landscape will likely shift. This will partly be due to the increased value of data through analytics potential, and partly because new sources of data will become available.  Positioning is critical.  For example, an infrastructure operator focusing primarily on digitisation to improve asset performance may not be doing enough as the competitive game moves on to value chain integration and optimisation.

–         Without a clear strategic purpose, other than digitising for its own sake, the digital investment risks becoming an aimless and expensive exercise.  With a few key overarching goals defined, the very best sensing and analytics capabilities can be deployed, and transformational teams positioned to achieve these goals. The alternative is often a poor application of technologies that are ultimately not an appropriate fit.

Rethinking the approach to transformation is critical because:

–         The data-centric culture will be a big shift for most businesses. Data itself will become more valuable and therefore needs to be collected, valued, used and managed as such. Creating this culture will be a major leadership task as much as safety, quality and cost have been in the past.

–         Organisations will become more fluid, and rates of learning will need to increase.  In the past, technology platform changes have often been horrendously expensive and spectacularly unsuccessful, mostly because major programs redesigned rigid processes and structures en masse – often to suit software – instead of treating organizations like the more dynamic entities that they are.

–         New skills will be required to perform new roles in the transformed organisation.  Data scientists will be key, as will the wide spread ability of more people to think analytically, interrogate data, and draw conclusions.

Ultimately, the key to success in digitising will be by both enabling and encouraging agile change and organisational experimentation, but at the same maintaining a clear focus on the end game that is made explicit through a small suite of transformational goals.

Graeme Stanway is a partner of VCI Ltd, a global strategy design company. Graeme has over 20 years experience in mining, heavy industry and technology businesses. He holds a PhD from Imperial College University of London, has been awarded the Medal of Innovation from the Institution of Civil Engineers in the UK. His strategy work has been referenced in the book “The First 11” as a benchmark case study in strategic transformation.