Digital transformation strategy
Typically, the digital transformation projects are initiated by the CEO and led in partnership with CIOs and other senior leaders. It requires collaboration across departments to align business objectives and application development models.
In a report by Constellation Research surveying 100 Fortune 500 CIOs, 77% of the respondents named digital transformation as their top priority for 2021.
A Digital Transformation strategy involves innovation, changing operation and business models, and taking advantage of emerging technologies. It’s more than finding and adopting new technology to help your business become more efficient – it is the reshaping of a business as a whole.
According to Richard Rumelt (who McKinsey calls “Strategy’s Strategist”), Emeritus Professor of Business and Society at UCLA Anderson School of Management, a good transformation strategy contains the following:
- Diagnosis. The definition or explanation of the nature of the challenge. A good diagnosis helps simplify the problem by identifying certain pieces of the situation as critical.
- Guiding policy. A policy for dealing with the challenge. This is the overall approach that will be taken to overcome the obstacles defined in the diagnosis.
- Coherent actions. This set of actions are designed to carry out the guiding policy. They are steps that are coordinated with one another to collaborate in accomplishing the guiding policy.
Without a diagnosis, teams might take unnecessary actions that result in mayhem and uncertainty. It can likely lead to disjointed projects and random tech infusions that don’t add value or make sense.
The guiding policy answers the question: How do you want to do that, exactly?
If the guiding policy can be applied to any organization at any time, it won’t be very helpful in guiding your business’ digital transformation. And of course, nothing is accomplished without a set of coherent actions. If there isn’t a clear path with specific actions to take, resources will be wasted.
Simply having a to-do list is not a strategy, though. Data enables companies to find new opportunities easily. Leveraging new technologies and launching new opportunities requires a transformed way of working.
In developing your digital transformation strategy, consider the 5 Building Blocks of Digital Transformation:
- Operational backbone – A set of integrated, standardized systems, processes, and data that support a company’s core operations.
- Shared Customer Insights – Organizational-wide knowledge of what customers will pay for and how digital tech can meet their demands.
- Digital Platform – A repository of business, technology, and data aspects that facilitate fast innovation of new offerings and improvements.
- Accountability Framework – Clear distribution and ownership of a growing set of digital offerings and components, balancing autonomy and alignment.
- External Developer Platform – A repository of digital components that’s open to external partners who can contribute to and use the platform.
Ultimately, understanding both what you can do and what customers want will help evolve your strategy.