Digital transformation. It’s an interesting term that pops up in nearly every business conversation, but few people truly understand what it is. The literal definition of “digital transformation” implies a permanent shift from one state to another–an attainable, concrete, and final destination–achieved through the use of technology.
But instead of basking in glorified acclaim, even the most successful digital transformers in the world have yet to proclaim their digital efforts as mission complete. Why?
According to Dr. Chakib Bouhdary, Digital Transformation Officer at SAP, digital transformation is a never-ending journey of change, evolution, and progress. During his webcast “Digital Transformation Priorities and the Intelligent Enterprise–Learnings from SAP’s Digital Transformation Officer,” sponsored by Americas’ SAP Users’ Group (ASUG), he shared a simple, but powerful, observation:
“We know that digital transformation is all about the consumer at the end of the day. But once the concept of Industry 4.0 was introduced at [the 2016 World Economic Forum Annual Meeting in] Davos, digital transformation began to not only touch two-thirds of the global economy, but also evolved into a vast array of potential waiting to be tapped.”
The Changing Face of Digital Transformation
To grasp how digital transformation has evolved, an excellent place to start is with the strategies used to innovate the customer experience. About a year ago, businesses had set their sights on creating an omnichannel customer experience that provided seamless interactions. Now, companies know that competitors like Amazon have changed the game to the point that they must be willing to go beyond omnichannel interactions to redesign the total customer experience.
“Businesses must transform everything from how products are designed, warehoused, and shipped to how returns are handled,” Bouhdary said. “In essence, they must redesign the total customer experience. Even rethinking the functionality of a product to deliver it as a service can remove the need to physically ship an item.”
At the same time, new priorities for digital transformation have emerged. For example, the widely acceptable productivity growth goal of 1to 2 percent is not enough to maintain a competitive stance.
“Businesses need to think about 25 to 30 percent cost reduction in their enterprise to free up the money to invest in their future and become competitive,” he advised. Supporting this step change in productivity can be done by first considering the purpose of improving digitalization and then finding the technologies–such as artificial intelligence, blockchain, and machine learning–to enable it.
The Infinity Model: An Approach Made for Today’s Digital Strategies
The worldwide use of digital technology is connecting everything from people and processes to things. This phenomenon is bringing a level of hyper-automation, where cost structures, customer experiences, and business models are profoundly changed and set the foundation for hyper-disruption.
This new reality is within every company’s reach, thanks to the digital transformation accomplished so far that has embedded four critical technology capabilities into our world:
- Access to an enormous volume of data
- The science of math and algorithms to turn data into business intelligence
- Processes that turn intelligence into decisive actions
- Ecosystems of partners, suppliers, and providers that support and collaborate with the business network
“By connecting each of these four elements continuously and in real time, the cycle time in which work gets done shrinks so much that inefficiencies will eventually disappear,” Bouhdary mentioned. “I like to refer to this structure as the infinity model because it uncovers infinitely new ways of doing business and changing the world. But more important, this is the future of digital transformation as an end-to-end architecture.”
Take, for example, recent changes in grocery retail. The marketplace is crowded with digitally native competitors that have emerged recently, but perhaps the one rival with the most considerable momentum is Amazon. After five years of steadily building its digital-first capabilities, the e-commerce giant is integrating its e-commerce operations with the brick-and-mortar presence of Whole Foods.
With a single platform, Amazon is linking data, data science, business intelligence, processes, and its network of partners, suppliers, and providers to form a customer experience that merges the virtual world with a physical store presence. Shoppers are guided around the store by a digital assistant that knows precisely what the customer needs (such as supplies for a dinner party) and what they should avoid (such as ingredients that are known as potential allergens).
Competitive Growth is Found in Perpetual Evolution
As proven by digital leaders such as Amazon, digital transformation is a continuous acquisition of digital building blocks. Each one plays a significant role in strengthening the ecosystem and creating new opportunities regardless of traditional industry lines.
To be successful, however, companies must view digital transformation as a continuous journey fueled by the acquisition of new digital capabilities and technologies. Those that follow this approach are the ones that manage their evolution in a way that mitigates complexity, emphasizes speed, and focuses on delivering value that resonates with today’s world.
Learn how you can adopt the infinity model. Listen to a replay of our webcast with SAP’s Digital Transformation Officer, Dr. Chakib Bouhdary, Digital Transformation Priorities and the Intelligent Enterprise.