Five strategic patterns for successful digital transformation
A pattern is defined as the repeated way in which something happens or is done. In our personal lives, patterns often emerge as negative tendencies, such as being late or emotional eating. Once we recognize these as being repetitive behaviors, we strive to form new patterns to overcome them and transform our lives. In today's hyped culture of self-optimization, we constantly keep reevaluating these patterns and adjusting as necessary.
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In businesses, the same cycle exists. Established companies often find themselves stuck with their traditional business models, unable or hesitating to innovate and transform digitally to meet the needs of their customers today and tomorrow. They know they need to reinvent themselves, but they don't know how. To successfully achieve and simultaneously respond to digital transformation from customers and competition around them, they develop and execute strategic plans to replace their old patterns with new ones.
Recognizing that traditional, non-digitally native companies often struggle to develop and implement a digital strategy, a new study from Hewlett Packard Enterprise unveils five essential patterns that can help companies transform digitally on all levels of their organization: business, operations, culture, and infrastructure.
The HPE study was built on in-depth case studies from seven traditional, non-digitally native companies and looked at how these companies pursue digital transformation successfully from a strategic perspective. The conclusion is that they share common pain points in developing and implementing their digital strategies, and while those may arise in varying degrees in different organizations, they tend to solve in similar ways.
The following five most essential patterns offer guidance that businesses can reuse and adapt as they pursue their digital strategies.
1. Innovate the business models
This sounds daunting, but it doesn't have to be. Companies can recombine concepts and components of their existing business models to achieve minor or radical changes.
Your customer is constantly evolving, and it's entirely likely that the way you've always satisfied your buyer no longer works. It's time to reevaluate your business model. But this doesn't necessarily mean starting over with different products or moving your entire sales cycle online. Even minor tilts to a business model can yield dramatic results.
For example, consider a manufacturer with decades of success selling industrial machines. In the old business model, that company sells a product, makes a profit on that sale, and aims to scale. Innovating its business model, it also sells the outcome of the product it manufactures. So, instead of simply selling its machines, it now offers those machines as a service with a subscription model.
The buyer doesn't own the product; it essentially leases it like a car, paying a tiered monthly or yearly fee depending on the product utilization. The customer gets the satisfaction of always having the latest and greatest model without making huge investments in machinery. The manufacturer is in the same line of business with an entirely modern business model.
2. Evolve the operating model
Business model innovation will almost certainly lead to new operational patterns both internally (how your employees collaborate) as well as externally (how you create value for and interact with your customers). Evolving your operating model is not just about adjusting and automating your processes. It's about completely reinventing your entire value chain, the way of working, and the mindset of your organization.
One example might be partnering up with outside organizations such as universities, technology companies, or even competitive peers in order to broaden your ecosystem and collaboratively seek solutions for your customers. The old way of looking at the value chain is in isolation and operates on the assumption that it ends once a customer has plucked your product from the shelf.
A key to success is the understanding that the moment of purchase is the beginning of the customer value chain. Partnerships can help complement and scale the technical requirements, skills, and expertise to reveal a holistic view of the customer and the value your product brings to the market.
Operational evolution requires a cultural transformation within your organization, too. This includes training employees and rescaling them through practicing multi-modality and digital solutions such as remote working. According to a recent survey by McKinsey, 49 percent of employees who cited successful automation efforts at their company attributed it to coordination across business units and functions.
3. Modernize and adapt the infrastructure model
Your legacy infrastructure and systems will likely no longer meet the demands of your transformed value chain. This goes beyond just IT systems. Digital transformation creates opportunities to consolidate, store, and analyze data from various sources in a hybrid IT environment to drive insights throughout your business. Developing a data-driven mindset must be integrated not only in culture and workflows but also in all your IT systems hidden in the background, to connect different data points and leverage their full value across and beyond your organization.
One way that companies can modernize their operational backbone is through standardizing heritage infrastructure or creating modular system solutions. For example, bringing together all of your common management systems to operate in a more standardized way will help your company meet new and emerging requirements more easily and flexibly. Similarly, developing a modular approach to product development leads to faster execution.
For example, instead of using a monolithic application, a company might use three connected software microservices to monitor product maintenance for its existing customers. Then, as the company looks to offer predictive maintenance service, it can use the same microservices as its building block and invent on top of them. It can test and deploy faster.
4. Turn data into assets to create measurable economic benefits
Every interaction a customer has with your product or service produces data your organization could gain insights from. After the initial step of making any relevant data available to the organization, enterprises must go one step further and integrate and contextualize all this data to turn the data into insights and turn the insights into new experiences or services for customers.
The ultimate goals are to achieve organizational intelligence―for example, through the use of digital real-time representations of physical objects (digital twins)―and to elevate customization into the next sphere. Real-time insights from data analytics can present a game changer between an intent or not yet articulated desire of a customer and the company's action.
A classic example of this is in the business of printer cartridges. As the world turned digital, ink and printers threatened to become obsolete. But once the manufacturers created smart printers that could be monitored for activity, customers readily agreed to pay for a service that would replenish their ink cartridges before they ran out. It was simultaneously an innovative solution for customers and a new revenue stream for printer manufacturers.
5. Cultivate trust within and beyond the organization
In any industry, data collection comes with privacy concerns. Companies must make decisions about data and privacy in a customer-centric way. They must be proactive and transparent in communicating what data they are collecting and how they will use it. A secure and compliant foundation builds the basis for all the above.
The examples of this are everywhere: Uber knows your travel patterns; Amazon knows you're having a baby; Instacart knows you're dieting. Figure out what data you need for your business model to work, but also know where your customer's line of comfort is. If you step over it, your digital transformation will be over faster than you think.
Actively design your digital future
So, which patterns should your company leverage now? There is no one-size-fits-all approach to digital transformation. But consider all five patterns and derive the conclusion that is appropriate for the business you're in today or in which you'd like it to be in the future. It is continuous. It requires new thinking and openness for the new, like with your self-optimizing efforts.
Make digital transformation a strategic imperative beyond tactical benefits, put your customers in the center of your endeavors, and assess where you currently are. And often, an outside expert can trigger and help with certain steps.
Enterprises, particularly non-natively digital ones, must stop focusing on the past and instead address needs and demands that their customers aren't even aware of yet. Look for opportunities to diversify your business. For instance, a traditional manufacturing company in today's world might have enough data and insights that it could create a data science service to sell to its peers. Step into new businesses thoughtfully and proactively—don't wait until your peers approach you.
This article/content was written by the individual writer identified and does not necessarily reflect the view of Hewlett Packard Enterprise Company.