Creating business advantage through digital transformation

MANILA, Philippines – Since the ’80s and ’90s “digitization” has enabled companies to drive operational efficiencies through facilitating electronic storage and sharing of data.

Today everyone is talking about “digital transformation,” and I have personally written about this topic on several occasions. However, although today’s transformation is the progression of the “digitization” we have been experiencing for several decades, perhaps a better description of today’s environment would be the “transformation of digital,” leading to a pervasive adoption and connection of all “things,” resulting in the emergence of the digital economy.

Millenials today connect with each other differently than we did. Case in point, my young niece “hangs out” with her friends, digitally streaming over split-screen monitors, as we would do face-to-face around a table in a coffee shop. For those of us, not born with a smart device in our hand, this highlights just how far the “transformation of digital” has pervaded our lives.

While digitization has evolved around us for some time, what has emerged over the past few years is the commercial evolution of “digitization” from a tool to drive operational efficiencies, to a fundamental operating principle to create new markets, disrupt existing markets and redefine the economy of tomorrow. This evolution is perpetuated by the convergence of multiple technologies and trends, from mobile, to social media, to microchips, which are becoming smarter and more cost effective, leading to the advent of the Internet of Things (IoT) and hyper-connectivity.

Today, you only have to look at your smart phone to realize how companies are exploiting the transformation of digital, mobile, cloud and big data to disrupt traditional industries in ways that would have been unthinkable even a few years ago; and this is where many traditional companies are getting caught napping.

Many large multinational corporations have grown over the past 30+ years by leveraging vast resources to organically acquire market share, or inorganically expand, and even diversify, each time adding operational complexities.

The reason digital disruptors have managed to gain such a significant advantage over their traditional peers is because they “run simple.” Simplification, is the key to being competitive in a digitally connected economy, and you do not have to look further than the likes of Uber or Airbnb for proof.

While digital disruptors are taking advantage of their simple operations to dominate the digital economy, their traditional peers are searching through their internal complexities to identify the opportunity.

Transformation of digital

While many companies will look internally to simplify their operations, companies may well benefit from starting with the customer and taking an outward view. Ultimately, and especially in a digitally connected economy, everything comes down to the customer.

There is an ever-expanding need to meet the demands of hyper-connected customers; companies need to get ahead of the curve in modernizing their customer experience. This is especially relevant in Philippines, and other emerging markets, where the digitally connected youth are demanding a tailored customer experience.

Consider the example of real-life innovative retailer, Under Armour who realized that the more they know about their customer’s fitness habits and health, the better it can serve them. In partnership with SAP, they built a system leveraging mobile apps, which provides them “the single view of the consumer.”

For example – there are 800,000 people tracking their running shoes in Under Armour’s system. Past data shows that running shoes start to break down after 400 miles, which increases the chances of injury. To help prevent injury, Under Armour can send notifications to people, letting them know it is time to replace their shoes when the app shows they have passed 400 miles. Having that type of personalized information will open up many opportunities to improve the customer experience. The vision of connected fitness and the Under Armour Record app is not about technology or sportswear. It is about improving people’s lives.

To be competitive in the digital economy, companies will be required to “run live,” by leveraging omni-channel strategies, using multiple sources of data (including social media) to not only predict and respond in real, but to be are aware of, and react to the environment around them in real time. Integrating IoT to offer an experience the likes of which have never before been acquired, and leveraging digital technology as an enabler, with a strategic view of monetizing the benefits of the digital economy.

By taking this customer-centric view, companies can work backwards to rethink and reimagine their entire value chains, using technology to close the gap with their suppliers and customers and drastically simplify their business.

In parallel, companies also need to innovate to plan for this new framework to work e.g. do we have the right change management processes in place? How do we develop people in line with the culture we want to drive moving forward? Are we measuring and compensating people appropriately for the future direction? Are we recruiting and retaining the right talent to support the future vision?

Maximizing opportunities

Simplification is fundamental to effective digital transformation, as connections and data between people, devices and businesses drive the digital economy. However, businesses that run simple can only extract the real value from these connections by doing two things. Firstly, analyze the massive amounts of data generated by the digital economy to develop actionable insights, and then secondly, use this to drive smarter decisions and deliver smarter results in real-time.

The opportunity is no longer in the gathering and analysis of this big data, but rather in using the data to provide real-time insights, predict into the future and make meaningful decisions in real-time, so as to bring the organization closer together and closer to the customer.

Consider this scenario – a customer in the market for a new pair of running shoes. He visits your online store, logs-in using their profile, finds the make, model and size and reserves a pair for collection from one of your outlets. He also agrees to “friend” your store on Facebook to receive a five percent discount. Before logging off, he browses the apparel section and clicks on the description of a pair of lightweight new-tech running shorts, spending several minutes reviewing the product before logging off.

When the customer arrives at the store to collect the shoes, he receives a text message welcoming him, with the name and contact number of the store manager and a link to an interactive map, directing him to the reserved shoes. Simultaneously, the store manager receives a message on his mobile store app providing him with the information necessary to support the customer, including purchase history, profile, likes and dislikes. Taking this a step further, the manager receives a spot marketing promotion to provide the customer a discount on the running shorts they were looking at yesterday.

According to IDC, the connections between people-to-people, people-to-things, and things-to-things, is causing data volumes to double in size every 24 months, multiplying more than 10-fold between 2013 and 2020, with over nine billion mobile users and over 212 billion connected “things.”

Rise of the CTO

To remain competitive in the digitally connected economy, CEOs are recognizing the crippling effect of complexity and dedicating resources to help simplify and transform. Never has the role of the Chief Transformation Officer (CTO) been more fundamental to the future success of companies than today.

CTO’s need to be empowered to drive simplicity across the organization, delivering true business transformation aligned with the corporate strategy, while understanding the role of technology as a fundamental enabler.

CEO’s and CTO’s need to work together to develop corporate strategies and drive business transformation along four pillars: people, suppliers, customers and assets, leveraging technology as the digital core and a key enabler to simplification.

As CTOs expand their role across the business, value partnerships with key technology providers will need to change from a customer-vendor relationship to a strategic partner, trusted to enable change.

At the same time, successful technology partners need to provide new technologies and services that enable true business transformation and allow companies to “Run Simple,” driving competitive advantage through the connectivity of business, people, devices, data and processes across their enterprise, supplier network, customers, and the market to “Run Live.”

These same core pillars are echoed in the digital strategies of leading corporations and government ICT departments worldwide. The Philippine Digital Strategy highlights four pillars of a digitally transformed nation: ICT and business innovation, internet opportunity for all, digital literacy and transparent and efficient government.

To embrace the digital transformation across private and public sector, corporates and local government agencies need to develop a shared responsibility to successfully implement the strategies.

Proper use of ICT tools to develop viable, visionary and useful platforms and services, which create opportunity for the private sector while improving the lives of everyone. While government needs to create the platform, which allows private sector corporations to step in, private sector corporations need to step up, to drive digital transformation through the monetization of the digital economy, and the expansion of the pillars of a digitally transformed nation.

While transformation is not achieved in a day, the window of opportunity is narrowing as competitors (both private and public) are quickly quantifying the opportunity to expand into new markets, leverage underutilized talent and capitalize on previously inaccessible opportunities in a quickly shirking global economy.

The Philippines, with one of the youngest, most digitally connected populations, is in a unique position to capitalize on the digital transformation, with all the building blocks necessary to move quickly to gain an advantage in the global digital economy.

 Poggi is the managing director for SAP in the Philippines.