The key driver for digital transformation is the fact that since 2000, more than half of Fortune 500 companies have either gone bankrupt, been acquired or ceased to exist, says Ray Wang, principal analyst, in the report The Elements of Business Architecture for Digital Transformation.
The analyst firm, which focuses on disruptive technologies, defines digital transformation as the methodology organisations use to transform and create new business models and culture with digital technologies.
Wang notes while boards have not been complacent about addressing change, the past five years have shown the difference between those who invested in digital transformation and those who have not.
"Astute board members realise they must invest in transformational change or face a vicious Digital Darwinism," he states.
Astute board members realise they must invest in transformational change or face a vicious Digital Darwinism.
Ray Wang, Constellation Research
In the report, Wang lists the five steps to successful digital transformation based on Constellation's work with early adopters and fast followers:
Design new experiences and business models: Use digital as an opportunity to create new experiences, notes Wang. Customers seek outcomes and experiences while organisations continue to sell products and services. This gap in expectations only worsens in a digital world.
Wang says the shift to a sense and respond model requires a new design strategy. Early adopters have applied concepts in design thinking from the beginning, he notes.
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Develop a culture of digital DNA: This will require support from the top, says Wang. "Digital DNA requires strong leaders who are not afraid of dips in share price, cannibalising existing markets, and identifying new approaches."
Organisations also need a balance of skills of people who deliver hard science and engineering prowess, and the "creative class" who can co-innovate and co-create on demand.
Apply new technologies to existing infrastructure. Digital does not mean wholesale replacement of existing technologies, or just putting a mobile front end or adding a social collaboration feature to a process.
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Use the opportunity to rethink your technology strategy to align with the business objectives of digital transformation, he states.
The convergence of mobile, social, cloud, analytics (Big Data), and unified communications provide a starting point. "Bringing external data to internal systems creates new patterns that provide better data for testing out new business models."
Move from gut to data-driven decisions: Data is at the heart of digital transformation, notes Wang. The goal is to move from right-time information overload to real-time contextual relevancy.
Co-create and co-innovate with new partners: Wang says organisations should participate in industry consortia and also create their own ecosystems aligned around the organisations' self-interest. Where such an ecosystem does not exist, this can be created by market leading and fast follower vendors, suppliers, and customers.