Digital Transformation a path to innovation?

Publication Date: Feb 14, 2022
 
Digital Transformation Journey

Article by Johann Mifsud Executive at eSkills Malta Foundation published on The Sunday Times of Malta on 13.02.2022

 
Digital transformation has been a term that has been in use over the past decade, but providing a clear definition of this phenomenon is far from easy.

Broadly speaking, the term refers to the conversion of traditional paper-based processes that operate and deliver value in an organisation to digital means.

In the majority of cases, this is just the first step in what will be a longer journey that will bring about deep changes in the way business is done.

Often an organisation is driven towards a change path in order to respond to a combination of external forces, and internal forces and relative challenges.

 Typical external forces and challenges are competition or changes in the market landscape as well as consumer trends. Internal forces typically are pains originating from outdated internal procedures that have become inefficient and thus not cost-effective.

Such internal procedures are also incapable of providing top management with modern information access, which in turn leads to the lack of capability to control and act on aspects that impact the organisation's productivity and growth. Another change driving force are risks, both internal as well as external. An example of internal risk could be that posed by the loss of vital information of paper-based records while, an external would be loss of market share, which in turn can pose a threat to the very survival of the business.

 A typical example of a furniture retail business that, while successful for many years was faced with significant challenges induced by the pandemic.

Their response was to embark on digital a transformation strategy, with the final goal being to establish a solid online shopping presence.

This in turn, would put them in a position to provide customers with quality products and a shopping experience. As well,  as at the same time establishing a seamless process chain from supplier to customer across all trading channels.

 From the example above, one can also understand the complexity that is involved in developing such a strategy,  from vision to implementation, as such an exercise implies change at all levels of an organisation, and especially a change in culture which will pose many challenges.

 To put into context what changes might look like, one can look into the retail example we mentioned earlier and see that the change in how business operation is run from a silo-based system, with Sales, production, warehouse and purchasing departments that operate more or less independently of each other.

 
To a more data-driven model whereby a customer order generates data that is not only is shared among the whole operation but also percolates back further upstream into the supply chain.

In turn, this provides benefits to both the customer in terms of experience and also to the business and their trading partners.

The benefits could possibly be a short delivery period for the customer, automated and optimised production schedules and low inventory business operations as well as visibility of demand days ahead for the supplier.

Before proceeding further, one must be cautioned to keep all the factors in context in that the digital transformation journey may be long and involve costs and risks that may be substantial.

It is beyond the scope of this article to delve into detail of how a digital transformation strategy is developed. Suffice to say that there are a number of alternative approaches, some also take the shape of fully formalised frameworks.

The exact detail varies from one framework to another however they will have in common the major elements and thus can assist in bringing them into focus to be addressed.

To briefly illustrate the major milestones that a digital transformation journey entails and how these can be guided by the framework, we can refer to the following simplified overview as well as the illustration on this page.

 A firm first has to take a snapshot of what documents and procedures are currently in operation. These are then converted into digital versions while also carrying out an exercise to eliminate redundancy.

Following this step, the data and documents are tagged with metadata. Data is converted and all stored in a central repository and thus no longer silo-based.

 At this point, one can already expect to start reaping benefits such as the quick and efficient retrieval of information and reduction of duplicate inputs and associated work.

 Once these base stages are complete, they lay the ground for further stages that will introduce automation and standardisation,  processes automation, system inputs with standardised rules. From this point onwards, the firm can enter advanced stages whereby it can introduce cross-team process collaboration. It also starts seeing benefits from deeper business insight, which will eventually lead into the final stage of data and analytics-driven innovation and more agile adaptation to market demands.

As we have briefly seen organisations that embark on such digital transformation paths can often reap rewards that go beyond the mere digital recording of paper records. Firms often are set in motion on a path to innovation, as they identify unseen opportunities to develop new business models, new product spinoffs,  and possibly venture into untapped market niches.

This article was prepared by collating various publicly available online sources.