How is digital transformation changing your business?
Digital transformation represents opportunities for organisations to improve performance, drive top-line revenue growth and increase access to a greater pool of talent and resources through digital technologies. According to research conducted by Harvard Business Review, firms are embracing megatrends such as cloud, big data, mobile and social technologies to revamp their business models and develop new revenue streams.
Many organisations have prioritised customer experience as their digital transformation initiative. 43% of organisations today have implemented a mobile platform to sell their products and services in comparison to 23% in 2012 – as disclosed in MIT Sloan’s “The Digital Advantage: How Digital Peers Outperform Their Peers in Every Industry”.Retailers have gained better insights into their customers’ preferences through applications embedded in their products. This transfer of knowledge has largely been facilitated by the proliferation of Internet of Things (IoT) technologies.
Why are companies holding back on their digital transformation strategy?
The report titled “Understanding Digital Mastery Today: Why companies are struggling with their digital transformations” surveyed by Capgemini’s Digital Transformation Institute, has revealed that whilst businesses have made huge investments in their digital transformation initiatives and successfully transformed their customer experience offering; they are struggling to excel in back-end operations. According to the report, only 36% of organisations stated that their operations were successful. Many organisations are not providing the tools and capabilities that employees need in order to transform the business and only 29% of organisations modify their operational processes to quickly adapt to external challenges.
What are the challenges that senior management have to face?
A major challenge that organisations are facing today is a decrease in leadership support at the Chief Information Officer (CIO) level and the absence of adequate digital capabilities that they can use to advance digital transformation. The relationship between a CIO and the leadership team is crucial, especially in a digital age where senior management needs to actively engage their workforce in their digital transformation vision in order to increase productivity. Research conducted by Capgemini showed that in 2018, only 37% of organisations believe that CIOs have an understanding of digital investment priorities – as opposed to 65% in 2012. And this disconnect could be due to either “optimisation occurring in silos” or senior management’s impatience with the pace of IT initiatives.
Becoming more digital-focused would require CIOs to face challenges such as change management. Based on a survey run by global research firm Gartner, 90% of 3,160 CIOs expect that their jobs would be redefined by the influx of digitalisation. Technology trends such as cybersecurity and artificial intelligence (AI) are expected to significantly impact CIO’s duties. In addition to this, Gartner’s “For Most Firms, Digital Workplace Is Still Distant Dream” report stipulated that only 7% to 18% of organisations possess digital dexterity to adopt to new ways of working such as virtual collaboration and mobile work. According to Gartner researchers, organisations with high digital dexterity attract talent who are more technology-literate and have the ability to bring in more innovative solutions. It further stated that employees’ digital dexterity are determined by cultural factors such as differences between countries – i.e. countries that adhere more strictly to organisational hierarchy would be less inclined to adopt social media tools that drive social engagement.
Cyril Garcia, Head of Digital Services at Capgemini added that “New technologies such as AI, machine learning, automation and the IoT are providing businesses with opportunities they have never had before, but critical to their success is the ability to adapt and embed these technologies into their organisations. To take full advantage of the new technology landscape, it’s vital that business leaders not only invest in new technology but work together with their employees to advance the digital transformation agenda, putting just as much emphasis on change management as they do in understanding of the technology.”
Gartner recommends that organisations invest in their operations, talent and culture in order for the digital transformation of their business to be successful.
What are the predictions for digital transformation?
It is expected that Blockchain would push digital transformation to new levels and that its maturation together with technological progress in AI and big data infrastructure would encourage enterprises to establish new ways of working and would further transform jobs. Digital transformation is expected to keep disrupting IT roles at all business levels. Data driven strategies are also expected to become the main driver of digital transformation.
To better understand the implications of digital transformation, we have reached out to one of our networks, Zita Paprota from Toyota, to gain further insights about the impact digital transformation has on a business.
What does digital transformation mean for your business?
At Toyota, digital transformation means putting our customers at the centre of everything we do, even when it comes to improving our operations. If the customer does not benefit from a business process improvement, we will stop and implement an alternative process. By having this clear communication with our customers, we are able to build a closer relationship with them. Our focus was previously focused solely on the dealer who distributes our product. However, we have seen the results of digital transformation and accordingly shifted our focus towards the customer experience.
We have always been careful about how our brand is positioned in the market. This has become even more important now that digital platforms have made the brand image harder to control. Toyota is everywhere – on the road, across newspapers, TV, radio and online. Customers expect to see our reputation for quality alongside innovation and they compare our delivery with other online experiences, even those who may not be our direct competitors. Our digital transformation has also been driven by Toyota when the business changed from a manufacturing-centred organisation to a more customer-oriented organisation. We leverage on the importance of technology and our digital capabilities by maximising the use of our web applications and services.
What are the new tools or new ways of working that you have implemented?
We are now taking our lean culture and principles and applying it across the board to all facets of our operations, along with our agile way of working to be ahead of our competitors and customer expectations. Until now, the manufacturing operations have been the main areas that our lean culture has been adopted. We have a strong culture of continuous improvement through our ‘Plan Do Check Act’ management method, visualisation and respect for our people. Digital transformation is more than just technological tools. It is very much about our people and the way of thinking and problem-solving.
The rise of flexible working models have been largely driven by the cloud which could be described as the cornerstone of digital transformation. Do you agree with this?
Yes and no – It largely depends on what digital transformation means to the organisation. At Toyota, we interpret digital transformation as a business’ need to leverage digital technologies across all facets of our operations in order to stay competitive. I think that the cloud has made it easier for organisations to become digital. Before the cloud, small businesses were unable to physically compete with large organisations as they did not have access to funds necessary to buy infrastructure. Today, we hear many stories of success where a small business has become successful without the need for capital to buy their own technical infrastructure. Whilst I am not exactly sure whether a flexible working model has been facilitated by the cloud, my view is that we are able to do more as a business from a portable/personal device perspective. The cloud makes it possible to change technical infrastructure rapidly and extends the opportunity of trialling new devices more easily.
Can you give us a couple of examples where Toyota has adopted digital transformation?
- Preparation for launch of three digital transformation programs – namely in Human Resources, Supply and Product development;
- Valet parking for Lexus owners in Westfield shopping centres; and
- Online service bookings for Toyota customers
What areas are you transforming at Toyota?
I am proud to say that we are proceeding to digitally transform three key areas of our enterprise: customer experience, operational processes and business models.