Digital Economy Dispatch #126 -- The Four Conversations that Define Digital Transformation

Digital Economy Dispatch #126 -- The Four Conversations that Define Digital Transformation
9th April 2023

Often it is the simplest questions that are the most difficult to answer. In my case, I always have to hesitate when asked “where are you from?”. It sounds such an innocuous request, yet having lived in over a dozen locations in 3 countries, I always need to think for a moment to try to establish the context. Are they wondering where I was born and brought up due to the slightly strange accent they hear in my voice? Have they seen something of my past work with large technology companies and want to know the role I played there? Is it a test of my academic credentials to position what I am saying in relation to the work of others? Or more often, do they just want to know if I live nearby and can look forward to a quick journey home?

In such cases, context is everything. A meaningful discussion on such issues is only possible when we engage in a dialogue to establish some common areas of interest. Having found a point of departure, a meaningful conversation can begin.

In a similar way, I must admit that I struggle to define what is meant by “Digital Transformation”. Not surprisingly, it is a question I get asked often. With its broad scope and wide set of interpretations, where do you start? There are so many ways to respond that it can be difficult to know. Jump in without thought, and there is a strong chance that you will be missing the point of the question entirely. Something that has happened to me far too often.

The Sign of Four

Over the past few years, I have found that there are four kinds of conversations on digital transformation that I see most often. By considering each of them, you can get a very useful set of perspectives on the main ways that people understand and discuss digital transformation. They will help you engage with others in a more meaningful exchange on digital transformation issues.

Furthermore, this set of views on digital transformation can be very helpful when you consider the challenges and opportunities within your own organization. They can be an important baseline for creating an organizational framework for describing, reviewing, and managing your activities.

To help, here is a recording of a short video on the 4 conversations that define digital transformation. This 8 minute video was recorded and produced at The Financial Times studio by my good friends at Headspring Executive and is used here with their permission. It is followed by a transcript of the video that I created with some simple edits to improve the flow. I hope it is useful on your digital journey!

I'd like to talk to you a little bit today about digital transformation and the implications of digital transformation. It's a conversation we're all having in one way or another in our organisations. It's something that I think is changing how we look at the business world today. But there's also an awful lot of confusion. It's a term that's used in many different ways by different people. And I'd like to take a few moments just to perhaps give you a little bit of a perspective, a framework to think about what digital transformation means.

I think there are four kinds of different conversations and I'd like to talk to you about what do people mean when engaging with you about his digital world and what it's going to do to the way we think the way we work and the kinds of situations we find ourselves in in the world. I think there are four areas.

The first one is that we often get into conversations about the digital technologies themselves. Many organisations are going through technology upgrades. Various kinds of digital technologies have been used for everything from the introduction of simple computerization in the workplace that start to move us from an analogue way of working, maybe people filling in forms with pens and paper, to using those forms online, perhaps to more automated ways of doing appointments and people begin being able to give their information in different ways so that you don't have to repeatedly ask their names, addresses, and account numbers.

We've seen that kind of early digitization for some time, but those technologies are constantly being upgraded. So in the workplace, there's lots of discussions about what happens when we bring in the new generation of technology. Will it make us more efficient will it help us do more or less? So the first kind of conversation is technological. It asks what happens when we bring in this change? What happens when we introduce a new piece of hardware so that we have new laptops or new mobile phones or new ways of working and using online services? A lot of this conversation is looking at how we can improve efficiency, how we measure improvement, and how we look at the investment that we're making in relationships to ensure improvements in the way in which we work,

That's just the first step. The second kind of conversation takes us one step further than that. And it says, as well as the way in which we're using technology as an upgrade. We're using it as a way of communicating with our different clients and stakeholders. Hence, it's about new channels to market, and channels to our stakeholders and the ways in which we use digital technology to improve the interactions that we have with our stakeholders, with our partners with our clients.

Of course, many of these kinds of activities are through websites, and through online services using online channels. There's been a great deal of investment and thinking about how do we look at the way in which we engage with our clients, so that they do not just receive information from us through some digital channel like a website, but also they can feed back to us. They can tell us what are their needs. They can give us some information about how they're using our products and services. These online channels, of course, include creating apps on the mobile phone, creating new ways of interacting, and have been an investment for some time.

How do we look at the return on that investment? Often that's about the engagement: How often are people engaging with us; what kind of information and sharing; how do we understand their needs; how do we understand the way in which the products or services we offer affect what they do.

The third conversation takes us into a different realm. The first two look at how we digitise. What the third starts to say is how we transform the way we work. The third is about new ways of working asking: How do we operate in a digital world? How do we use these technologies, not just to automate or digitise what we did before but actually to change how we think about what we're doing and how we operate?

For example, if we're working with clients and trying to ensure that we find them the best service possible, perhaps we start to rethink whether they come in to visits to meet with us, how we exchange information, what kind of information is necessary for us to be able to provide the best service, how we manage the information that they've given us in the past to suggest new things so that we become a little bit more proactive, predictive, and anticipate what their needs might be. With new digital technologies, particularly around the use of data, we may work in a different way.

When we do that, the investments we're making often are about what sometimes involved Artificial Intelligence (AI) or simply smarter technology, often driven by things like artificial intelligence and machine learning, to use the data that we're receiving to use it in new ways. And that changes the workplace: It changes how we operate; it changes the processes. That can be quite disruptive. And the way in which we look at the return on that investment is often about how we do new things in new ways, not simply replace the old: Are they more effective? Do they make clients welcome the services or consume more of our service? Do they add a different value to the service?

Finally, the fourth way in which we see this digital transformation is really about the way in which we create new business models and engage with the clients we work with. The business model described how we create, manage and distribute the value of our organisations, the products and services that we offer. For example, you see a lot of organisations moving from selling products, to selling services, to selling access to those services, and then moving into selling the outcome of the service. We see more and more people wanting to move to these outcome-driven approaches. And we can do that because we're beginning to learn more through these digital channels about which services people consume, how they consume them, and what value they offer to different sectors.

Collection and use of data becomes very significant in how we look at these new business models. It's why we can move to subscription models, to surge-based pricing models, and so on. These sorts of changes are very significant for organisations and we see them in all forms of organisation. As we move to that view of what's the value we offer we must ask: How do we deliver that value? How do we understand the way people consume our services so that we can maximise the value and maximise the return?

These are 4 different ways that we can begin to look at digital transformation: As a technology upgrade; as a channel to market; as a new way of working; as a business model innovation. Often what we see in organisations is that these are mixed up. All of those conversations are taking place at the same time. I would encourage you to think about digital transformation and the conversations about digital technology in terms of these four areas. Consider when are you talking about one or the other. Figure out if the conversation uses the same kind of language and the same kinds of concepts and ways of thinking. Or when you're struggling, maybe step back and use this framework of four ways of thinking to pick apart the conversation so that you can move forward with a shared context.