Notes on Digital Transformation vs Digital Innovation
I’ve been struggling with Digital Transformation for a while now and I think this post from Jessica Sherratt is quite insightful. It helped me realise some things that bother me with this term and I ended up with some thoughts that I want to add to it.
TL;DR Digital Transformation can become an empty promise that frustrates all levels of an organisation if not done properly. Usually what happens is trying to do punctual efforts with a short-vision perspective and low budget that don’t produce sufficient results to get things rolling and high management ends up cutting things short. What I advocate is that to become more digital and data-driven a company needs an innovative and customer-centred mindset. This way you can foster an environment that will continuously look into maximising the value being provided to customers, to then review and iterate its products, processes, systems and even talent to keep continuous improvement. That is why I find Digital Innovation a much better term, and that technology is just a part of the process, which also includes strategy, customer, talent, business models, operations, processes, and digital structure, all capable of changing over time the overall culture into a more digital and innovative one.
The Empty promise
When a company decides to invest in digital and data, especially with the mind of transformation, what the high-level management sees is an opportunity to improve their businesses, increase profit, and lower costs. As machines replaced human labour in the 1st industrial revolution, “the digital” will raise productivity and… also replace human labour costs. Which will pay off in no time, according to the promise.
What happens is that to digitally transform an organisation (especially the big ones) and reach a Google or Apple digital innovation level takes A LOT of time and resources, and big bosses get frustrated that the needles are not moving fast enough. What they often don’t see is that not only do the teams in charge have to build this futuristic unachievable utopia, but also build it on top of ancient technologies, processes and overall culture. Again, it takes A LOT of time to deconstruct and reconstruct.
Digitisation without digitalisation
The rush for success creates a need for quick results, which, while well intended, may backfire. Jumping all the surrounding problems, teams fall directly into switching a process from physical to digital ipsis litteris. That is quite an obvious result since the budget will fall quicker on this sort of project than on research or cultural ones. The risk here is ending up with a digital solution that is as bad as (or worse) than its physical counterpart. Digital and physical are different contexts that demand different solutions. If you digitise a bad process, you will have a bad digital process.
And here is where Service and Strategic Design so brilliantly help. It is not about doing something on top of the original context, it is about understanding what people want to achieve, their needs, hopes, and fears, and delivering new digital solutions that actually improve it (here assuming that a fully digital solution is the best way to go, cause it may not be). And even more, how can we make this transition smooth for those who are used to the old physical experience while still welcoming newcomers in this new improved context? And, just as a note, by people here I don’t mean only clients. We need to take into consideration all stakeholders, from users to the board level.
New siloes of digitisation
Another byproduct of a poorly planned transformation attempt is to end up with some areas (that are more receptive to digitalisation) more digital than others. So you have an amazing digital product envisioned that wows the clients during initial testing, but your HR process is still the same, and you can’t hire people to execute it because we don’t know how to do that or who to look for. Or you have the financial division beaming data left and right, but operations are still done in clipboards and spreadsheets. Then conflicts start to arise and actual results don’t show up.
Thinking about digitally transforming a company is not (only) about technology. It involves strategy, customers, business models, operations, processes, talent management, the whole digital structure, and, of course, the overall culture of the company. It is a long-term commitment in most cases, and it takes time to pay off. It should include things like understanding what customers want, how will they adapt to change; how can high-management become more innovation-focused and get used to making data-driven decisions; how will employees be affected by it all, especially the more vulnerable ones; how can we sustain the company while all this change is happening. In sum, it is complex, but it is worth it if you want to keep yourself in the market we live in.
From digital transformation to digital innovation
My point here is that digital transformation is a term that raises a lot of expectations, few of which can be fulfilled in time. The bottom line is that what is tried in each digitalisation process is to innovate the current status into a new and improved one. And innovation is not about a project or a single person’s skill. It has to be embedded in the culture of an organisation so that digitally improving the context can unfold organically. When thinking about changing a company’s way of working and culture (which is needed to digitalise), a lot comes into play and a lot of strategizing is needed.
Strategic and Service Design are great allies in this process cause they look more broadly at the problems and help roadmap the way to innovate efficiently. That is why I personally prefer the term Digital Innovation because it joins both key skills needed to upgrade an organisation to our current era: innovate continuously to make it digital what needs to be.
