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Let’s start from the beginning and define Digital Transformation before diving into a high-level toolkit
that you can use to kick-off your digital transformation journey: a Digital Strategy Framework and its first
step “framing the opportunity”.
Definition of Digital Transformation
There are numerous definitions of digital transformation in the business world. And speaking to a
business vs. a technical leader, you will receive different explanations (and viewpoints) of digital
transformation.
To simplify the definition (and especially to align the understanding with all stakeholders), I suggest the
basic definition spearheaded by Prof. Nathan Furr and Prof. Andrew Shipilov from INSEAD:
“Digital Transformation means
Doing things differently
i.e. transforming core activities with digital
Doing different things
i.e. discovering new business opportunities”
A number of business and technical leaders think that digital transformation is the same as using or
applying new technologies (only) but there is definitely more to it to improve your business
performance.
Digital Transformation is a strategy choice
With technology advancing (from virtual reality/augmented reality to big data) and consumer needs
changing (from offline to online and especially now accelerated with the Covid19 crises that forces
consumers to stay at home and limit their outside activities), most industries are going through a digital
transformation push with new business models and digital solutions either driven by consumers
(external) or driven by cost/optimisation factors (internal). The boundaries between your offline and
digital business are slowly diminishing and elements of both your internal and external activities are
getting more and more connected.
Most business leaders start their decision-making process with what new technologies or solutions they
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can implement. Fundamentally though, I would start your assessment by raising the basic question of
competitive advantage before evaluating any new technology or digital solution:
Is this new initiative, technology or business model
1. helping me to lower my (resource) cost
2. helping me to increase the willingness-to-pay of my customers or
3. will this be a new type of customer that I am able to discover or attract
It sounds simple but I have seen numerous times that teams are jumping right away into technological
solutions (e.g. recently a blockchain solution for an event organiser) without asking the basic questions
of competitive advantage. So think about the 3 questions above before you implement any new
technological solution.
Start to Frame the Opportunity
I recently finished the INSEAD Executive Management Course Building Digital Partnerships and
Ecosystems. As part of the Action Learning Project (ALP) we had to deliver a structured approach to
innovate on a digital business model. I am using the same steps from my ALP assignment to walk you
through a digital transformation journey:
Example of a digital transformation journey
Once you have asked yourself the basic questions of competitive advantage you can map your initiatives
on the Digital Strategy Framework to better understand whether it is a (1) market-driven (external
focus), (2) cost-driven (internal focus) or a (3) new digital business model altogether (strategic growth).
This is the first step of framing the opportunity.
Applying the Digital Strategy Framework
I took the liberty to create a digital strategy framework inspired by the research work of Prof. Nathan
Furr & Prof. Andrew Shipilov (both INSEAD) and by the digital strategy work for the automotive industry
produced by Accenture. This framework can (hopefully) help you to define and frame the opportunity:
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Digital Strategy Framework to frame your digital transformation opportunity
49 1
Digital Strategy Framework to frame your digital transformation opportunity
(1) Digital Customer Experience (DCE)
DCE is used if you want to increase the willingness to pay of your customers. The focus of your digital
transformation activities is to digitise the customer experience.
Examples: digitising your loyalty/CRM activities (from offline to online) to drive omni-channel purchases or
adding a new digital revenue stream (e.g. for F&Bs adding online/food delivery as a distribution channel)
(2) Digital Enterprise (DE)
DE is used if you want to improve your productivity i.e. decrease your cost. The focus of your digital
transformation activities is to digitise part of your operations.
Examples: digitising of your support functions (e.g. digitising your finance/accounting activities with a cloud
software such as XERO, implementing a digital application tracking system that is integrated with all your job
postings (such as podio))
(3) Digital Business (DB)
DB is used if you want to digitise your existing business model or develop a new digital business model to
increase the willingness to pay or attract a new type of customer
Example: Companies that start to develop new digital initiatives and business models outside of their core
business (such as Axiata with boost in Malaysia)
Digital Transformation is not about inventing the wheel but to form alliances, partnerships
and adaptive ecosystems
Another common thinking is that companies “have to build their own technical solutions”. I have had
the painful experience that a number of traditional businesses decided to build their own CRM system
(“to individualise it”) ending with a 1–2 year project that ended nowhere — apart from high development
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cost and frustration for all parties involved. Without going too much into detail on how to evaluate
potential partner I wanted to end this article with the key insight that all new technologies do require
deep expertise but at the same time it will be needed to closely collaborate with others.
The success of any digital transformation project will depend on the strategic fit and alignment of your
alliances, partnerships and the type of ecosystem that you want to develop. I will write about alliances,
partnerships and tools that you can use in one of my next articles for the “toolkit for your digital
transformation journey” series.
The author uses concepts, approaches and strategies that have been applied and used by a variety of industries,
companies and/or practitioners. This article makes descriptive references to trademarks that may be owned by
others.
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