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Blog Digital Transformation

Digital Transformation: Reacting Fast In A Changing Market

Digital transformation is a complex challenge and will keep companies busy for the next few years. Some are doing great in establishing new business models and digitalizing processes - others, not so much.

Experience shows that the hardest part of almost any digital transformation project is the change in corporate culture that accompanies it. Changing the way you work is tied to leaving your comfort zone, escaping old habits and routines.

Furthermore, digital leaders had a head start. They were created with agility in mind, making it easier to invest in new technologies like cloud, big data and AI. Digital leaders know that digital transformation first and foremost means to react fast and seize opportunities in a changing market.

Even though most employees already possess the necessary skills and know-how to master digital transformation, new digital products or business models never come to pass.

Trust is good, control is better

What does it cost? What advantages do we gain from it? Two of many familiar questions coming from the controlling department when asked about budget for digitalization projects. These questions demonstrate why companies often struggle to tackle digital transformation.

For example, only after Industry 4.0 has been extensively proven to be advantageous for every company, people start to invest in it to not be left behind, forgetting something crucial. Processes and structures have to be digitalized as well.

Furthermore, there is still a very low tolerance for making mistakes in many companies. If employees are not allowed to fail, they will never come up with new ideas. It is therefore crucial that managers come up with a different incentive than pure market value.

This is in large part due to how successful companies still are with their traditional business models. And why should they risk good sales numbers for digital products that might never bring in money?

It is a hard decision to make, but an inevitable one. Most CEOs still choose old business processes – not realizing how fast new digital competitors could catch up.

Examples for disruptive digital companies taking over existing markets are abundant. Airbnb and Booking.com in tourism, Tesla in the automotive industry, or Amazon Web Services in IT infrastructure.

Digital transformation – where are we right now?

In one Luenendonk study, the company evaluated the state of digital transformation in major companies.

Only 30 percent of respondents believe that they have a competitive advantage in digital innovation. 55 percent think they are head-to-head with their competitors.

Many companies allocate big budgets for the development of digital prototypes, but the development still happens inside traditional business models. Consequently, developers can’t make use of agile methods and DevOps.

Furthermore, only 21 percent of companies were able to build a cloud ecosystem faster than their competitors. This also correlates with only 22 percent of respondents having the edge over their competition in cloud deployments.

The devil is in the structures

These results show that companies know that it is necessary to act on digital transformation, but are often too slow in changing and adapting to new digital business models. Especially companies with many complex structures are having a hard time to initiate change and become customer-centric and digital.

However, Luenendonk expects that companies will start to pick up speed regarding digital transformation. Almost every second company is planning a rollout of digital business models, meaning the development of digital products and services.

Furthermore, 48 percent of respondents already have developed digital business models and created digital products.

Digital transformation – where does that leave us?

Digital transformation can only succeed if the goal is clear for everyone involved, and if management actively supports employees. It’s especially crucial that staff and executives are willing to change – otherwise, every digital transformation project is doomed to fail.

In addition, companies need to pick up speed. They need to react faster to changes in the market. Only if companies are able to analyze customers’ needs and wishes and use that information to fulfill them will they be able to survive in the digital age.

Source:
E-3 Magazine June 2018 (German)
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