The Benefits of Digital Transformation
Digital Transformation is a new concept, and it’s still early, but so far the evidence for companies leveraging digital technology is encouraging, with many expected benefits such as:
Do it like Starbucks
One company that has succeeded in adopting digital transformation for business growth is Starbucks. In 2009, after low performance cut the company’s stock price in half, Starbucks looked to digital to help re-engage with customers. It restructured its internal operations and created a department for digital ventures. Starbucks started offering free Wi-Fi in Starbucks stores, along with a digital landing page with a variety of digital media choices, including free content from publications like The Economist, in an effort to do something innovative around how they were connecting with customers. Another strategic digital move was to make digital transactions faster, by cutting 10 seconds from every card or mobile phone transaction, reducing time-in-line by 900,000 hours. Starbucks is also adding mobile payment processing to its stores, and is processing 3 million mobile payments per week. Soon, customers will order directly from their mobile phones. Using social media, mobile and other technologies to change customer relationships, operations and the business model has helped Starbucks re-engage with customers and boosted overall performance. As a result of these changes amongst others, its stock price has also bounced back up from roughly $8 in 2009 to nearly $58 in July 2018 as traded on the NASDAQ stock market.
Different levels of digital business maturity
Not all organisations are of the same level of digital maturity as Starbucks. A study by Westerman et al. (2012) categorised organisations in 4 distinct categories, according to their digital maturity.
Executing the change
Therefore, not all companies and organisations are embracing change and digital transformation, with some rejecting it and some being very sceptical about its value. So, how can they execute the change in the most effective way? A survey by MIT Sloan Management Review asked the question: How are digital technologies changing the way companies do business? Findings revealed that simply implementing or using digital technologies is not enough. The key to successful digital transformation is less a question of technology than of strategy, culture and talent development. Furthermore, many survey respondents question whether their company’s leadership has the skills and abilities to lead the organization in a digital environment.
While each organisation leverages its technology differently, there are a few universal keys to making the most of digital transformation. Firstly, old and new technology must connect. Digital transformation and innovation can only be as effective as the rest of your technology allows it to be, so understanding current workflows and how technology impacts them is critical. Next, companies must review operating model differences and their speeds, agility, fluidity, and customer involvement ahead of time to prevent problems from occurring down the road. Technology investments or failures of the past should not affect future adoption.
Furthermore, a new organisational culture must be established, making sure that employees believe in the potential of digital transformation. A workforce needs appropriate training and continuous learning opportunities to cultivate the knowledge and skills necessary for maximizing digital transformation’s impact. As seen in Figure 2 below, entrenched attitudes of fear and ignorance beat down digital transformation within many corporate cultures. According to the study conducted by MIT Sloan, more than 20% of respondents said that internal politics, including fear of losing power in the organization, impeded adoption of digital technology. Therefore, during this transitional period, the coexistence of two different models (old and new) has the potential to slow down operations and bring decision-making into question. These negatives only get worse without open lines of communication. Organizational leaders should communicate clear expectations regarding employee responsibility and accountability on a continuous basis to minimise disruptions.
Lastly, among the obvious obstacles to digital transformation is lack of clarity about the pay-off. Companies want to know that they are getting something beneficial from investment in new technologies. Corporate leaders need to leverage metrics to help make digital transformation happen.
In relation to this, the Government has announced its plans to support the private sector whilst also intensifying the public sector’s digital transformation efforts to improve Cyprus’ position in the index. One such measure of support, as stated by Cyprus Transport and Communication Minister, Vassiliki Anastasiadou, is to implement the legislation on ultra-fast broadband networks included in the Directive on the European Electronic Communications Code. The government, she added, was constantly developing new e-services and improving existing ones. According to the minister, the e-government council has approved projects worth over €200m for the next three years.
Europe's Digital Progress Report 2017
Cyprus ranks 22nd in Digital Economy and Society Index (DESI) 2017 announced by the European Commission (see Figure 3). Compared to 2016, Cyprus showed significant progress in connectivity. The digital scoreboard measures the performance of Europe and the Member States in a wide range of areas, from connectivity and digital skills to the digitisation of businesses and public services. The delivery of online public services is close to EU average. Despite the fact that internet users engage in a wide variety of online activities, low levels of digital skills risk acting as a brake to the further development of its digital economy and society. Although Cyprus is among the countries that have recorded the greatest progress during the last four years, along with Ireland and Spain, it is still among the low-ranking countries.