How can companies successfully manage their digital transformation?
More and more traditional large-scale companies and organizations are seeing a need to adapt their business to the new opportunities offered by digital technology in order to remain competitive. However, there can be considerable uncertainty about what the process actually involves – and how it should be handled.
“As a business leader, you need to understand that it isn’t just about digitalizing the business. You need to be working with external actors in a brand new way in digital ecosystems based on new technology,” argues Anna Essén, researcher at the Stockholm School of Economics.
From value chain to value network
Anna’s areas of study include the impact of digitalization on the ways individuals and organizations collaborate and work.
“A clear shift is under way, with companies moving from linear work in a classic value chain of supplier, business and customer to being part of a value network. These tend to include actors that previously belonged to different industries and markets. In addition, their roles change frequently – customers become suppliers and vice versa, for example. Digital platforms are gaining in importance and disparate industries collaborate in digital ecosystems to benefit from each other’s experience and expertise. Instead of one company working with the whole chain of production for goods and services, the various actors contribute their sub-components to a kind of ‘total’ service.”
Platform owner or module supplier?
A digital platform provides the empty functionality and infrastructure, to which a large number of actors can then connect services and content. However, customers encounter an interface with many underlying modules in the form, for example, of apps, other technical solutions, goods and logistics. Without them, the platform itself would have no value. This means that the owners of the platform and the modules are dependent on each other.
“Take online retailer Zalando as an example: the fashion company owns the digital platform and has the infrastructure that allows other actors to fill the website with goods and services. Without one, the other’s business crumbles,” explains Anna.
Find the right role in the ecosystem
As a business leader, you need to consider what role your business will take in a digital ecosystem, based on your particular industry: do you have the capacity to be the spider at the center of the web, owning a platform, or will you be providing one of several modules? Do you have unique products or specialist logistics to contribute?
Being a platform owner requires major investment, but it can also provide major returns in the long run if you manage to attract numerous service developers and users.
As a module supplier, you have the advantage of more mobility between different ecosystems and partners and being able to offer your services on multiple platforms. At the same time, you need to be prepared for constant competition and being copied.
From competitors to partners
Many successful platforms are based on decentralized and shared development, with the collective bank of knowledge and resources accelerating the creation of new online services and apps, since the respective companies are not required to do all the steps themselves. As a platform owner, you therefore need to instill in the module suppliers an understanding of how important it is to share, for instance through open program code and other fundamental technical elements.
Anna points out how traditional thinking is changing as the boundary between competitor and partner breaks down.
“We are seeing a huge transition from jealously guarding trade secrets to increasingly sharing information in order to build on new knowledge together.
“Look at Google: they delegate the innovation of functions, products and processes to external actors and then collect it all on their own platform so that others can benefit from it. In this scenario everyone is a winner.”
Combine skills and processes
Just because a business is undergoing a digital transformation doesn’t mean that all previous work should be discarded. Instead it should be adapted to the new conditions by combining and reshuffling skills, processes and products.
The revolutionary trend toward digitalization should also not be confused with the less broad term ‘digitization’: the former fundamentally changes behaviors and processes, while the latter simply switches the existing processes and tools from analog to digital form.
“Innovation is often about taking what we have and arranging it in a new way to create new business and development opportunities.
One way may be to pick out a physical service, online service or other part of the business and offer it via an alternative forum so that it becomes part of another company’s offering,” says Anna.
Health care with broader knowledge base: better treatment outcomes
We can see a related example in the health service, which Anna has studied closely. A company might develop a digital service where patients contribute to their own treatment by sharing their own knowledge and experience of their health status ahead of a doctor’s visit.
“Having the additional information gives the doctor a broader picture of the patient’s condition, and this new combination of knowledge can lead to better treatment outcomes.”
Four tips for successful digital transformation
Finally Anna has four pieces of advice for business leaders who want to successfully manage their digital transformation:
- Focus on the customer’s actual need and remember that your business may play one of many roles in satisfying that need.
- Review your business’s opportunities: are there different components and modules that could be split up, picked out and put to use separately?
- Be creative in combining and rearranging processes and skills: what you do should be available for others to use in whatever way best suits them.
- Be open to introducing other people’s skills into your business.
All these factors can lead to a better overall solution – for you as a business professional and not least for the customer.
Are you facing a developmental leap forward?
Would you like to know more about digital transformation? SSE Executive Education has various educational solutions that can shed light on this topic, depending on your company’s needs and level of knowledge. Please contact us to discuss the matter further.
