Digital Transformations. Every organization — for-profit, non-profit, public, and private — is talking about it. Covid-19 has only accelerated the trend. Just as Covid-19 is a bigger threat to those with underlying health conditions, the economic disruption due to Covid-19 is posting uneven threats to organizations with underlying conditions. Covid-19 as a disease turns chronic conditions into an acute condition in a compressed time scale. Similarly, Covid-19 as an economic condition has amplified the underlying conditions threatening the long-term viability of many organizations; it also has radically accelerated the time horizon of much-needed strategic transformation. Just we need vaccine for Covid-19 that produces antibody in our body, organizations need a digital shot in the arm to build resilience for continuing disruptions that we can expect even after the pandemic. Digital transformation is no longer a long-term strategic issue. It is a clear and present challenge that is upon us now.
Even before Covid-19, the millennials, the first generation of so-called “digital natives”, have shown that their behaviors are markedly different from previous generations. They are inspired by what they see on Instagram and Facebook, gather information about those products on Google, and purchase them from Amazon. They prefer Uber or Lyft over their vehicles or traditional public transportation systems and enjoy the convenience of Uber Eats, Door Dash, and Blue Apron. They listen to Spotify, watch Netflix, use Philips Hue, and ask Siri and Alexa questions. These behaviors are now accelerated and expanded beyond millennials as the global economy is coping with Covid-19.
Despite the urgent strategic necessity of digital transformation, many traditional firms still struggle to come to terms with what it means to them and how to implement digital transformation. Many organizations still approach digital transformation as fundamentally a technology exercise, augmenting in their traditional business models. Until recently, digital has been often considered as periphery activities that do not alter the fundamental architecture of the business. Even those who embraced digital transformation early often lack a coherent organization-wide vision of digital transformation that enables different groups in the organization to work together. Instead, many organizations suffer from incoherent, fragmented, and uncoordinated activities under a broad umbrella of digital transformation. Other traditional organizations that successfully launched digital transformation initiatives are often stuck in a small-scale pilot study. Often led by a small band of an interdisciplinary team and outside consultants, these pilots show promising potentials with no clear path for scaling beyond the initial pilot project.
What is lacking in these traditional firms is a clear understanding of what digital transformation entails for them. Such a vision necessarily embraces technology but must go sufficiently beyond that. Technology in digital transformation is where it begins, not where it ends.
An effective digital transformation initiative must begin by asking three fundamental strategic questions: why, what, and how. The answers to these questions will guide the firm’s strategic direction in digital transformation. These questions are directly related to the three distinct but interrelated architectures that form a firm’s DNA. A successful digital transformation must be an attempt to re-architecting a firm’s DNA by asking these questions. I will explore these three questions over the subsequent few postings.