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Digital Transformation - A Reengineered Approach

Phyllis Doig

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On one hand, digital transformation is progressing well. With innovations happening at light speed, technology and human activity are blending together seamlessly. We swipe, we click, we tap and our homes are heated, our doors alarmed and our cars able to park themselves. We refer mainly to the thing transformed using names like 'Smart', 'Virtual', or 'Intelligent', while tending not to think too deeply about the technologies within. We simply set about enjoying our newfound capabilities.

On the other hand, massive disruption continues unabated, affecting us economically, socially, ecologically, and globally. Fortunately, the World Economic Forum has been intensely focused on digital transformation from the beginning. In 2016, its founder and executive chairman Klaus Schwab acknowledged that "We do not yet know just how it will unfold, but one thing is clear: the response to it must be integrated and comprehensive, involving all stakeholders of the global polity."[1] Today, digital transformation remains the Forum's number one key strategic challenge.

This is a strange dichotomy. Above the waterline, we readily surf one curl after another of these immense mobile waves of innovation; below the waterline, a powerful churn tears at the seabed underneath as it tosses and rolls everything in its way. How do we best reconcile these diverging views?

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By turning the spotlight of digital transformation directly onto the basic business transaction (meaning the business, its product or service, and the customer), a new perspective emerges that may help to reconcile and resolve these differences.

From Business to Business Ecosystem
The focus turns from agility to versatility as we expand our view into the business ecosystem.

The drive for business agility has led to rethinking the organization of the future: should there be 'pods' of autonomous, multidisciplinary teams[2, 3]? Will teams 'shape-shift' between business and technology areas?[4] Will general and administrative functions be outsourced as 'exo-ops' or external operations?[2]

While streamlining an organization leads to greater agility, it also facilitates automation. Roadmaps for automating a business typically start with the low-hanging fruit of backoffice operations, and work toward the front office in a wider and deeper progression until hyperautomation is ultimately achieved.[5] At this point, business processes and human effort alike become augmented through the use of robotics process automation, cognitive process automation, and other tools of digital transformation.

However: will this agile organization of the future be at risk of 'organizational sameness' and lose its competitive edge? And will progress on the path to hyper-automation become stalled and need to be reworked with each merger and acquisition?

It may help to take a larger view -- the business ecosystem -- within which the business actively engages with entities beyond its own perimeter. Within the ecosystem, a business may vertically or horizontally integrate with others to achieve capabilities of exponential proportions (think Amazon Prime, Netflix). Whether this is done through partnership or full integration via merger and acquisition, businesses need to become more versatile. The tools and techniques of digital transformation can help. For example:

- To streamline efforts across organizational entities: apply distributed ledger technology when working in concert with acquired entities in order to present a more unified front (one quote, one invoice, one service experience) while maintaining ledger entries appropriately and meeting compliance needs.

- To facilitate automation in an environment that is constantly changing: establish an automation layer at ecosystem level, creating an extended "virtual business" focused on improving outcomes. This could take many forms: a supply chain circuit breaker for distribution channel fault tolerance; a bridge across entities to facilitate operations by reducing redundancy from overlapping areas; a workflow manager to augment any kind of internal or externally oriented business process that spans entities. Where formal partnership is not possible amongst too distant cousins within the business ecosystem, engage analytics and data science for analyses, predictions and behavior modification.

Businesses can avoid the sameness problem and become a healthier, more versatile entity by taking the ecosystem approach to digital transformation, retaining its distinctive properties while expanding to ecosystem-level capabilities.

From Product and Service to the Organic Innovation
Technology-driven innovation extends the innovation process beyond business boundaries, establishing a more organic model.

Innovation at one time was closely aligned with idea generation, an isolated step at the beginning of the product development lifecycle. Even as it grew to include "all the activities needed to introduce something new[6]", the practice of innovation largely remained within business boundaries. Today, innovation extends out into the market, living almost indefinitely via the service delivery model and fortifying itself through subscription billing and a continuous stream of upgrades.

Today's innovations deliver capabilities in so many different ways, reflecting the complexity and granularity of offerings that make them hard to classify using basic terms like product or service. For example, they may deliver new behaviors (on demand), processes (RPA/CPA), and content (data and analytics), or new ways to compute (AI/ML), connect (5G), and control things (IoT). These can be further combined into "exponential technologies" to deliver higher level capabilities: cognitive automation + data science = augmented analytics, or distributed ledger + artificial intelligence = smart contracts for example.[7]

One might even say that technology-driven innovations enhance three main areas of capability: intelligence, experience, and connection. That this mirrors a mind-body-spirit perspective is deliberate, reflecting the organic nature of innovation and its continual growth.

With innovation moving beyond traditional boundaries, delivering new and complex capabilities, and growing organically, it needs to be well managed. Where the supply side is more intimate with the underlying features and functions, businesses must drive responsible management practices with respect to quality, access, and security in particular. Where the demand side recognizes collateral impact economically, socially, ecologically, and globally, governments and industry organizations need to manage guardrails and regulate accordingly.

Even better would be the supply and demand sides working closely together to synch future roadmaps on the way to achieving a collectively agreed upon form of "Society 5.0: The Creative Society"[8] (a vision of the digitally transformed world, presented by the B20 business consortium at the G20 Tokyo Summit in 2019). The World Economic Forum's Strategic Intelligence[9] platform is a good starting point to get a view of partnerships and programs already under way.

From Customer Experience to the Human Experience
From CX to HX: Customers are people, too.

Business has for years used tools including customer journey mapping and design thinking to better understand customer behavior. Connected devices, apps, and analytics are furthering business knowledge of customers and translating this information into better, more personalized experiences. At the same time, this push for more data is being met by an equivalent pushback due to privacy rights concerns. In any case, to be understood without being too predictable is a delicate balance to achieve.

Today's view of customers, however, needs to expand beyond the target market perspective. Traditional target markets are becoming much more granular and nuanced, one reason being the unique and varied influences of a customer's remote and connected relationships (through social media, online groups, and influencers). Since these relationships are virtual in nature, customers can have a large number of them, add or drop them at any time, and change behavior suddenly due to viral news and events. One's list of connections is more than just a set of customer attributes. From a higher level, understanding the interplay between these external communities and target markets is as important as understanding the individual customer behavior.

Another reason to expand our view of customers is that they are making more value-based choices. This may mean a general alignment with company values[4] or a specific reaction to major issues affecting people and planet. Understanding the pains and sacrifices of informal work without sufficient social protections may lead some to avoid using "gig" services, for example. Being aware of a company's practices related to sustainable development goals including climate change may drive other choices. Business, therefore, needs to take an expanded view of customers by seeing them as part of the larger human experience.

The data science community is making inroads to help with understanding the complexities of the more granular and connected target market, as well as understanding factors affecting values-based decision making. For businesses that cannot afford to employ or engage a team of data scientists, tools including augmented analytics are aimed at helping the "citizen data scientist".

To step back and take a fresh look at your customer base in terms of the human-centered experience, businesses can start by building these considerations into the marketing mix. Today's mix aims for consistency across the 4 P's: Product, Price, Promotion, and Place. Adding two more, People and Planet, would be a reminder to consider the larger realm of human experience and its influence on buying decisions. This can be done by:

- Staying attuned to current events and key issues and events affecting the welfare of people (workers and consumers in their supply chain) and planet (for environmental issues as well as issues related to specific resources consumed or produced in their production process).

- Tracking country-level metrics via the World Bank Group including: the Human Capital Index[10], a measure of the economic potential of a country's citizens as measured by specific health and education factors, and the World Development Indicators[11] dashboard which monitor progress toward achieving Sustainable Development Goals (including climate change).

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Conclusion

If you feel a bit tossed about in the churn of a powerful wave and would rather be the surfer that I mentioned at the beginning of this article, consider instead that most of us are merely the observers. We stand next to our cliffside homes, wondering when their foundations will be disrupted by these waves of transformation. Or will they?

By taking a fresh look at the basic business transaction, we gained an understanding of the complex forces surrounding its main components: the business, the product or service it offers, and the customer. This understanding led to a higher level view of each: the business ecosystem, the organic innovation, and the human experience. It is at this level we need to engage going forward, in order to derive exponentially greater capabilities while using technology to harness the underlying complex forces to our advantage.

The very point of digital transformation is to let the technology perform that last part of handling the underlying complexity. We may then concentrate on enjoying our newfound capabilities: the more versatile business, the ever improving innovation, and a healthier engagement with people and planet.

It is interesting to note that there is an equivalent to this experience in mathematics called the Laplace Transform. This technique replaces a complicated equation with a simpler one that is much easier to operate due to the use of a special variable. Digital transformation tools and technologies represent that special variable, allowing us to experience higher level capabilities directly while digital transformation handles the complexity for us.

Acknowledgements

[1] The Fourth Industrial Revolution: what it means, how to respond , by Klaus Schwab, 14 Jan 2016,
https://www.weforum.org/agenda/2016/01/the-fourth-industrial-revolution-what-it-means-and-how-to-respond/

[2] CIO Futures: The IT Organization in 2030, by Jenny Beresford, Jackie Fenn of Gartner, 8 March 2018 


[3] The Bionic Company, by Rich Hutchinson, Lionel Aré, Justin Rose, and Allison Bailey of Boston Consulting Group, November 2019

[4] Forrester Predictions 2020: On the Precipice of Far-Reaching Change, 2019 Forrester Research, pdf and Webinar 23 Jan 2020, https://go.forrester.com/predictions/

[5] Robotic Process Automation: Overhyped or the Next Big Thing?, by David Vellante, Wikibon, blog, 15 Feb 2020 https://wikibon.com/robotic-process-automation-overhyped-or-the-next-big-thing/

[6] Innovation Management - The Complete Guide, by Jesse Nieminen, Viima Solutions, blog, 25 June 2018 
https://www.viima.com/blog/innovation-management

[7] Forrester New Technology & Innovation Forum - "Putting It All Together: The Power of Exponential Tech"; "Welcome to the Age of Exponential" (conference session), Matthew Guarini, Forrester, 18 July 2018
https://events.forrester.com/ehome/index.php?eventid=301574

[8] B20 Tokyo Summit Joint Recommendations "Society 5.0 for SDGs", presented by the B20 (a collaboration of National Business Federations and International Business Organizations) at the G20 Tokyo Summit, 15 March 2019
http://www.b20tokyo.org/ .. choose B20 Tokyo Summit Report or use this link:
http://www.keidanren.or.jp/en/policy/2019/020_Recommendations.pdf

[9] World Economic Forum - Strategic Intelligence (dashboard; requires signing up): 
https://intelligence.weforum.org/

[10] World Bank Group - Human Capital Index (dashboard): https://data.worldbank.org/indicator/HD.HCI.OVRL

[11] World Bank Group - World Development Indicators (dashboard): http://datatopics.worldbank.org/world-development-indicators/


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