True digital transformation isn’t just about acquiring new technology; it’s about reimagining your entire business strategy with a commitment to value creation and integrity. Digital transformation is not just about adopting new technology tools, but also about creating long-term value and integrating ethical principles. This holistic approach ensures that digital initiatives align with the core business values and societal expectations, fostering sustainable growth.
Amidst all the buzz around Digital Transformation, a research from McKinsey & Co in 2022 found that only 20% of over 600 firms achieved more than three-quarters of the revenue gains they anticipated from their digital transformation projects. Furthermore, only 17% achieved the cost savings they expected. This data underscores a significant gap between expectations and reality in digital transformations, often due to flaws in how businesses research, commission, and implement these projects. One of the key issues identified is the lack of holistic and effective change management across entire organization, suggesting that successful digital transformation requires more than just technological upgrades; it demands a comprehensive and well-structured approach to organizational change (Raconteur).
At the heart of digital transformation lies the goal of creating sustainable value. To achieve this, leaders must focus on solutions that not only address immediate needs but also pave the way for long-term success. For instance, adopting cloud computing not only improves efficiency but also scales with your business growth, ensuring long-term value. Leaders should identify technologies that are adaptable and scalable, ensuring they remain valuable as the business and its environment evolve. Moreover, investments in digital training and upskilling employees can cultivate a culture of continuous improvement and innovation, adding value to both the organization and its workforce.
According to recent studies, sustainable value creation in digital transformation involves integrating technologies in a way that scales with the business and evolves with the market. The Boston Consulting Group’s (BCG) research shows that scaling individual digital solutions can lead to significant revenue increases (9% to 25%) and cost savings (8% to 28%) compared with the baseline. However, when companies scale multiple digital solutions, they can see an almost 17% increase in revenue and a similar reduction in costs. Additionally, this scaling fosters a culture of innovation, enhances customer experiences, and strengthens business resilience (BCG Global). In the healthcare industry, digital transformation through scaling of multiple digital solutions like electronic health records, telemedicine, and AI-driven diagnostics tools has allowed healthcare providers to improve patient care and operational efficiency. This leads to cost reductions from streamlined workflows and increased revenue from the ability to serve more patients with improved services. Similarly, in the retail sector, companies that have embraced and scaled multiple digital solutions to support like omnichannel retailing, personalized marketing through big data analytics, and efficient inventory management systems have seen substantial growth. These integrations enhance the customer experience and optimize supply chains, contributing to reduced costs and increased sales.
In line with this, Incorporating ethics into digital transformation is crucial. Ethical considerations in technology adoption involve data privacy, security, and fairness in AI. Leaders should establish clear guidelines and principles for ethical tech use, ensuring that technology serves humanity positively. Building trust with customers and stakeholders through transparent data practices can lead to long-term loyalty and business success. Ethical leadership in digital transformation not only mitigates risks but also enhances brand reputation and fosters a culture of integrity. BCG’s report published in December 2021, Performance and Innovation Are the Rewards of Digital Transformation gave insights into digital transformation across various industries. This report highlighted the importance of ethical use of technology, showcasing that only about a third of digital transformations meet or exceed their target value and achieve sustainable change. This emphasizes the need for a focus on ethical practices and sustainable change, rather than short-term gains (BCG Global).
To make these real world gains, from projections in the initiation plans, Strategic planning is essential for effective digital transformation. Leaders should align digital initiatives with their business strategy, focusing on areas that offer the most significant impact. This involves not just adopting new technologies but rethinking business models and processes. A clear roadmap for digital transformation, with defined milestones and metrics, allows for better monitoring and adaptation. Collaboration across departments and involving employees at all levels ensures a comprehensive approach that considers diverse perspectives and expertise. Companies that effectively scale digital solutions see substantial performance advantages over their counterparts, achieving three times higher revenue growth and cost savings from their digital transformations (BCG Global).
While much of this is about the action of leaders, their success is dependent on the people in the organization. Hence it becomes important to, foster a culture of digital Innovation. Building a culture that embraces digital innovation is key to long-term success. This involves creating an environment where experimentation and learning from failures are encouraged. Leaders should champion digital initiatives and foster an atmosphere of openness and collaboration. Encouraging employees to share ideas and giving them the tools and autonomy to innovate can lead to breakthroughs in digital transformation. Moreover, recognizing and rewarding digital innovation can motivate employees and drive further advancements. An example is a leading European bank that significantly increased its sales by adopting a digital-first approach. By conducting extensive market research and piloting about 40 digital initiatives, the bank chose to expand and scale four workstreams, leading to a 30% increase in sales within six months. This example illustrates the importance of cultural shift, where management of product experiences and customer journey is cross-functional, and roles of CMO, CTO, and CIO overlap, requiring full C-suite support to scale solutions successfully (BCG Global).
For businesses in developing economies:
- One of the most effective strategies is to leverage local talent and resources. Local expertise not only reduces operational costs but also brings invaluable insights into the cultural and regional market dynamics. Training and investing in local talent can lead to innovative solutions tailored to regional needs, fostering a culture of local empowerment and driving sustainable business growth. Additionally, utilizing local resources can significantly cut down on logistics costs and environmental impact, aligning with global trends towards sustainability.
- Agility in adopting digital technologies can be a game-changer in developing economies. Small and medium-sized enterprises should focus on cost-effective digital solutions that offer the most immediate benefits, such as cloud-based services, mobile technology, and e-commerce platforms. These tools can significantly expand a business’s reach and efficiency. Embracing digital transformation allows businesses to tap into new markets and customer segments, often with minimal investment compared to traditional expansion methods.
- Similarly, forging strong local and international partnerships can accelerate growth and provide essential support in a developing economy. Collaborations can lead to shared resources, knowledge exchange, and access to wider markets. Networking with other businesses, governmental bodies, and non-governmental organizations can provide new opportunities and insights, as well as support in navigating the unique challenges of developing economies, such as regulatory environments and market fluctuations.
- In developing economies, businesses (especially SMEs) should focus on innovation tailored to the specific needs and challenges of local markets by developing products and services that address the unique needs of their region. This might include solutions for limited internet connectivity, products designed for local tastes and preferences, or services that address specific local challenges. Local innovation not only garners customer loyalty but also positions the business as a relevant and integral part of the community.
- In developing economies, businesses that prioritise sustainability and positive social impact often gain a competitive edge. Consumers globally are increasingly supporting companies with responsible practices. Implementing sustainable operations, such as eco-friendly manufacturing processes or ethical sourcing, can not only improve the business’s reputation but also lead to long-term cost savings. Additionally, contributing to local communities through employment, education, and health initiatives can build strong relationships with local stakeholders and foster a positive corporate image.
Overall, business owners and organisational leaders in developing economies can thrive by leveraging local resources, embracing digital agility, building strong networks, innovating for local needs, and focusing on sustainability and social impact. These strategies not only drive business success but also contribute to the overall development and upliftment of the economy.
In conclusion, driving digital transformation with a long-term value creation strategy and ethics requires a holistic approach. It involves sustainable value creation through innovation, ethical considerations, strategic planning, and fostering a culture of digital innovation. Leaders who embrace these principles can not only transform their businesses effectively but also ensure they are prepared for the future in a rapidly evolving digital landscape.
Reference:
1. https://www.mckinsey.com/capabilities/mckinsey-digital/our-insights/three-new-mandates-for-capturing-a-digital-transformations-full-value
2. https://www.raconteur.net/digital-transformation/digital-transformation-failure-rates
3. https://www.bcg.com/publications/2022/keys-to-scaling-digital-ability-and-value
4. https://www.bcg.com/publications/2022/digital-transformation-efforts-reportSai Kumar Chandran is the founder of OrbitShift. He is a coaching and consulting practitioner and an entrepreneur at heart. He can be reached at saikumarchandran@orbitshift.com.
Sai Kumar Chandran is the founder of OrbitShift. He is a coaching and consulting practitioner and an entrepreneur at heart. He can be reached at saikumarchandran@orbitshift.com.
