Digital Transformation? Not for us!

Digital Transformation

“All organizations are on a digital journey – most have no map, no guide, and bad shoes.”

Thornton May, leader of the top membership tier at AIIM

Cloud is the most disruptive technology since the PC started to make its way into our businesses in the 1980s. Cloud is part of the Digital Transformation—or Disruption—we’re in right now. But is it something SMBs have to take care of? Is it for your business? Weren’t we successful in the last decades? Why bother with this hype?

“Strategy, not Technology, Drives Digital Transformation

What is Digital Transformation after all? The report “Strategy, not Technology, Drives Digital Transformation – Becoming a Digitally Mature Enterprise” by MIT Center for Digital Business and Capgemini Consulting in 2015 says:

“Maturing digital businesses are focused on integrating digital technologies, such as social, mobile, analytics and cloud, in the service of transforming how their businesses work. Less-mature digital businesses are focused on solving discrete business problems with individual digital technologies.”

An excerpt from the Executive Summary of this report reads:

“The ability to reimagine the business is determined in large part by a clear digital strategy supported by leaders who foster a culture able to change and invent the new. While these insights are consistent with prior technology evolutions, what is unique to digital transformation is that risk taking is becoming a cultural norm as more digitally advanced companies seek new levels of competitive advantage. Equally important, employees across all age groups want to work for businesses that are deeply committed to digital progress. Company leaders need to bear this in mind in order to attract and retain the best talent.”

Strategy is a CEO driven teamwork

In these concepts, we are talking about a paradigm shift. This is much more about corporate culture, customer centricity, and business strategy than about technology. Technology follows your business strategy and Cloud is a tool we now have in order to bring the Digital Transformation to life. Of course, the CIO knows Digital Transformation and the opportunities that come with it. But to execute this shift requires a lot of persuasion and learning on many levels.

This has to be a teamwork of the C-levels in your business. The CIO can and will bring this to attention, but the entire C-level team has to drive the process. The CEO must be the primary driver. The Forrester Study, “Digital Transformation In The Age Of The Customer,” gives a clear recommendation at the end of their study. Although addressed to 1000+ businesses, it is also valid for SMBs.

Advocate digital transformation and the customer experience at an executive level. Digital transformation can only succeed as a companywide initiative, which requires strong collaboration and evangelism from company leaders. No one person alone can drive all of the changes that are required for an organization to operate as a customer experience machine. Our study found that the company culture and organization lag behind process and technology when it comes to digital readiness; this has to be fixed in order for companies to mature effectively. Therefore, don’t downplay the cultural change and educational aspects of transformation; instead, make them a highlight of your plan.”

You cannot use the Cloud and apply the same business strategies you used to five or ten years ago! If you are not willing to go for Digital Transformation, you better think twice before introducing a Cloud strategy. Cloud requires a different approach to business processes and working-culture, and won’t leave your business unaffected.

Why bother with Digital Transformation?

New businesses, startups, and your future competitors will use Cloud technology like Lego® bricks, choosing only the components they need to support their business. They will attract Generation Z, who has a totally different mindset than Gen-X or Gen-Y, let alone the Baby Boomers. They expect to work from coffee shops or home, and want to use modern technology fluently. They don’t accept that you ban Dropbox, Skype, Evernote, Facebook, LinkedIn, or other tools. You don’t like that? You better think twice! Who do you want to hire: the smart but demanding guys, the real digital natives, or the normal guy who accepts everything? By 2025, Millennials will supply 75% of the workforce.

Look at the following chart I borrowed from ihumanmedia.com. It gives you some idea of why it is important to look at different generations and understand their unique needs and capabilities for your business.

work-habits

Today’s entrepreneurs and your future competitors will start their businesses by keeping their initial investment as low as possible. Why set up, run, and pay for a data center with redundancy, backup systems, and storage that last at least for the next three years? Buy Microsoft Server licenses that they don’t need because they are not productive? Set up complex Exchange servers? Hire specialists that need ongoing specialized training?

What today’s entrepreneurs need is access to ERP, CRM, Office, Presentations, etc. wherever they are. Small but capable startups may not even rent offices that stay deserted most of the time. They rent office space ‘per use.’

  • Use SaaS Cloud software. ERP, Microsoft Office 365, Exchange, collaboration tools, everything will be in the Cloud.
  • They will be able to work with an internet connection and minimal IT infrastructure. They may not even run a single server on their premises. This dramatically lowers their risk.
  • They even hire design offices instead hiring their own engineering staff. Buying the expertise from others makes them flexible if they need to switch to another product. Would you work like that? Probably not! You see the risk of losing your products to competitors. They see the opportunity of starting immediately with little risk!
  • They won’t even rent expensive offices in the beginning. Today, you can rent office space on a daily basis, for instance: www.sharedesk.net.
  • Production will be done where it’s most affordable, in places like South East Asia.
  • I know a company that doesn’t even see their products anymore. They are directly shipped to Amazon, who handles direct distribution to the customer.

The above scenario is emerging in B2C businesses, but it is a question of time until B2B will follow. They can survive in a most disruptive market, since they have more flexibility.

Why bother with Digital Transformation? Because your competitors will!

Changes in the Digital Business

Until now, IT systems had to be customized to fit the business process. I know a lot companies who have severe customizations in their ERP systems. The deeper we look, the clearer it becomes that many of these could be removed if they would dare to change their business processes. How much do you have to pay just for your customizations if you want to move to the next major update of your ERP system?

Cloud technologies give us a means of simplifying our local IT technologies significantly. The big mind shift is that we use Cloud-based IT opposite of what we are used to: instead of streamlining our IT and software, we need to streamline our business processes so that they fit best with what is available. This is what our competitors do. This will give us the flexibility and scalability we need. It is not an easy approach. On the contrary, this is a highly demanding approach that requires considerable time and effort.

Accepting the challenge of Digital Transformation is a bold step with broad and helpful consequences. The question is: who is responsible to initiate this paradigm shift, to accept the challenge of Digital Transformation? Is it your IT department (because they want to use new technologies)? No. This is a corporate cultural shift that will change and challenge the entire business. Only the CEO or the board can initiate the move in this direction. If the CIO convinces the CEO to move down this path, and the CEO executes it half-heartedly, you can actually jeopardize your business.

Prediction

I am convinced that businesses who accept the challenge and are willing to change will gain a major competitive advantage in the future over those who don’t, choosing to stay with what they have. The book about change, Who Moved My Cheese? by Dr. Spencer Johnson, is a classic today. The message is simple: you cannot avoid change. You can either embrace change or die from hunger.

Businesses cannot avoid this paradigm shift. We can get the facts, understand the consequences, and act accordingly. Many will ignore it and hope that this Cloud hype will disappear as quickly as it came. Your new competitors who play this instrument of Cloud and “pay-per” with perfection will sooner or later teach you. Do you think these words are too harsh? Let’s see!

I am personally convinced that we won’t be discussing the question of whether businesses should use Cloud systems five years from now. I am also convinced that SMBs who focus on the opportunities Digital Transformation gives them—sooner rather than later—will be more efficient, more successful and, finally, more competitive compared to those who stick with on premises IT systems.

Can you agree with my thoughts? I would love to see your comments on this article or reach out to me directly, using the contact form.

About Alexander

Alexander Buschek is passionate about Digital Transformation and the opportunities it gives businesses—especially MSEs. He is convinced that every business has to embrace Digital Transformation in one way or another in order to survive. The sooner a business begins its Digital Transformation, the better. Alexander was the CIO / CDO of Braunschweiger Flammenfilter and CIO of Cherry GmbH. Prior to that he was an entrepreneur, consulting MSEs about IT strategies, providing external project management, and overseeing various IT projects (e.g. ERP and CAD implementation and migration). Working with many MSEs gave him a deep understanding of this market. Alexander is now Senior Director, Analyst (MSE) at Gartner.