A guide to embarking on an evolutionary and successful digital modernization journey
As traditional barriers to entry fade, companies are increasingly replacing their traditional and disparate legacy IT systems with modern digital tools and advanced technologies to stay relevant to customers and enable business agility. Not only does this highlight the necessity of digital modernization, but also makes it a critical agenda item for a company’s Board and — more importantly — the CIO (Chief Information Officer) or the CDO (Chief Digital Officer).
A brilliant example of a company using digital modernization to its advantage is Amazon. The global eCommerce leader began by selling books online, gradually venturing into other businesses using digital technologies to disrupt everything from retail to financial services. Digitally advanced players are utilizing new technologies to improve critical internal processes, make their businesses more agile, and win customers over to increase their wallet share.
However, digital modernization is more than just having a Twitter handle or a chatbot on your website. Implementing social, mobile, analytics, cloud and IoT (SMACI) does not count as digital modernization either. If done in silos, digital modernization efforts may end up driving customers away. The key is ensuring that digital technologies are aligned with each other and integrated with the digital backbone of the underlying infrastructure.
We hear a lot about successful digital modernization, but little is said about the effects of digitalization gone wrong. Mis-aligned digital modernization projects can deteriorate user experience, erode brand value and customer trust, and may even put a company out of business permanently. Therefore, it is critical that organizations undergoing a digital modernization should follow a synchronized and coordinated approach.
In this article, we will try to shed light on what digital modernization is and how companies looking to transform should navigate the journey.
Born to win or adopt/adapt to win?
In the digital realm, organizations are divided into two categories — born digital (or digital natives) and digital adopters.
Born digital companies have had the benefit of starting in the Digital Age, and their business models are largely based on digital channels. Amazon, Google, Facebook, Uber, Airbnb, and many other emerging tech companies are in this group. Financial institutions like DBS Bank in Singapore or Tangerine Bank in Canada may also fall into this category. Their initial business models were based on digital channels, even though their services may not be as comprehensive as their larger competitors.
Digital adopters are traditional companies like Walmart, Home Depot and large banks, which are working hard to beat their digital native competitors in the race to acquire and retain new customers.
FedEx CIO Rob Carter described digital adopters are the companies who have a stack of technical debt that powered their success in the past but has now become a barrier to their growth.
Digital adopters are the companies who have a stack of technical debt that powered their success in the past but has now become a barrier to growth.
While digital adopters may lack the first-mover advantage, they can still get up-to-speed by adopting a digital modernization strategy. Here’s how:
Get started on your digital modernization journey
Digital modernization is a three-phase journey. These phases are quite well known, but differences in terminology can be confusing. Before we dig deeper into digital modernization, let’s define these terms.
1 - Digitization
Simply put, digitization is converting physical data into an electronic format. Digitization can save organizations millions of dollars on physical document creation, storage, transmission and updating. It also includes related requirements for infrastructure set-up, cybersecurity, and loss of information or accessibility in case of a site failure.
2 - Digitalization
Digitalization is the part of the journey when an organization begins using digital technologies to create new business models and processes. It enables banks to provide digital payments, helps start-ups like Uber enable resource sharing, and leads organizations towards improved operations and processes, such as using smart glasses to maintain equipment in a manufacturing plant.
3 - Digital transformation
This is the pinnacle that every digital adopter strives to reach as fast as possible. However, business and technology leaders must understand that it will be more of an evolutionary journey than a revolutionary one. To ensure all gaps are bridged, efforts must be coordinated and synchronized across the entire organization and across the previous phases of digitization and digitalization.
Once an organization understands the different phases of the digital modernization journey, its leaders should assess where they stand before embarking on their journey. A deep dive into their own processes, business goals and vision will help them set the pace of their journey with a clear roadmap.
In the next post, we will look at simple ways to benchmark where an organization stands in its digital modernization journey, and more importantly, where it should go next.