In Part I of this two-part article series, we explored digital transformation, what it is, where a company can begin, how to create standard processes for collecting innovative ideas, the role IT plays, and some of the necessary technologies to transform.
Now in Part II we will discuss digital transformation dimensions, strategic investing to gain true competitive advantage, strategic growth horizons, and cast vision around what’s next with disruptive technologies. The frameworks and examples below were provided by our partner, Brent Leland of High G, a boutique consulting firm focused on innovative and technology-enabled growth strategies.
Digital Transformation Dimensions
Digital transformation is not simply an “IT project.” Instead, there are many dimensions involved in creating significant transformative change. For example, delivering a better experience isn’t only about the customer but also about employees and partners.
Source: High G
Strong leadership is critical as is a solid strategy, but what truly drives a successful transformation is culture. Without the culture or a mindset of experimentation, learning, and adapting, many companies get stuck in the status quo rather than thinking disruptively or thinking about future-proofing their organization.
A Balanced IT Operating Model
The IT Operating Model shown below highlights typical areas of technology investment. The Systems of Record are your transactional systems (ERP, MRP, Financials, etc.) These systems help run the business. At some point, all companies need these systems to scale, however, we don’t recommend focusing more than 50% of your time on systems of record.
Whereas Systems of Record count the money, the systems in the top row make the money. Systematic investments in these areas help companies drive more competitive advantage.
Investments in areas such as:
- Systems of Engagement – Systems where the business interacts with customers, suppliers, and employees.
- Systems of Insights – Information and insights that drive better decisions.
- Systems of Innovation – What will set you apart and drive new business models.
Source: High G
Reference the IT Operating Model above to help your company pinpoint where to invest in driving the most added value.
Horizons of Growth Innovation Framework
The Horizons of Growth is a framework utilized by many companies to manage their innovation portfolio. Originally these horizons were based on time horizons. For example, 12-18 months was seen as the short-term horizon. However, with the ability to bring in service providers & cloud solutions, these time horizons have been significantly compressed, almost becoming irrelevant.
Source: Adapted from Three Horizons model “The Alchemy of Growth” (Baghai, Coley, White) and “Innovation Tournaments” (Terwiesch, Ulrich)
In the chart above:
- Horizon 1 is your core business. Your existing solutions and the market you have today.
- Horizon 2 is expanding your core offerings into new markets or providing new products or services to your existing customers.
- Horizon 3 is about disruption & transformation, sometimes described as “a Hail Mary for the future.” This horizon is about breaking into totally new markets or new-to-the-world offerings.
Horizon 2 is often considered the bridge between Horizon 1 and a future Horizon 3 goal. Microsoft’s Xbox gaming console illustrates this concept. Microsoft was known for its operating system & office suite products (Horizon 1). Their Horizon 3 goal was to create a gaming console. To get there, they created Horizon 2 initiatives to bridge the gap. This meant expanding into peripherals (mice, keyboards, etc.) and also rolling out computer games to get both hardware and gaming software experience. The first Xbox ran on Windows 2000 under the hood but the genuinely transformative Horizon 3 move was probably Xbox Live. Gaming consoles existed before, but Xbox Live rewrote the rules.
Microsoft and other disruptive companies usually spend 70% of their time in Horizon 1, 20% in Horizon 2, and 10% in Horizon 3. How do you spend your time?
Digital Transformation Roadmap
As mentioned in Part I of this 2-part series, processes and systems are crucial, but can’t just come up with ideas and kick them to IT, assuming they know exactly what must be done and when. Digital transformations can’t occur in silos – an integrated, cross-functional approach is needed. By creating a Digital Transformation Roadmap, you can help foster a collective vision and reach alignment across the organization. (See the example below.)
Source: High G
In this example, the company was very siloed and had grown to the point where they could no longer scale by heroics alone — not uncommon among companies these days. The transformation started with leadership and culture to encourage mentorship and buy-in during the disruptive change. It was also necessary to create an actionable business strategy to drive the technology strategy because a digital transformation isn’t only about technology — it’s about the business. Finally, the company needed to ensure they had formalized a cross-functional process center of excellence as they evolved to a more integrated business model.
What’s on the Radar of Disruptive Technology?
Nowadays, it’s not uncommon to see many disruptive technologies in our day-to-day lives, from drones to 3D printing to wearables and smart vehicles.
The most significant shift in the last five years has been around predictive tech. We are moving from a reactive to a proactive mindset and thinking about what’s next? What should we do? The tools are getting much faster, and many companies are still in the “why?” stage.
The three technologies that will likely have the most significant impact are advanced analytics, the Internet of Things (IoT), and AI/Machine Learning.
Digital transformation is here to stay. To remain relevant, your company needs to think about what’s next constantly. If your company is ready to begin your digital transformation journey or needs support in the process, SafeNet Consulting is here to help. Contact us at email@example.com for a free, no-obligation personalized digital transformation discussion.