Digital Transformation is All Around Us…Again

The phrase “Digital Transformation” has re-emerged as a new phenomenon. Google tells me there are 49 million (49,000,000) search results for the words Digital Transformation.

First, why do I say it is a phenomenon? It seems that many of our leading think-tanks are talking about digital transformation. Here are some examples:

• Earlier this year, MIT Sloan Management Review posted this article: The Nine Elements of Digital Transformation
• Forrester is predicting that in 2015 “Digital Business Transformation Will Gain Critical Mass“.
• Back in July, my colleague Michael Porter blogged about Altimeter’s research into Digital Transformation:  Enterprise Collaboration and Digital Transformation.
• IBM’s Institute for Business Value has a report, a web page and some video about this topic: Digital transformation: Creating new business models where digital meets physical.

But is Digital Transformation new?  Not really. The idea of digital transformation goes back many years. My guess is that it first arrived as a concept back in the 1990s when we were going through our first dot-com bubble.  In fact, way back in 2000, Keyur Patel and Mary Pat McCarthy published a book titled Digital Transformation: The Essentials of E-business Leadership.

Back in the day, companies like Amazon, Priceline and others were redefining business models, business processes and customer engagement using digital as the mainstay.  Many of these early digital transformation pioneers crashed and burned in the dot-com bubble burst in 2000, but several have become powerhouses.

So why is Digital Transformation re-emerging as a new phenomenon now?  Or why, all of a sudden, are we talking about Digital Transformation again?

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In my opinion, we now (finally!) have several important technologies that have matured enough and when combined together have the capability to be truly transformative.  I’ll mention a few of the technologies or concepts below and then talk about how a combination of these technologies can lead to an even higher level of customer engagement and can improve business outcomes.

First, let’s talk about big data. In the early days, our systems could not handle the amount of data or provide timely analysis of what we captured.  We had to wait until the end of the day, week or month to really analyze large volumes of data. Now we have platforms and systems capable of processing massive amounts of data and we have analytics systems that can sort through the data to provide us meaningful insights within seconds. Companies are using these capabilities to understand customer buying behaviors as fast as trends start to appear.

Second, we have “The Cloud”. Before the cloud, companies were tied to limitations of hardware buying practices.  When you wanted to build a new system, you had to wait for the servers to be acquired and installed, physical space has to be developed, network firewalls configured, etc, etc.  If your site started to get overloaded it could take weeks to add the required capacity.  “The Cloud” has enabled companies to create systems quickly and now can react quickly to changes in demand without tying us to those infrastructure buying cycles. Its becoming ever easier to connect systems and “things” together around the world.

Third, mobile.  Mobile, mobile, mobile.  As one person recently said, if you don’t have a mobile optimized web site, you are already behind.  Mobile was not a factor in the early days of digital transformation. Thanks to smart phones, anybody can now participate in the digital world any time of the day.

Fourth, we have new technologies for creating excellent customer experiences. Web Content Management Systems, Portals, and eCommerce platforms have tooling to create great sites, can be mobile ready, and can take advantage of analytics to tailor each user’s experience.

Combining all of these technologies can lead to the digital revolution we are now undergoing. Here is an example:

A customer enters a store carrying a smart phone.  A beacon system in the store monitors the customer’s movements. This data is relayed through a cloud-based system and combined with other store data from around the world.  Two transformative things are happening simultaneously:

1. The customer stops in front of canoe on display.  Our beacon tells our content management system that the customer has stopped near this particular canoe.  Our CMS sends a notification to the customer’s smartphone with information about the canoe and a link to a video showing how fun it is.  After the customer buys the canoe, we connect their phone with the registration information in our CRM system and use that data to begin offering the customer additional content on our website.
2. Data from all customer movement in all stores are combined into our big data system.  Analytics on that data reveals that our customers are tending to move toward a certain display area.  Using that information, we reconfigure some stores and move the display toward the front.  After monitoring the new layout, we can continue to make adjustments to optimize the store based on our customers’ behaviors while shopping.

In the early days of digital transformation, this example would not have been possible given the technology available at the time. Now this example is real and has been implemented in the U.S.

This example shows why Digital Transformation is so important. Companies that align their businesses to take advantage of all these capabilities will be more connected to their customers and will have better insights into their customers’ expectations.