Digital Disruption

As digital disrupts traditional business models, companies entering the digital marketplace will experience digital transformation in different ways. One scenario would be the following. First, they will add a Facebook page or website to their TV commercial or print add. Second, they will realize that the TV commercial is now digital and needs to be integrated with their digital campaign. Third, they will discover that the consumer is the center of the digital marketplace and effects the entire marketing function. Finally, organizations are challenged to incorporate digital technologies at the core of every aspect of their business and use it to fundamentally improve the performance or extend the reach of their enterprise. These five ‘realizations’ initiate organizational change and serve as the foundation of Digital Transformation.

Much of the work on Digital Transformation has focused on large transnational companies

IBM studies of leading corporations’ path to digital transformation suggested three paths:
1. Create and integrate digital operations first. Then address the customer value proposition to achieve full transformation.

2. Enhance, extend or reshape the customer value proposition with digital content, insight and engagement. Then focus on integrating digital operations.

3. Build a new set of capabilities around the transformed customer value proposition and operating model in lock-step.

The Capgemini –MIT Sloan study of 157 executives in 50 large companies across 15 countries suggested “Executives are digitally transforming three key areas of their enterprises: customer experience, operational processes and business models.” Didier Bonnet, Global Practice Leader for Capgemini Consulting, sums up the key findings of an expanded study in “The "Front Line" of Digital Transformation.”

In studying the impact of digital transformation in the financial services industry, three similar areas were noted: user experience, business processes, and operating model. What made the digital journey successful in each area was the value drivers of customer service, process excellence and operations excellence.

McKinsey, in another study of larger companies, suggested that digital technologies drives value in businesses in four ways: enhanced connectivity, automation of manual tasks, improved decision making, and product or service innovation. They contend that digital reshapes every aspect of the modern enterprise. If companies take a limited view of digital transformation, they become “vulnerable to new entrants and agile incumbents that can translate operational improvements across the full value chain, combined with innovative operating models, into better, cheaper, more customized products, faster service, and an improved customer experience.

Whereas the larger companies note the strategic necessity for digital transformation, they face a siloed organization with entrenched management and a large workforce to transform. SME’s have an advantage in terms of size, flexibility and management adaptability to seize these gaps in the digital marketplace and transform their organization to meet these needs. UK Fast CEO Lawrence Jones says, "Large businesses have a much different process to go through than SMEs. If small businesses don't innovate digitally and don't try harder, they don't survive. So I think we've seen a lot more digital transformation in smaller companies".

“Digitization” is forcing organizations to rethink their business models and focus on their agility to harnessing their assets. A case study of Hays Recruitment, a major recruitment company’s experience with the internet and social media, reflects the above three areas in digital transformation.

The company’s CIO of 20 years was faced with digital technologies that were unrecognizable, including a content-led strategy to build the company’s following on social network LinkedIn.

“At that point, the company had a technology strategy that hadn’t changed for 25 years,” recalls Weston. “We were running software that wasn’t Internet enabled, and all our regions were all using different variants of that software.”

“We stepped back and said, we know that the Internet is going to change the way that we operate, but we don’t know how,” he explains. “So if we're going to be successful in the future, we need to have an infrastructure that allows us to plug things in – without knowing what they are in advance.” He was forced to rethink his business model.

Hays set about replacing its entire stack of recruitment software including posting vacancies to job boards and parsing CVs into structured data. It added the back-end to the infrastructure as a data warehouse for reporting and analytics and a Google search appliance that allowed them to pin-point very specific candidates.

“Now we worry more about the user experience than the plumbing and infrastructure,” says Weston. “The infrastructure to present the data and interact with our corporate systems is all there.”

Focusing on customer experience, the CIO partnered with the marketing department to rebuilt its web presence, and mobile strategy – both of which were made much simpler by that underlying transformation. Perhaps the best vindication of the strategy has been Hays’ integration with LinkedIn. The company uses the professional social network as a source of up-to-date and relevant information about its candidates. It drew in candidates LinkedIn profiles so consultants use that in their assessment.

“That gives us a richer dataset, with more complete data, and it’s more likely up-to -date as well.”

The transformation at Hays went beyond technology integration. They needed to develop a content marketing strategy to accumulate the highest possible number of ‘followers’ on the site, in order to attract new candidates to fresh job openings. It is now the 40th most followed company on LinkedIn, just ahead of Nike with – at time of writing – 259,000 followers. CEO Alistair Cox is among the top 150 ‘influencers’ on the network.

The CIO concluded: “For me, digital leadership has to come from an marketing leverage point, and a technology leverage point. I am working with a colleague who brings the marketing experience, but I am ultimately accountable for the whole programme.”