Digital Transformation. The Challenge of Digitalization A How-To Guide. Copyright 2015 ScS Lüttgen All Rights reserved.

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1 Digital Transformation The Challenge of Digitalization A How-To Guide Copyright 2015 ScS Lüttgen All Rights reserved.

2 The business landscape today is undergoing a radical change the likes of which the markets have never observed before. The rapid advancements in the field of information technologies and the ever-shorter technology life cycles have led to the creation of significant amount of pressure for all business organizations. Even well established and traditionally secure market incumbents are feeling the colossal effects of this new world force. Their once loyal customers are becoming exceedingly more demanding and are turning away in favor of more appealing offerings. Their competitors are constantly discovering new ways to make better use of innovation and challenge the once unreachable top of the market. The driving factor behind all these changes is what has come to be known as digitalization. It is the reason why a multi-billion dollar organizations could be threatened by and lose customers to a five people team operating from a garage on the other side of the globe. Digitalization represents the modern reality, in which everything is connected through the Internet, consumers have a nearly unlimited access to information, and competitors can establish a company and instantly have access to billions of users. In this dynamic and turbulent environment the winners are no longer determined solely by their ability to achieve scale economies or reduce process redundancies bur rather by their ingenuity and capability to deliver superior and innovative customer value. 2

3 Viewing digitalization solely as a threat, however, will be a grief mistake. Large companies have the power and resources to transform themselves in the new ways. In doing so however, they must reshape their entire business model and be willing to adopt a new way of thinking and doing business. The path to achieving this can be broadly broken down to four main steps that provide a basic how-to guide to digital transformation. The four steps are namely: evaluate, develop, implement, and train. The specifics of those are up to the organization itself to determine and require a thorough indepth analysis of the internal workings and core processes of the company. Evaluate Current IT Infrastructure Digital transformation is a gradual process and as with every process it must begin with the definition of a clear starting point. This where-we-currently-are point entails the exhaustive evaluation of the organization s present IT infrastructure and facilitates the identification of potential weaknesses and areas that need improvement or have become obsolete and need to be removed completely from the organizational structure. In order to achieve this the company should make use of approved best practices that could be used as a template in pointing out hotspots. The outcome of this step should be to have a clear understanding of the company s current degree of digitalization and to thus be able to better estimate the impact of digital transformation on the business model. 3

4 Develop Transformation Roadmap After the where-we-currently-are step is completed the where-we-want-to-be one should follow. In this second stage of the digitalization process the detailed plan on how to achieve it should be developed. In order to do so the company s leaders must be able to produce a clear and well-defined roadmap that covers all the major milestones to be accomplished and can present a complete list of all the organizational components, both structural and strategic, that will be affected in the process. The development of this step requires the organization s managers to exercise their full-fletched entrepreneurial way of thinking in order to come up with innovative and modern ways to create superior value for the their customers. Implement Digitalization With the possession of a detailed and well-defined roadmap to digital transformation the company s leaders can now begin the process. Implementing the changes outlined in the previous steps could prove to be quite a challenge as organizational members often have the tendency to resist large-scale transformative actions within the company. In order to tackle this problem managers should ensure that the digitalization process is as incremental as possible and that its benefits are well understood organization-wide. One point that makes this manager s task easier is the fact that the positive effects of digitalization are easily observable and have instances in every department and hierarchy level. 4

5 Train Workers in New Ways The final step of the transformation process occurs postdigitalization. It is however, crucial if the organization wants to utilize to a full extend the benefits and possibilities the new business model has to offer. In this step the company s leadership has to face the challenge of implementing new ways of reporting and measuring performance that fit better with the new frontiers the organization operates in and communicate those to all organizational members. Understanding the underlying principles of the digitalization process by all employees is crucial to the sustainability and effectiveness of the model as the turbulence of the business environment the company operates in causes it to often change, which requires adjustments to be made on the go often without the full involvement of the organization s top level management. The process of digitalization could prove to be a real challenge to the organization. Its nature is such that it affects the complete business model of the company all business units, all hierarchy levels, and all structural and strategic components. Undergoing the transformation process, however, is a vital prerequisite to the organization s success in the newly molded business landscape. Digitalization helps shift the company s focus towards a customer-centric view and paves the way for the implementation of entrepreneurial management, which is how a modern company should be run. Copyright 2015 ScS Lüttgen All Rights reserved. 5