Digital Transformation, the buzz phrase of the moment, is a term I’ve heard and used a lot myself in the past couple of years, but I’m still not sure it’s clearly understood. This is my defininition which I hope clarifies the concept.
Firstly, let’s define transformation. Transformation is a whole scale change to the foundational components of a business: from its operating model to its infrastructure. What it sells, to whom and how it goes to market. A transformation programme touches every function of a business;, from purchasing, finance human resource, through to operations and technology, sales and marketing. To understand the scope of what transformation means to a business, refer to the value chain model.
Businesses often build and develop new products and services, move into new markets, merge with or sell to competitors, or swap out components of their value chain to gain competitive advantage, but none of these things are necessarily transformative. Business don’t transform by choice because it is expensive and risky.
Businesses go through transformation when they have failed to evolve. When a business evolves with its market, continually refreshing products and proposition, reaching new sets of customers and growing the value of existing ones, it doesn’t need to transform. A business may go through radical changes and significant restructures, but it’s only a transformation if it’s highly visible from the outside, to its customers, and was driven by external factors. That said, a transformation is still some way off of a turnaround.
There are three key drivers of transformation: changing consumer demand, changing technology and changing competition. These, of course, are an ecosystem and it is always a convergence of factors that brings about changes in a market.
When any of these factors coincide such that a business’ operating model is no longer fit to serve its customers, the business has reached a tipping point. Here’s the thing – evolving businesses don’t reach tipping points! They spot opportunities before they become tipping points. Evolving businesses are continually focussed on their customers, changing and adapting with, or leading in their market. Businesses that spot tipping points when they are too late to be considered opportunities need to transform, and those that don’t, tip over the edge. Consider HMV as a point in case.
Clearly none of this is new – there are well-used models to understand these market phenomena; Porter’s five forces, McKinsey’s 7S , and the Boston matrix, for example.
Next let’s define digital. I think of it in the broadest sense as any technology that connects people and machines with each other or with information. Therefore ‘Digital Transformation’ is a visible, wholesale restructure to avoid a tipping point caused by digital technologies and downstream market effects.
So, what is our role in Digital Transformation?
Firstly, let’s clarify what we don’t do. We don’t manage transformation programmes on behalf of large businesses. This is the realm of the big global consultancies: PwC, DeLoitte, Accenture, etc. To transform a large organisation takes a huge amount of resources and a cross functional set of business skills that you typically only find in these global consultancies, and it takes more than a year to define and implement.
Our role is far simpler. We help businesses avoid the need for Digital Transformation altogether.
We specialise in being close to consumers, understanding new technologies and markets, and what’s going to happen next. We work with our clients to see what’s coming and help them evolve to meet it. We bring new products and services to life in prototypes and trial products and experiences such that businesses can envision the future, so they can be ready for it, so they can lead it.
Smart businesses take advantage of opportunities before they become tipping points to avoid going through transformation, and we, as creative agencies, play a critical role in helping them do this.
Howard King
As Head of Data and Analytics, Howard is responsible for development and delivery of analytics capability to meet both the needs of our clients and to enable Rufus Leonard to demonstrate the commercial value in the work we do. He ensures that we define, collect and utilise the right data on all projects. Joining Rufus Leonard from PwC, Howard brings a wealth of experience having worked with a variety of clients in sectors including media, utilities, consumer goods and telco including Channel4, Anheuser Busch InBev, and Nestlé.
