Questions about how and in what order to do Digital Transformation

Questions about how and in what order to do Digital Transformation? That’s what we’re going to talk about in this article, which is the fourth part of Digital Transformation Strategy: The Essential Guide to Enterprise Success.

This article emphasizes the importance of digital transformation (DX), highlighting that it is primarily about changing the way work is done rather than focusing solely on business model changes. It emphasizes that technology plays a role as an enabler but organizational readiness and preparation are crucial. The article uses the example of Blockbuster and Netflix to illustrate the need for adequate preparation and organizational change for successful DX.

DX’s scope includes innovating through digital capabilities and tools, transforming existing core products or services into digital forms, and even introducing entirely new business models. It also involves the transformation of work processes. The article underscores personalization as a key element of DX.

The article discusses the evolution of DX over time, from the early days of building digital infrastructure during the dot-com era to the expansion of digital foundations in the mobile era. It highlights technologies like the Internet of Things, cloud computing, artificial intelligence, and big data as critical in the current phase of DX.

In terms of prioritizing DX efforts, it suggests that defining and specifying the problems DX aims to address is crucial before diving into the technological aspects. The article concludes by emphasizing that DX will continue to be relevant across various organizational levels, with a focus on people, organizations, and processes being essential considerations.

– Summarized by ChatGPT

The Heart of DX: Changing the Way We Work and Transforming Your Business

Most of the DX success stories in the market have been focused on business model transformation. This focus on business models makes us think that DX is far from something we can do today. But as I’ve emphasized before, DX is about changing the way we work, and then transforming the business around it. Technology is just a stepping stone to unlock the possibilities, so it’s a journey where it’s clear who has to be the hero. DX doesn’t just happen because a CEO wakes up one day and says, “From now on, we’re going digital.” It’s not something that happens naturally, even in digitally savvy companies.

The challenges of digital transformation and the importance of changing your company’s culture

Evolving a traditional business is hard enough, but transforming it digitally requires significant investment and effort, and there’s no guarantee of success. Transforming a company is not a matter of copying other companies. If you try to copy another company’s DX practices, you’re more likely to fail.

Blockbuster and Netflix: Contrasting Examples of DX Failure and Success

Even if they were the number one company in their field. The case of Netflix and Blockbuster, which Harvard Business School professor Clayton M. Christensen cites as prime examples of what he calls “disruptive innovation,” provides us with a great example of the failure of a number one company.

Blockbuster started out as a video rental store, with rental locations in major cities across the country and a model that allowed them to rent DVDs to customers for a fee and collect late fees for late returns. Netflix, on the other hand, opted for a subscription model, sending DVDs in the mail and receiving them back in the mail. Since they had already paid for the subscription model, they didn’t collect any additional late fees.

What were the results? Well, as we all know, Blockbuster went bankrupt, and Netflix made history as an OTT (Over The Top, meaning “over the top of your TV set-top box”) service that delivers broadcast programming, movies, education, and other media content over the Internet. Along the way, Blockbuster, like Netflix, adopted a no late fee model and also became an OTT service. But Blockbuster eventually went bankrupt. Why? Because it wasn’t organizationally prepared for the change.

The importance of starting small with DX

Blockbuster’s example is not unique. No organization can secure its future if it doesn’t prepare itself internally for change. It’s one thing to know that change is necessary, but it’s quite another to actually implement it internally, so it’s important to start with small steps that everyone can take, rather than just consulting and arguing about big DX.

But even this is difficult to apply to all companies. Every organization is different. If you’re trying to make your organization more pro-digital, you might miss out on some really important business changes, or your culture might be disrupted. So you have to be mindful of all of that and always be thinking about what roadmap you’re going to apply and where and how you’re going to apply it. So the trick is to have a different sequence of DX for each department instead of a one-size-fits-all company-wide approach, or to have one destination for the DX and create a kind of welcome mat.

DX roadmap: departmentalized, targeted strategies instead of an enterprise-wide approach

From that perspective, let’s summarize what DX is all about. DX is the process of leveraging digital capabilities to create targeted innovation. Specifically, it involves innovating technologies, tools, culture, etc. that correspond to digital capabilities, and then using them to digitize existing core products or services or innovate into completely new business models. Along the way, business processes are also transformed. All of this is the subject of DX.

And it’s about putting people at the center.

The evolution of DX: From digital infrastructure to personalization

DX has gone through three evolutions so far. The first evolution of DX is the establishment of a digital infrastructure foundation, which occurred during the dot-com era when the Internet was in full swing in the 2000s. At that time, as the use of the Internet increased rapidly, a variety of related products began to emerge, from traditional music to digital music such as MP3, and from video and DVD videos to digital VOD. In addition, offline businesses were also changing. Online bookstores have emerged, threatening brick-and-mortar bookstores, and numerous e-commerce services have replaced retail stores.

The technologies that made these services possible were server/client systems and networks. During this period, companies and individuals began to build digital infrastructure and actively pursue digital marketing, such as advertising in online media instead of mass media.

The second was the mobile era of the 2010s, when the digital base expanded. As iPhones and Android-based smartphones became popular, people began to purchase paid apps or in-app purchases from the Apple App Store or Google Play Store. It was a new business model to sell digital items on mobile, as opposed to selling physical goods online, and social networks like Facebook and Twitter were becoming ubiquitous.

Streaming video services such as YouTube have also become part of our daily lives. As changes in the media market accelerated, the product advertising market also began to move to mobile. It quickly became a global service, with Facebook, YouTube, Twitter, Instagram, and WhatsApp being used by more than 1 billion people worldwide.

As 2020 began, a third evolution began. At the heart of this third evolution is personalization. The Internet of Things, cloud computing, artificial intelligence, and big data technologies have connected devices and spaces that were not previously connected to the Internet, and the data generated is analyzed through the cloud, and artificial intelligence technology is used to solve the problems found. Businesses are providing personalized services and making them available to everyone. This affected not only large companies but also individual business owners.

Today, NAVER’s Smart Store service helps anyone open their own shopping mall and digitally transform their business. One-person businesses are now able to do business freely thanks to digital technology. This evolution has been driven by the COVID-19 pandemic, but also by stronger IT technology and delivery services. DX is now a conversation that applies to everyone, whether you’re a large enterprise, a small business, or an individual.

As such, DX is being practiced at many different levels and on many different levels. So you could say that there is no formula for DX.

The first step in running DX: defining the problem and the roles of members

So what should we focus on and prioritize for DX, and what’s the first question to ask? The first question we need to ask for DX is what is it that I want to solve with DX and define it specifically. If you can’t create a problem, if you can’t pinpoint a problem, you can’t find a solution. If you start interpreting DX through the lens of technology, it’s easy to get caught up in where you can apply technology.

It doesn’t matter if it’s necessary or not. For DX, we need to think about what the problem is and how our members can solve it. Then, it’s about what opportunities we need to give them. Depending on the definition, the method and sequence of DX will vary.

The DX we’re going to talk about will be detailed, from the individual to the enterprise, from building and leveraging digital environments to preparing for new innovations. At the heart of it all, we will continue to ask what people, organizations, and the processes that surround them should look like.