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Steps to digital transformation success: start small and fast

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Steps to digital transformation success: start small and fast

Steps to digital transformation success: start small and fast. First Steps to Digital Transformation Success: Small, Quick Start, the first in the Digital Transformation Process: Keys to Success guide, helps you understand the importance of transforming your business model through digital transformation (DX, DT, Industry 4.0) and emphasizes the importance of an incremental approach with success stories from Starbucks and Rolls-Royce. Learn how to start your DX journey with Small, Fast Steps.

Understanding the success and importance of digital transformation

Most organizations that are interested in digital transformation (DX) often set fairly ambitious goals from the outset. This is because the digital transformation success stories that have been shared in the market so far have focused on business model transformation. There’s also a sense of expectation on the part of executives that DX will do something magical. But like all things, the DX journey is a step-by-step process.

A successful business model transformation story: Starbucks

Let’s take a look at some of the best examples of successful business model innovation through DX. (DX examples) First of all, in the B2C field, Starbucks is the best example. Starbucks added a mobile service called “Siren Order” to its business model of selling coffee in offline stores. The idea was to move from in-store, face-to-face ordering to mobile ordering.

Starbucks also created Starbucks Pay, which allows you to make deposits and use them to pay in-store, as well as a loyalty program and various rewards programs, all through a mobile app. Now, Starbucks is naturally collecting customer information and will find new ways to use it.

Starbucks

Several recent research reports have called Starbucks the most powerful fintech company in the world. In addition, with the recent increase in drive-through stores, Starbucks is now offering a service that connects your license plate to your existing Starbucks membership, allowing you to pay by simply scanning your license plate without having to open the app. DX is at the core of Starbucks’ mobile-centric business.

Innovation in B2B: Rolls-Royce’s approach

The next example we’ll look at is in the B2B space, with Rolls-Royce‘s aircraft engine business. Unlike automobiles, aircraft engine sales work on the basis that when an airline places an order to build an airplane, it specifies which engine it wants to use, i.e. when Korean Air buys an airplane from an airplane manufacturer like Boeing, it orders the airplane to be built with a specific brand of engine. Like most manufacturers, Rolls-Royce’s business model is to manufacture and sell aircraft engines and then provide maintenance services.

More recently, however, the company has been adding a variety of sensors to its engines and using the data it collects to provide maintenance services. An aircraft engine generates 20 terabytes of data in one hour, which is a huge amount of data if you assume that an airplane has two engines and flies for an average of six hours. The idea is to use this big data to diagnose aircraft engine faults.

This is a very important service that can save a company a lot of money in terms of preemptive checks before an actual engine failure occurs. Rolls-Royce has also created a business model that is tied to a performance system that rewards airlines for reducing their losses due to engine failures, meaning that if they can reduce what could have been a week of downtime through big data analytics and proactive maintenance, they get a share of the airline’s revenue.

It could be argued that they are actually charging for the time an aircraft engine runs. Rolls-Royce has created a new business model by moving from the traditional model of manufacturing and selling airplane engines to charging for time spent in service.

An incremental approach to digital transformation

As you can see from the DX journeys of Starbucks and Rolls-Royce, their business model transformation didn’t happen overnight. It took a lot of trial and error and constant execution to refine it. Whether you’re a mid-sized company, a large enterprise, or a startup, these business model shifts are based on years of investment and experimentation.

While it would be great if all companies could follow the same steps and navigate the DX journey, that’s not the case, which is why we recommend that manufacturing companies start by digitizing the product itself. It’s about connecting your product to the internet and thinking about what information it can collect and, conversely, what information it can provide.

In the case of Rolls-Royce, we’ve already seen how the company transformed its business model from engine manufacturing to a data-driven service business. They started by connecting their products to the internet, which is to say, they started with what they were good at and gradually incorporated digital technologies and ultimately transformed their business model.

Steps to digital transformation success: start small and fast

What if you’re struggling to digitize your flagship product internally? If so, you may want to consider DX as a way to streamline your operations, not as a new business model. Operational streamlining means reducing various costs in a company’s operations. If the application of technology in the value chain of planning, development, operation, production, quality, and marketing improves productivity and reduces costs, this is also a great DX journey. Automating production processes centered on the know-how and experience of skilled workers by utilizing digital technology, even if it improves the yield of the production process by 1%, will result in tremendous added value for the company.

Other activities include analyzing customer review data after a product has been produced and sold, or tracking usage data of internet-connected products to detect abnormalities early and prevent quality incidents such as recalls. In addition, predicting the number of sales of flagship products and estimating the storage period of accessories for product repair are other areas that can be streamlined through DX. For companies producing consumer products such as food and cosmetics, instead of conducting FGI (Focused Group Interview) in the market research process, they can mechanically collect various comments on SNS and analyze them to derive insights. This is also the journey of DX.

Digital transformation starts with small goals

The ultimate goal of DX is to create the conditions for a company to always be able to shift to a new business model that allows it to continue to grow. However, if you aim too high from the start, you can end up spending money and not seeing results, or failing to implement DX due to internal resistance. Instead, it’s best to start with small goals that you can implement in a short amount of time and see immediate results.

Digital Transformation Organizational Structure: The Importance of a Self-Sufficient Organization

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Digital Transformation Organizational Structure: The Importance of a Self-Sufficient Organization

Digital Transformation Organizational Structure: The Importance of a Self-Sufficient Organization. The seventh part of Acquiring and Organizing Talent to Drive Digital Transformation (DX) Success explores strategies for effectively organizing and managing a dedicated digital transformation (DX) team. Learn the importance of an end-to-end organizational structure and HR strategy, and discover how to support your organization for DX project success.

Basic considerations for building a digital transformation organizational structure

Now that you have an organization dedicated to digital transformation (DX and DT) and have someone working on it, the next question is how to organize it. If you have 8 people or less, you can organize them into a team without much thought. However, if you have more than eight people, or three or four people in different roles, you’ll need to think a bit more. How you organize your team has a lot to do with how fast you can get DX up and running.

Job-centric vs. project-centric: How digital transformation organizations should be structured

Even when a company has only 30 members, executives are often faced with the question of how to organize. Most companies have two main types of organizations. One is a functional organization. For example, a development team, a planning team, a design team, etc. In IT, this is especially preferred because people learn and grow by working with their peers. Functional organization gives employees a sense of security and helps them improve their skills.

Another form of organization is teaming up by project or business unit. Instead of being organized by job function, people with different roles are brought together to work on a project or business with a common goal. This type of organization has the advantage of being able to execute quickly because the common goal is clear. Instead, the leader of the team needs to have an understanding of all job functions. And because members aren’t working with people in similar roles to their own, they may not have a sense of belonging and may feel insecure about their personal development.

forms of business organization 1

The right end-to-end organizational structure for your digital transformation organization

So what kind of organization is right for digital transformation? Unless you’re a large enterprise that can afford a large team to handle your digital transformation, I recommend a single, purpose-driven team, which means you’ll want to have an end-to-end organization where someone on the team is responsible for DX execution from start to finish. This may sound like a no-brainer, but you need to be aligned early on, with clear goals and a limited timeframe. This is why it’s good to have an organization that is accountable for the beginning and end of a task. That’s not to say you should create an IT-only organization.

If you’re planning DX for your existing core business, you’ll need to bring key people from that side of the business into the DX organization as well. For example, when Starbucks launched a new business offering mobile experiences like Siren Order, they had service planners, developers, and designers that were part of the IT staff, but they also had people from the retail organization that were transitioned into the new organization. This means that you need to have a true end-to-end organization, and you need to be able to pull in and out of the organization as you see fit.

This is similar to running a separate startup or internal venture. You might think that you can create a virtual organization in the form of a task or project team, but the reality is that running a DX is a series of decisions, just like running a successful startup. That’s why it’s important to have clearer organizational goals and approval lines. It is difficult to achieve the desired level of DX results by simply moving from one place to another like an enemy.

HR strategy for running a complete digital transformation organization

Once you’ve made the decision to create a complete, end-to-end organization, the next step is to establish the basic principles by which it will operate. It is fundamental to give the head of the organization maximum authority and responsibility, and to establish early on the attitudes and philosophies that individuals in the end-to-end organization should have as new team members.

To this end, I would like to suggest the following HR practices: For the first three years, I recommend that the organization’s evaluation method be absolute rather than relative. Relative evaluation has its advantages, but in a DX organization with a clear direction, it is important to create a sense of shared goals among employees. It sends the message that if you do your best work, you’ll get a good evaluation. Absolute appraisals help to focus all work towards the organization’s common goals, rather than individual competition.

When you have a cross-functional team in an organization, there are bound to be some roles that are more internally vocal than others. This can vary from company to company or depending on the person in charge of the organization. This can lead to developers giving various opinions on planning and business instead of focusing on development, designers ignoring developers’ opinions, and so on.

In order to avoid these mistakes, it is important to clearly declare the roles and responsibilities of each job from the beginning of the organization and make sure that they are recognized by each other. In other words, it is important to create a culture that recognizes and trusts the skills of the best professionals. There should be a consensus that each person should be expected to make the decisions necessary to execute their job.

Effective organizational management to support your digital transformation organization

Finally, we’re talking about the support organizations that will help your DX organization. For example, legal, finance, accounting, and so on. Leaving these support organizations to execute according to their existing processes can lead to frequent changes in personnel, or people with no IT understanding trying to dictate the DX project with their own internal management rules. To avoid this inefficiency, executives should also consider assigning a dedicated DX person in the support organization.

Some of the aforementioned directions can be quite uncomfortable from a traditional HR perspective. However, since DX is all about breaking the mold and creating new efficiencies, it’s important to explain this to existing employees and create a culture where both organizations understand each other.

Digital transformation workforce: need to be treated according to IT industry standards

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Digital transformation workforce: need to be treated according to IT industry standards. The sixth part of Acquiring and Organizing Talent to Drive Digital Transformation (DX) Success explores the importance of treating members of a dedicated digital transformation (DX, DT) organization in line with IT industry standards. Examines the competitive landscape of the domestic and international IT labor market and the strategies needed to recruit DX talent.

Up-and-coming careers in IT and the demand for digital transformation talent

Most of the jobs in the top 10 of Glassdoor’s list of the 50 hottest jobs of 2020 are in the IT field. The list was based on salary, job satisfaction, and job placement rates, and the top 10 jobs include front-end engineer, JAVA developer, data scientist (AI modeler), product manager, DevOps engineer, data engineer, and software engineer, all in the IT field.

The current state of domestic and international IT talent competition

In fact, these are the people who are essential to digital transformation. The domestic situation is not much different. Recently, the battle for IT talent among Korea’s top IT companies, such as Naver, Kakao, Delivery Nation, Coupang, and TOS, has been fierce enough to resemble a war. They are competing fiercely to recruit A-level developers with the best treatment in the industry, as well as large signing bonuses (incentives given in advance upon signing a work contract), various other welfare benefits, and stock options. This competition for talent is only getting more intense.

The importance of treating your digital transformation workforce right

The reason for the lengthy description of the job market in the IT industry is that the talent for digital transformation falls into the above categories and is competing for talent with the big names. One of the first things that comes up internally when you’re building an organization to execute DX from a non-IT perspective is the treatment of new hires. This is not only true for large organizations, but also for small and mid-sized companies.

If you’re a small startup, you have the flexibility to negotiate with the managing director and make decisions based on individual capabilities, but if you’re a larger company, you’re limited by the size of your workforce, and you can’t treat people differently for different jobs. However, the bottom line is that it is important for DX employees to align their treatment standards with the company’s existing treatment and the IT industry in which they work. This will ensure organizational continuity.

Digital transformation workforce: need to be treated according to IT industry standards

Key factors to consider in digital transformation staffing

Beyond the need to align average pay with market standards, there’s something else to consider when hiring new talent. In IT, the difference in productivity between an A-player and a C-player is more than double. So, if you can, it’s better to hire one A-player, even at a higher salary, than two C-players. Of course, as your organization grows, it’s not practical to keep everyone at A-level talent.

But in the early days of building a new organization, it’s a good idea to keep it that way. And one more thing, what companies like Google, Netflix, and Amazon in the US have in common is that more people want to work for them because they know that the people they work with next to them are A-listers and they want to work with them and compete with them. This can also be an important factor in driving loyalty to the company. This is something that we need to think about when we’re recruiting talent.

Digital transformation workforce: Strategies for reference checks and turnover in the IT workforce

When conducting a recruitment interview, it is difficult for managers or interviewers to accurately assess a person’s capabilities based on a short interview time. However, people in IT jobs are relatively easy to evaluate because it is easy to check references and see their own apps, services, and data modeling. When checking references, it is possible to get two or three or more external people instead of just one.

In recent years, the IT industry has seen a lot of competition for talent, and it’s not uncommon to see people jump from one job to another in the middle of a project for a higher salary. It’s not uncommon to see people leaving for double their previous salary. Not all employees decide to change jobs simply because of salary. However, it’s important for executives and managers to realize that many workers are getting offers from more places than they realize. For non-IT organizations, the loss of hard-earned talent can be devastating. Don’t overlook the fact that digital transformation is more likely to be an individual effort than an organizational effort in the short term.