DT - Digital Transformation

Questions about how and in what order to do Digital Transformation

01/07/202411/27/2023 by DX Talk

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.

Digital Transformation takes at least 3 years

01/07/202411/27/2023 by DX Talk

Digital Transformation takes at least 3 years. Of course, it doesn’t happen in three years, but the point is that you need at least three years to make a difference. In this article, we’ll look at Kakao and other examples of why digital transformation doesn’t always produce results. This is the third part of Digital Transformation Strategy: The Essential Guide to Enterprise Success.

A successful digital transformation (DX) project requires a minimum of three years of time. During this time, year one should be focused on improving digital capabilities and expanding the digital culture within the organization; year two should be spent collaborating, choosing, and focusing on business-meaningful tasks and setting full-fledged DX goals; and year three should build on the previous years’ achievements and expand DX into new areas. Digital practitioners need to understand the “three-year time horizon,” moderate their expectations for deliverables, and persevere through the project. This process will help organizations anchor their digital culture and achieve a successful digital transformation.
– Summary with ChatGPT

The birth of KakaoTalk: A journey that began at iWillLab

South Korea’s KakaoTalk is the leading mobile messenger with the largest market share, used by most smartphone users in Korea every day. However, not many people know how KakaoTalk came to be.

Kakao started as a startup called iWillLab in 2006. For the first year of its existence, iWillLab created a web-based service called Buru.com, a social bookmarking service. However, most readers probably don’t even remember that it existed. In fact, Buru.com was shut down just three months after its launch due to a lack of users. The company then went on to create a social ranking service called Weegeea, which reached up to 50,000 users. Three years went by, and when the iPhone was released in November 2009, and the company saw that the entire game had shifted to mobile, they saw an opportunity and started planning a new service. This is how KakaoTalk was born.

In addition to KakaoTalk, other communication services with different targets but similar characteristics were launched one after another, such as KakaoAjit and KakaoSuda. In fact, KakaoAjit was the first to be released in February 2010, and KakaoTalk was released the following month in March 2010. The number of KakaoTalk users exceeded 1 million within six months. It was a huge success. In 2014, three years after its launch, Kakao merged with Daum Communications to form KakaoTalk.

The long road to success: examples from startups and enterprises

We started out as a small startup and failed to launch a single service for more than three years. Many of the services we use every day also require quite a few failures and time to reach success. This is true not only for Korea but also for famous services abroad. Amazon and Facebook also had to wait at least 5 years and up to 10 years after starting their business before they gradually secured a stable business model and started growing in earnest.

In the process of growing a startup, you often hear the term ‘death valley’. Death Valley refers to the process in which a startup successfully launches a new service or business, but then faces difficulties in attracting funding and is pushed to the brink of bankruptcy. It usually happens between three and five years after launch. The reason why startups go through death valley is simple. It’s because it takes at least three years, and often five, to succeed. It doesn’t end when you build something, it takes time to establish yourself in the market and establish a new business model.

The importance and challenges of digital transformation

What about enterprise-driven DX? Like startups, DX requires a minimum of three years. The people and organizational changes that are most important for DX to take hold can’t be done in 1-2 years. When I see DX failures, especially in professional management, it’s often due to pressure to deliver results in a short period of time. This is the reason why we miss it even though we know it in our heads.

If you focus on short-term results, your DX is likely to fail, even with strong executive support. That’s why it’s important to communicate this timeframe to management and explain well why they should wait.

Digital Transformation takes at least 3 years: Step-by-step approach

So what’s the best plan to have and execute over time? Every organization is different, so there’s no one right answer, but we recommend the following phased approach.

In year one, focus on activities to increase the digital capabilities of your existing organization. Introduce digital technologies and tools, and run training and support programs to improve employees’ digital skills. Also, start thinking about extending the digital culture to the rest of the organization and create a dedicated DX team. This organization works with the existing IT organization to focus on the challenges of improving the digital experience. For example, pilot projects that apply the core technologies of DX – artificial intelligence, big data, and cloud – to the enterprise environment. At this stage, focus on gaining experience through execution rather than high performance. Make sure to communicate this to the executive team and get buy-in.

In year two, select a business-critical challenge from the pilots in year one and set a full-scale DX goal. This is where collaboration with the existing organization is critical. It is difficult to achieve a successful outcome if the benefits of DX are unclear and irrelevant to existing organizations. Therefore, it is important to start by focusing on the challenges that existing organizations need and can quickly move to commercialization. In other words, be selective and focused.

Year 3 is when the work selected in year 2 is at a commercial stage and has business significance in the eyes of management. It’s not complete, but it’s the end of the DX cycle that the organization has come to expect. If you think you’ve made significant progress at this point, it’s time to scale the success equation to new areas.

A long-term view of digital transformation and advice for practitioners

My mantra for DX practitioners is “three years”. You need at least three years to embed DX into your organization’s culture. If you don’t have three years, take a step-by-step approach as described above, but lower your expectations for results.

If we’re not an IT company, or if we’re in a business that’s far from IT, then as a DX person, I’m like a wanderer in the desert. You have to endure that time. You can never get lost.

The Long Journey of Changing Habits in a Digital Transformation Organization (1/2)

01/07/202411/27/2023 by DX Talk

Today I’m sharing a two-part article on The Long Journey of Changing Habits in a Digital Transformation Organization. This is part 2 of Digital Transformation Strategy: The Essential Guide to Enterprise Success.

Digital Transformation: An Essential Strategy for the Modern Enterprise

Digital Transformation (DT or DX) is a buzzword that is rocking the enterprise market. Many organizations are feeling pressured and impatient to get ahead of the curve. DX solution and data services companies are trying to capitalize on this impatience with a lot of marketing. They’re talking about artificial intelligence, big data, etc. and telling you that if you don’t adopt their solutions, you’ll be left behind. At the center of this phenomenon is technology.

DX beyond technology: The importance of people and process

Is it possible to talk about DX in terms of technology alone without also talking about the people and processes that make up the organization? When you look at proven DX success stories, you see that while technology is important, it’s more about changing the culture of the organization and the digital awareness of its people. By focusing on the people and the organization, rather than the technology, DX has been successful. But culture doesn’t change in an instant. They change over time as people become more digitally literate and redesign how they view technology and how they work. That’s why DX is a “long journey” of designing and transforming into a new business.

From the 1990s to the Present: The Changes and Evolution of DX

When it was first introduced in the 1990s, DX meant applying digital technologies to disrupt traditional social structures. Indeed, in the 2000s, with the internet and mobile era, digital technology has revolutionized our daily lives. When Amazon first announced its intention to sell books online, many media outlets mockingly criticized the idea, saying it would never succeed. But now it’s the number one e-commerce company in the world.

The same was true when Apple launched the iPhone and proclaimed it would change the world. At first, we looked at smartphones as just a cell phone with a little bit of intelligence, but now, as we know, every service in our daily lives is done on a smartphone. And when the Fourth Industrial Revolution became a business buzzword, digital was no longer the preserve of a few IT companies, but was recognized as a necessity for all businesses to survive.

The Long Journey of Changing Habits in a Digital Transformation Organization

What are the differences between DX in the past and DX today? DX today does not just mean technology change, but also includes management transformation and even business model transformation. The reason for the shift from technology change to business model is that the maturity of the technology has reached a significant level unlike before. In other words, DX is no longer a buzzword, but a realistic business transformation, and the market has built up trust that it is a reality that can no longer be postponed. In fact, DX-related technologies represented by cloud, big data, artificial intelligence, Internet of Things, and blockchain are producing meaningful business results beyond attempts and trends.

The cloud server market has already started to emerge as a large industry (Amazon AWS, Microsoft Azure, Google GCP, etc. are representative companies), and artificial intelligence technology is being used for deep learning, natural language processing, and self-driving cars, making it difficult to predict where the technology will end up.

Doubting DX: Resistance from Traditional Industries

However, despite the maturation of the underlying technology, some still have reservations about DX. This is especially true for organizations based in traditional industries. From questioning how a business model or process that has been at the center of an organization for so long can be digitally transformed, to believing that DX is just a fad that sounds good because we don’t know how effective it will be, to resisting the idea of a department that was once considered a computer room suddenly becoming the center of the business.

The Future of DX: Opportunities and Challenges

However, with the recent news of the failure of GE Predix, a symbol of DX, traditional companies are once again left with the question: is DX still relevant? (GE launched a business in 2013 to digitally transform various devices used in electricity, energy, and railroads, but it did not grow into a new business and ended up supplementing the digital resources of each affiliate). Meanwhile, the impact of COVID-19 was felt around the world.

(Continued in The Long Journey of Changing Habits in a Digital Transformation Organization (2 of 2))