DX - Digital Transformation

Steps to digital transformation success: start small and fast

01/07/202412/05/2023 by DX Talk

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.

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.

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 Process: A Key Guide to Success

01/07/202412/05/2023 by DX Talk

Digital transformation process: a key guide to success. Digital transformation is more than just the adoption of technology; it requires a fundamental change in your organization. As the third process change in Digital Transformation: Changing organizational habits, this article takes a closer look at the key processes for successfully driving digital transformation.

1. Start with small digital transformation goals

The journey of digital transformation starts with setting small goals. This approach helps you build the step-by-step process you need to achieve your big change goals.

1.1. Step-by-step approach

It’s important to set realistic goals for each phase. For example, in the first phase, you might aim to select and adopt digital tools. In a later phase, you might use these tools to improve specific work processes, and in the final phase, you might see how these changes are integrated throughout the organization.

1.2. Small experiments

Start with small projects and make incremental improvements based on feedback and learning along the way. For example, you might try out a new digital tool in one department, analyze the results, and look for ways to apply it across the entire organization.

2. Adopt digital tools

One of the key elements of digital transformation is the adoption of the right digital tools.

2.1. Choose a technology

It’s important to choose the right technology for your business goals and organizational needs. For example, you might adopt a CRM system to improve customer management, or a collaboration tool to enhance internal communication.

2.2. Build an adoption plan

Your tool adoption plan should be specific and organized. It should include employee training, technology integration, system updates and maintenance, and more. It should also clarify how the new technology will be integrated into existing workflows.

3. Things to keep in mind when adopting tools

When adopting digital tools, it’s important to keep the following in mind

3.1. User-friendliness

The tools you introduce should be user-friendly – this is a key factor in making it easy for employees to adopt new tools and use them effectively. Make sure the user interface is intuitive and that the features you need are easily accessible.

3.2. Security and compatibility

Security is a very important consideration when adopting digital tools. You need to make sure that the tool is compatible with your existing systems and can keep your organization’s sensitive data secure. You should also consider whether it complies with laws and regulations related to data privacy.

4. Process visibility

An important aspect of digital transformation is not simply replacing existing processes, but making them more visible and easier to understand.

4.1. Transparent operations

By making processes visible, operations within your organization become transparent and understandable to all members. For example, you can adopt a workflow management system to visualize your work processes and get a clear picture of what’s happening at each step.

4.2. Continuous improvement

Visualized processes make it easier to identify and resolve problems. It allows you to improve inefficiencies, continuously optimize processes, reduce employee resistance to change, and increase understanding of new systems or processes.

5. Introducing the startup process

Bringing the processes of innovative startups into your digital transformation can bring new energy and ideas to your organization.

5.1. Agile approach

Startups have the flexibility to respond to rapidly changing market conditions. This agile approach can also be adopted by large organizations, enabling them to make quick decisions, work adaptively, and implement innovative ideas.

5.2. Learning from failure

Startup culture encourages an attitude that sees failure as a learning opportunity. When you bring this culture into your organization, you won’t be afraid to fail, and you’ll be able to try and experiment to find a better way. This can go a long way in driving innovative growth for your organization in the long run.

We’ve talked about how the journey of digital transformation starts with changing your processes to change the way you work, changing the way you work to change your people, and changing your people to change your business model. Processes are the first area to start. However, many companies don’t understand how to change their processes. We’ll be exploring these challenges in a series of articles.

By taking a step-by-step approach, choosing and adopting the right tools, and considering the things to watch out for, digital transformation can bring positive change to your organization and drive growth for your business. Through this process, organizations can change to keep pace with the digital age and gain a competitive advantage. By making the process visible and adopting the agile approach of a startup, digital transformation can be more effective. With these strategies, organizations can adapt to the rapidly changing digital landscape and pursue sustainable growth and innovation.

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

01/07/202412/05/2023 by DX Talk

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.

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.