DX factor: the vital elements of a digital transformation

“Play­time is over for dig­i­tal trans­for­ma­tion,” says Thier­ry Driesens, dig­i­tal trans­for­ma­tion offi­cer at DHL Sup­ply Chain. “The tech­nol­o­gy chal­lenge is no longer about try­ing out dig­i­tal inno­va­tions and see­ing what works; it’s about achiev­ing a strate­gic change that deliv­ers enhanced finan­cial per­for­mance and a bet­ter expe­ri­ence for cus­tomers and employ­ees.”

Many com­pa­nies have been forced to invest heav­i­ly in dig­i­tal tech to solve the imme­di­ate oper­a­tional prob­lems posed by the Covid cri­sis, but much of that spend­ing has been on enhanc­ing or automat­ing exist­ing process­es. Driesens’ advice is to not let that tac­ti­cal expen­di­ture dis­tract from the task of reimag­in­ing busi­ness mod­els and build­ing a long-term com­pet­i­tive advan­tage through a true dig­i­tal­ly enabled trans­for­ma­tion.

“The world has changed around us. Covid-19 has dis­rupt­ed things even fur­ther and faster. If your aim is sim­ply to dig­i­talise activ­i­ties in a tra­di­tion­al way rather than trans­form­ing your oper­a­tions, you’ll ulti­mate­ly go out of busi­ness,” he warns. 

His belief is backed by evi­dence show­ing that the pan­dem­ic has forced com­pa­nies in many indus­tries to scale back their dig­i­tal trans­for­ma­tion (DX) ambi­tions. Although glob­al spend­ing on DX increased by 10% in 2020 to $1.3tn, accord­ing to research by the Inter­na­tion­al Data Cor­po­ra­tion (IDC), that rep­re­sent­ed a sig­nif­i­cant slow­down com­pared with the 18% growth record­ed in 2019. 

IDC’s glob­al research direc­tor for DX strate­gies, Shawn Fitzger­ald, observes that many busi­ness lead­ers have, under­stand­ably, adopt­ed defen­sive tac­tics dur­ing the pan­dem­ic. 

“They have been using tech to solve their firms’ urgent chal­lenges while also con­serv­ing cash,” he says. “Despite the many bold state­ments we’ve been hear­ing about how the Covid cri­sis has been accel­er­at­ing DX activ­i­ties, much of what peo­ple are actu­al­ly doing would be bet­ter termed ‘dig­i­tal­i­sa­tion’, rather than any broad­er strate­gic ini­tia­tive that sets the foun­da­tion for a future dig­i­tal enter­prise.”

So how can busi­ness lead­ers deter­mine whether their com­pa­nies are still on the right path in this respect? Experts in the DX field can iden­ti­fy sev­er­al hall­marks of a sol­id trans­for­ma­tion strat­e­gy that set it apart from pre­vi­ous waves of dig­i­tal invest­ment. 

Driesens, for instance, argues that firms seek­ing true DX will be fol­low­ing a com­pre­hen­sive imple­men­ta­tion “roadmap” designed to take them all the way from plan­ning to large-scale exe­cu­tion. DHL’s own one is three years old, as the com­pa­ny works to ful­fil its DX pro­gramme – to which it has com­mit­ted £1.7bn – by 2025.

Its roadmap has includ­ed the roll-out of autonomous fork­lift trucks and robots, which already roam many of its ware­hous­es, pick­ing pack­ages for ship­ment. The com­pa­ny has also adopt­ed a cloud-based risk-man­age­ment tool called DHL Resilience360, which helps cus­tomers to pre­dict and mit­i­gate pos­si­ble sup­ply-chain dis­rup­tions.

Fitzger­ald agrees that the absence of a detailed roadmap is a warn­ing sign. While many busi­ness­es have formed a clear vision of what their trans­formed state will look like, they have failed in most cas­es to trans­late this into prac­ti­cal steps. IDC’s research last year found that, while most mid-sized and large com­pa­nies were intend­ing to dig­i­tal­ly trans­form them­selves, only 27% had cre­at­ed any kind of roadmap for doing so.

Make DX a company-wide effort

DX agen­das should dif­fer marked­ly from pre­vi­ous rounds of dig­i­tal­i­sa­tion in anoth­er cru­cial way: while IT teams have typ­i­cal­ly led dig­i­tal­i­sa­tion efforts in dis­crete areas of the busi­ness, a true DX com­mit­ment must cov­er the whole organ­i­sa­tion. 

That is cer­tain­ly the view at Stan­dard Char­tered, as its group CIO, Dr Michael Gor­riz, explains: “Our trans­for­ma­tion goes beyond automat­ing func­tions to achieve cost sav­ings. This is about becom­ing a bank that’s cus­tomer-led, insight-dri­ven, fast and con­nect­ed. We are grab­bing the oppor­tu­ni­ty to rein­vent how we work and serve our clients.” 

That com­mit­ment trans­lates to a £1.1bn annu­al invest­ment in tech­nol­o­gy, but Gor­riz stress­es that the most cru­cial fac­tor in the suc­cess of any DX effort is effec­tive “inte­gra­tion between busi­ness and tech­nol­o­gy teams”. To this end, Stan­dard Char­tered has organ­ised its teams into 1,000 “squads”, work­ing to the prin­ci­ples of agile project man­age­ment.

Lead from the top

Anoth­er hall­mark of a gen­uine DX project is that it is dri­ven by the whole lead­er­ship team, accord­ing to Driesens.

“Say­ing that the trans­for­ma­tion is the job of the CIO sim­ply isn’t going to work,” he argues. “Dig­i­tal is no longer some­thing that is done by the few. It needs to be part of the entire cor­po­rate cul­ture.” 

He con­tin­ues: “I can­not sim­ply announce to the man­agers of a ware­house in, say, Sin­ga­pore, that we’re about to instal robots that will change the work of hun­dreds of employ­ees unless they already know that we’re going in that direc­tion. That’s where you need a broad­er change-man­age­ment plan from the top, which has to give peo­ple the nec­es­sary infor­ma­tion in good time and con­vey to them a sense of excite­ment about the new way of doing things.”

Dim­itris Mavroyian­nis, group COO at Piraeus Bank, agrees that a key focus of any DX project is cul­tur­al change, which requires clear com­mu­ni­ca­tion with employ­ees at all lev­els, explain­ing how it will affect them.

“The biggest chal­lenge is to be ready for con­stant change, so a trans­for­ma­tion­al cul­ture has to be embed­ded in the organ­i­sa­tion,” he says. “There is an exis­ten­tial imper­a­tive to rethink busi­ness mod­els, change cost struc­tures and offer more rel­e­vant cus­tomer-focused solu­tions.” 

Mavroyian­nis even goes so far as to sug­gest that the cur­rent DX wave may be seen as the “last full-scale trans­for­ma­tion. After this, organ­i­sa­tions will con­stant­ly need to rethink them­selves and deliv­er change quick­ly and con­tin­u­ous­ly.”

Make data the fuel of transformation

Many of the core tech­nolo­gies that enable DX – from arti­fi­cial intel­li­gence to big-data ana­lyt­ics – have the pow­er to process vast amounts of infor­ma­tion. Aki­ra Mit­suma­su, vice-pres­i­dent of glob­al mar­ket­ing at Japan Air­lines, reports that these tools have helped his com­pa­ny to improve its cus­tomer ser­vice and so gain a com­pet­i­tive edge. 

“Our dig­i­tal trans­for­ma­tion is enabling us to con­sume much more data,” he says. “Oper­a­tions data, togeth­er with infor­ma­tion gath­ered from cab­in crews and ground staff, has enabled us to iden­ti­fy key areas for improve­ment.”

Its One ID con­cept, for instance, com­bines cus­tomer data with the facial-recog­ni­tion tech­nol­o­gy that air­ports have adopt­ed to stream­line the progress of pas­sen­gers from the check-in to the board­ing gate.

Big data is also begin­ning to gen­er­ate big val­ue at DHL, as Driesens reports. “We are only just start­ing to unlock the poten­tial of what we’re learn­ing from our ware­hous­es, freight busi­ness, sup­ply-chain oper­a­tions and many more sources,” he says. “But we’re already see­ing incred­i­ble insights that could help us to cre­ate val­ue-added ser­vices for cus­tomers, from opti­mis­ing their dis­tri­b­u­tion net­works to iden­ti­fy­ing the best loca­tions for ware­hous­es.”

As economies start to recov­er from the pan­dem­ic, the upshot for firms whose DX strate­gies are com­ing to fruition is clear, accord­ing to Driesens: “It gives us noth­ing less than an unfair com­pet­i­tive advan­tage.”