What is a Digital Transformation?
The term digital transformation has been coined some years ago. It describes the process for an organisation or society to change in the digital age. Caused by more connectivity between individuals, the possibilities for new types of interactions have dramatically increased. This creates new forms of how we live together.
If we look closer on organisations and commercial companies in particular, we can observe more potential business models. These business models have much more variety than the standard eBusiness models that were implemented over a decade ago during the internet bubble. With mobile commerce and social media, customers can be reached via different channels in many places. This makes it possible for a business to get in touch with the customer at the right time and the right place. The value that is delivered to the customer can be higher but depends very much on the experience he or she has with this interaction. If the company is doing it right, the delivered value leads to more customer satisfaction and binds the customer more closely to the brand.
These new business models are also an increasing threat for traditional businesses. Due to the leverage a new market player can create, it may disruptively change even a whole industry. We have seen this in the music and currently in the publishing sector. Also the automotive industry is changing because the traditional vehicle-centric business model does not meet the expectations of young digital natives anymore. Automotive companies must shift from the vehicle-centric to a customer-centric business model. They will provide mobility services rather than vehicle products.
What needs to be changed?
As elaborated earlier, the business models will change. How does a company find a new business model? It’s an innovative act to create a new business that is attractive for customers and successful. Not every company culture supports innovation well. Very often they have been optimised for efficiency. Even when the senior management calls out for more innovation, the culture may prevent it. How can you create a culture for innovation?
A new business model can be successful but very often they fail. According to Forbes, 9 out of 10 startup go out of business. The environment for a new business is very uncertain. Often the strategy to implement a new business model is to invest a lot of resources and time founded on many hypotheses. These hypotheses are ideas that are later often proved to be false. Companies need to come up with new methods to deal with this uncertainty without spending a lot of resources and time.
The existing structure of a company is often another hurdle to overcome as well. Especially the new innovative cross-channel business models require changes of the internal processes that connect different departments and even devisions. The silos of such an organisation obstruct the process to find the solution. Creating the best solution requires phases of divergent and convergent thinking of together with multiple departments. Silos must be overcome to get the best out of the company.
Why is Agile helpful?
What we mean with Agile is the Agile with a big „A“ – the body of knowledge that is growing in the agile community. Agile (with a big „A“) is not just for software development. Although – due to digital nature, software plays always a big role in a new digital business model. Within the agile community the knowledge is growing on the whole value chain. Agile consists of practices that turn an idea into cash. Agile helps to deliver more customer value in shorter cycle time, hence increasing competitiveness.
Within the agile community the method Design Thinking is combined with software development. Design Thinking is used to create innovative ideas for new products. Main concept of Design Thinking is the interdisciplinary team that consists of people from different departments. This method helps product development teams to be more innovative.
The uncertainty to develop a new business model can be overcome by using the Lean Startup method. This method is combined with agile software development and develops new business models by testing underlying hypotheses step by step with minimal resource usage.
Apart from these new methods, the common agile software development methods help companies to get quicker from a business idea to real customer value. Cross-functional teams deliver digital value and use practices like Continuous Integration to get this done on a larger scale. The power of Scrum to drive the change in an organisation is a good catalyst for a digital transformation.