Digital transformation is not for the faint-hearted. Disruption, thinner margins, extreme competition, commoditization of products and services, call for better customer experience and increasing operating costs are pushing many firms to take the first step.
Today, every business can see the consequences of not taking this first step. Entire industry incumbents are now marginalized, outcompeted and made irrelevant by nimbler and digital startups. With data, better customer experience, infrastructure agility, and innovation on their side, many are redrawing the battlegrounds. So, digitalizing your firm makes sense.
What happens when you digitalize your business? It is a question that many CDOs ponder. And Josep Ruano Bou, CEO at CAPSiDE called it "the great deception" in his white paper The Day After Digital Transformation.
He noted that most CDOs would face two options. "(1) you just operate at higher efficiency, thus having lower prices (being more competitive) or higher margins OR (2) You change your business model, maybe developing some new technology that enables you to have something unique, something scarce, at least for a while," he wrote.
Choosing the first option may seem simple. But Bou warned, "you will probably be dead or at least suffering very soon." The main reason is that your rivals would be digitalizing their operations as well or releasing tools that you invested as open source or freeware. Netflix, Facebook, Microsoft, and Adobe are good examples of the latter.
While the second option gives you new possibilities and chances, the new technologies will be immature. You need time to test and harden these tools for commercial use. AI adds another dimension where it needs time to learn your business environment.
Bou wrote that the smart choice is to do both. "You need to go on with the first option to drive income but, more importantly, to assure you can be nimble and adapt when the new technology is ready for the market (and the market is ready to buy it). Then, once you are agile and nimble, and able to put metrics on top of any process, you have to rethink your products, services and selling propositions. It is better to cannibalize yourself before others cannibalize you," he wrote.
Throughout his white paper, Bou noted that digital transformation is a journey--not a means to an end. Once you begin, you will need to start changing your business.
Mostly, "you are starting to dig the grave of your own business," he noted. In other words, your business would change. He urged CDOs and digital leader to prepare for this inevitability.
Bou pointed at the music industry as a clear example. Technology firms like Spotify and Apple are now leading the industry because the main labels did not prepare for change. Despite innovations like ATRAC, MP3 technology led technology firms are now the defacto standard.
“Does it mean you should avoid Digital Transformation? Absolutely not! You must embrace Digital Transformation. Instead, you should start planning for the day after,” Bou wrote. More importantly, CDOs need to “expect to dramatically increase the pace into a journey of change that will never end.”