Why ‘Digital Transformation’ Is All About Changing the Way You Think

    Adapting a pre-Internet enterprise to a post-Internet world is known as “digital transformation.” It’s also known to any number of CIOs as their worst nightmare. More than one CIO I’ve spoken with over the years, in response to the standard question about what keeps them up at night, responded without hesitation that keeping the business relevant in this new era is the biggest sleep-depriving culprit.

    That being the case, I recently jumped at the chance to speak with David Rogers, faculty director of programs on digital marketing and digital business strategy at Columbia Business School, and author of the new book, “The Digital Transformation Playbook.” My hunch is that Rogers has lost his fair share of sleep over this question, too. But in his case, it’s likely because he needed to document the late-night epiphanies that have arisen from his immersion in the subject of digital transformation.

    Our conversation opened with a discussion of what digital transformation is really all about. Rogers stressed what it’s not all about—technology:

    As I think about digital transformation, for me, it’s really a question: How do businesses that were started before the Internet need to adapt and change in order to thrive in the digital age? In working on this book, and drawing on research and [the experiences of] companies I’ve worked with, what crystalized in pursuing this question is that digital transformation is fundamentally not about technology. It’s about changes in your strategy, and in your thinking and leadership. 

    When I started the book, I looked at a lot of fascinating emerging technologies, and how the media business has been transformed, and trends like mobile computing, social media, and cloud computing have been established. The more I looked at it, the more I questioned how you transform businesses built before the Internet era, that aren’t in Silicon Valley, that aren’t trying to be the next Uber, that already have a customer base, a business model, an organizational culture. The challenge for them is fundamentally about strategic thinking.

    To address that challenge, Rogers explained five shifts in thinking that businesses need to make. The first one has to do with customers:

    You need to shift from thinking about your customers as targets, to thinking about them as networks—it’s a very different way of thinking about your customers. So rather than thinking of them as targets who you need to hit and persuade with marketing, your relationship with customers is more about how you energize and participate in interactions that are already going on between them.

    The second, Rogers said, involves competition:

    It’s a shift from thinking about competition as a zero-sum struggle, where you are competing with other companies that look just like you, to understanding that your competition today is much more ambiguous, and that the same companies that are your biggest competitors may also be your closest business partners. You have to be able to manage both of those relationships at the same time.

    Essentially, it’s a world of ‘frenemies,’ when you look, for example, at the relationship between Google and Apple. And your most significant threats may come from asymmetric competitors—competitors that have a completely different business model from yours, but are solving the same customer needs as you are. Think of Marriott, whose traditional competitors would be the other major hotel chains. Their asymmetric competitor would be Airbnb, who is giving that traveler a place to stay, but doesn’t have the same business model whatsoever—it’s not another Starwood or Hilton.

    Third, Rogers said, is a shift in how companies need to think about their data:

    Traditionally, data has been siloed, and operational in nature—something that allows you to get the job done, to do what you as a business have always done efficiently. Now, data is becoming a strategic asset that has to be grown over time, like a brand or intellectual property. It’s something that should actually become a source of innovation.

    The fourth shift has to do with how companies think about innovation:

    We need to shift from thinking of innovation as a high-risk process of making big bets placed by smart people at the top of the company, to a process where innovation happens at a much lower level. The job of leadership is simply to pose the right questions, not to guess at the right answer. Innovation needs to be a process of continuous and rapid experimentation where, in very controlled ways, you are testing opportunities and finding out which ones are going to work, and which ones aren’t. Surprisingly, being much more experiment-driven actually lowers the risk to a traditional enterprise. A lot of enterprises think experimentation sounds risky, but it’s actually much less risky than the way they have been innovating for years.

    Fifth is a shift in thinking about business value:

    It’s a shift in terms of how you define the value of your business, and being willing to evolve that perception. It’s really a shift from looking at new technologies through a lens of how it impacts your current business, to asking how they open up the next opportunity to create value in a market you didn’t have before.

    I ended this portion of the interview by asking Rogers what the single most important takeaway is that he wants readers to get from his book. He said it’s that traditional businesses are not dinosaurs—they don’t have to go extinct:

    There’s a bit of a myth about disruption—that all of these traditional businesses are just going to wither away, and that’s not really the case. For every company like a Kodak or a Blockbuster, who we love to point to as not being able to change, there are other companies like Fujifilm, which was in the exact same situation as Kodak, and completely turned around the business. Encyclopedia Britannica—most people assume they went out of business because they stopped printing 30-volume, leather-bound encyclopedias. They’ve actually completely changed their business model, and they’re as profitable now as they’ve ever been. So it’s a myth that just because you’re an old business, that you can’t transform, and that disruption is inevitable. It isn’t inevitable if you are willing to change, and evolve your thinking. Your business can continue to grow, and find the next opportunity in the digital age.

    Rogers also shared his thoughts on where leadership and digital transformation intersect. I’ll cover that portion of the interview in a forthcoming post.

    A contributing writer on IT management and career topics with IT Business Edge since 2009, Don Tennant began his technology journalism career in 1990 in Hong Kong, where he served as editor of the Hong Kong edition of Computerworld. After returning to the U.S. in 2000, he became Editor in Chief of the U.S. edition of Computerworld, and later assumed the editorial directorship of Computerworld and InfoWorld. Don was presented with the 2007 Timothy White Award for Editorial Integrity by American Business Media, and he is a recipient of the Jesse H. Neal National Business Journalism Award for editorial excellence in news coverage. Follow him on Twitter @dontennant.

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