Updated: Wednesday, May 3rd 2023, 10:56:51 am
The challenge for modern businesses is to pursue rapid digital transformation in an ever-growing competitive landscape. Companies focus on digital transformation to bring in more revenue, create new opportunities, accelerate the pace of innovation, and improve performance. Depending on the business objectives and goals, enterprises must decide the direction of their digital strategies- whether to digitise the core business or build new digital ventures. Digital technologies have the ability to create company-wide efficiencies in both internal and external systems.
Transforming the core business of a company is more cost-effective than building new business models; additionally, it also leads to greater customer satisfaction for the company’s existing products and services. On the other hand, for businesses facing monumental challenges and disruptions, a new digital venture is the bold solution it requires to edge past competition. Alternatively, companies can also create a hybrid strategy to digitalise current operations and innovate new models as well. According to a report by Mckinsey, 29% of CEOs would opt for a fully digitised core business, 32% would replace core business with a new model, and 43% would opt to launch a new digital business in response to digital transformation.
Enterprises face multiple challenges when it comes to transforming their business. One of the biggest challenges is company culture. For most companies, behavioural and cultural challenges are one of the biggest obstacles to digital transformation followed by lack of understanding digital trends and lack of talent for digital. Leading companies invest more boldly in digital technologies than their less performing counterparts. Their digital strategies are more broadly distributed in the business model- products and distribution, business processes, supply chains, and ecosystems. Such aggressive investments in technology help these enterprises to become performance differentiators.
For organisations to make the most of opportunities, they need to be highly adaptable. However, many companies have trouble freeing themselves from siloed mindsets and behaviours. To minimise the risks of disruption, companies must take a holistic approach to digital. Business leaders need to develop strategies that redefine the ecosystem, offer new business-value propositions, improve performance, and deliver value to customers.
Next-generation operating models would require companies to reorganize around customer journeys and combine digital capabilities and technologies which would include lean process redesign, intelligent process automation, advanced analytics, business process outsourcing, and digitization. Organizations with forward-thinking leaders are building a digital culture by deploying new capabilities through the integration of new digital tools with legacy IT services.
The priority of any business is to improve revenue. However, some digital initiatives generate more returns while others don’t even cover the cost of investment. Improving the ROI of digital investments requires precise targeting along the dimensions where digitization is proceeding. Digital has widely expanded the number of available investment options, and simply spreading the same amount of resources across them is a losing proposition for most businesses. Companies need to strategically decide where to prioritise investment- whether on marketing and distribution, product development, ecosystem, processes, or supply chain.
Digital transformation is an entrepreneurial challenge and any changes to the business model must take into account the following:
The organisational decision to either digitise core business or build new venture will require sweeping changes in the internal environment, especially within the workforce. Most repetitive processes will be automated by machines and AI hence workers will have to upgrade their skills, analytics, design, and technology to step up the speed and scale of change in the organisation. A strong organizational culture is also vital. Firstly, it enhances the ability to perceive digital threats and opportunities, secondly, it bolsters the scope of actions companies can take in response to digitization, and lastly, it supports the coordinated execution of those actions across functions, departments, and business units.
Without a transformation of the core of a business, any digital initiative is likely to be a short-term fix. The reinvention of a business is bold but also a necessity for a modern-day competitive enterprise. A digital reinvention, whether it’s through complete digitisation, the launch of a new business or a hybrid approach, would require the leadership to make tough decisions and have an ambitious outlook.