Digital transformation: Thinking beyond the core of your business can help you grow

There's more to transformation than today's customers, products and assets.

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Image: Shutterstock/robert-kneschke

Digital transformation is one of those buzzy terms that's come to mean absolutely nothing at all. Much like "alignment" or "platform," vendors, consultants and leaders bandy the term about with the unstated hope that no one will call them out and ask what they're actually referring to when mentioning their aspirations to "digitally transform" the business. I've seen everything from ERP (Enterprise Resource Planning) implementations to new laptop rollouts breathlessly described as digital transformations, perhaps in an effort to bring some excitement to otherwise tried and true elements of running an IT shop.

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The biggest problem with the term's overuse is that it focuses too much on the digital and not enough on the transformation. Putting some neat Internet of Things sensors in an old factory or sprinkling a dozen sets of Oculus headsets around doesn't magically transform a business. At best, it might optimize the existing process and make it more efficient. In short, it becomes the longstanding problem of focusing on the tool rather than the outcome.

Defining transformation

Part of the problem is that many leaders inside and outside tech lack an understanding of what transformation actually entails. The best definition I've found is that it's identifying and exploiting opportunities outside your current core business. This begs the question: What's my core business? The simple answer is that it's the combination of today's customers, products and assets. If you're a toy company that makes toys for preschoolers, your core business would include the product categories you produce, a customer set composed primarily of parents of toddlers, assets like your factories and suppliers, and any proprietary intellectual property or unique capabilities your company possesses.

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Creating a state-of-the-art e-commerce capability would undoubtedly be beneficial to your company, but if it's not attracting new customers, branching into new product categories, or creating a unique asset, it's not a transformation. Similarly, investing heavily in automation, IoT and artificial intelligence-driven manufacturing execution to double-production capacity is wonderful and laudable, but it is not transformation.

It's more than word games

While this narrow definition of transformation may seem like a game of semantics, it's important to set clear boundaries between the core business and truly transformational efforts so you can ensure that the latter is part of your portfolio. With the prevalence of interesting, novel, and downright disruptive technologies in the market, it's too easy for leaders to get distracted and mistakenly invest all their resources and attention into the core business and assume they're doing transformational work because they're employing interesting technology.

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Many tech leaders have recounted tales of woe of companies that missed transformational shifts in their markets, and perhaps you've referenced Kodak or Blockbuster Video at some point in your career. With the benefit of hindsight, it's all too easy to assume leaders at these companies had grown fat and lazy and willfully ignored the obvious shifts happening before their eyes. However, rather than suffering from a unique and rare collective incompetence, these leaders diligently and dutifully focused on their core business. They probably assumed that transformation was "above their pay grade" or merely a question of applying some novel and interesting technology to today's business with the assumption that they were taking care of areas outside the core.

Separating the capabilities and innovative nature of technology from its application ensures that you regularly devote some of your attention, initiatives, and budget to exploring areas outside your organization's core business. You might even be able to leverage seemingly "legacy" technologies that your organization already possesses to areas outside the core and accelerate your company's ability to identify and create truly transformational opportunities with today's tech and skillsets.

As technology leaders, there's an expectation that we're on the lookout for innovation and disruption. The majority of us are well-equipped and often passionate about identifying these criteria in the technology arena. Coupling this passion with a solid understanding of what our core business is today will allow us to combine the disruptive tech with future opportunities outside the core to truly drive transformation.

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By Patrick Gray

Patrick Gray works for a leading global professional services firm, where he helps companies rapidly invent and launch new businesses. He is the author of Breakthrough IT: Supercharging Organizational Value through Technology as well as the companio...