Digital transformation: much more than new technology

Digital transformation is one of the most commonly used, and misunderstood, terms in the business world. Many see digital transformation as a simple investment in new technology, but the truth is far more complex. Success requires not only the right systems, but also the right skills, processes and a culture that supports change. Throughout my years at Increo, I have seen how a lack of capabilities can lead to even the best systems never realizing their full potential. So how can business prepare to increase its chances of success?

What is digital transformation — and why do so many fail?

Digital transformation is not about “putting power on paper” and digitizing existing processes. It involves a fundamental change in how the organization works, how it creates value for customers, and how it positions itself for the future. This requires a strategic approach, that one has a culture of continuous improvement and the ability to see opportunities with technology.

Even with these pieces in place, success is far from guaranteed. Many organizations underestimate the internal capabilities required. The technology may be perfect, but without a change-ready organization, the project can still fail.

Capability mapping with Business Model Canvas

In order to succeed, it is crucial to identify both what capabilities the business possesses, and which ones will be needed during and after the change process. Here's the Business Model Canvas  a clever tool. By analyzing every building block of the business model, from customers and value propositions to activities and partners, one can identify both current resources and future needs.

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For example, let's say you run a physical store selling shoes, but want to transform the business so that the bulk of sales is done digitally. What capabilities do you have today and which will you need in the future? In the illustration below you will see a simplified Business Model Canvas where the current situation is shown above the line, while the future picture is below. The example shows how digital transformation not only affects the business model, but also changes the organization's need for resources, expertise, processes and technology.

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By using Business Model Canvas as an analysis tool, you can systematically identify which capabilities are missing, while ensuring that the development of new resources is in line with your business's strategic goals. This increases the likelihood that the transformation will succeed — both technologically and organizationally.

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The Three B's: Strategies for Building Capabilities

When a business identifies missing capabilities, there are three main strategies: build, borrow or buy -- the three B's. The choice of strategy depends on how critical the capability is, how quickly it needs to be in place, and how demanding it is to develop it.

If a capability is central to the new business model and has high strategic value, it may be most appropriate to build this capability in-house, so that the business itself owns and controls the competence. At the same time, capabilities that are more specialized or demanding to develop may be better suited for a combined approach.

In the example of the shoe store, digital customer service can be a capability that is built in-house, since this builds on existing core business. Digital marketing, on the other hand, may require a hybrid approach, where the business both hires external experts for faster results and, in parallel, develops internal expertise for long-term ownership. This type of strategic assessment gives the business flexibility and ensures that capabilities are built in a cost-effective manner.

From strategy to action

Digital transformation is far more than investing in new technologies. It's about understanding how technology, people and processes need to play together to create lasting change. To succeed, businesses need to identify and build the right capabilities, either by developing them in-house, hiring external experts or through acquisitions. Without a clear strategy for how to acquire missing capabilities, it is easy to make mistakes.

Digital transformation is demanding, but also one of the most exciting processes of a business. Those with the ability to do it right are not just positioning themselves for the future — they are active in shaping it.

Want to read about organizations that have succeeded in digital transformation?

At Increo, we have had the pleasure of contributing to significant change and innovation in several organizations. Among our partners are Westco Environment, Sit Catering and Trondheim Symphony Orchestra. These companies have taken great strides in modernizing and streamlining their operations, and the results have made them innovators in their industries.

Do you want to know more? Get in touch, and together we'll figure out how to turn your business into a digital success story.

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