How To Improve Business Performance In The Era Of Digital Transformation

Companies embark on digital transformation paths for (at least) two reasons: to make processes more efficient and to accelerate innovation, hence more agility, the ability to satisfy market needs, and new (potential) business models. In one expression: to improve company performance. But the road is uphill.

Few improve business performance with digital.

In a broad sense, digital transformation is a broad and pervasive journey. In fact, it is not a question of a simple technological investment but of managing the systemic transformation technology brings with it. Thanks to digital, companies change profoundly: their culture, organization, leadership model, communication, and so on change. Change management is the keyword to ensure that the new technology platform positively impacts company performance.

Furthermore, there are different types of digital transformation. Often, companies undertake a path of “simple” technological updating aimed at obtaining greater competitiveness; in other cases, they want to transform the core business through digital solutions, and in still others, they aim to create a new business. The effort, the investment, and the challenges are very different from one case to another.

Not all companies take the right path or manage to value their investments in digital. McKinsey analysts say, “Most organizations get less than a third of the expected impact from recent digital investments.” The causes are different and should be evaluated on a case-by-case basis: lack of adequate culture and mindset, an organizational structure that is difficult to remodel, the purpose of the projects not being well defined, and the absence of sufficient skills are some concrete hypotheses.

Focus on innovation, not on cost reduction.

How to maximize business performance through a digital transformation journey? Given that a manual would not be sufficient to answer completely, McKinsey always provides some hypotheses. In an authoritative Global Survey, the company sought to highlight the distinctive elements of top-performing organizations to provide insights capable of directing the investments of any company, regardless of its size.

Why does a company, for example, introduce a chatbot in its customer care? Usually, the immediate objective is rationalizing costs and efficiency: many entrepreneurs are convinced that they can delegate a large part of the first-level requests to a virtual assistant to reduce the pressure on the operators and, simultaneously, not have to hire new ones. Whether or not the initiative is successful, the primary goal is efficiency.

However, analysts have found that top performers take a different approach. The focus is on innovation and customer engagement rather than process efficiency. The latter becomes, in fact, a (pleasant) consequence of the first.

Innovation-driven digital transformation maximizes business performance as it creates market differentiation and a real competitive advantage, which in turn translates into increased revenues and the development of new sources of income. Returning to the example of customer care, if the investment priority is the customer experience rather than process efficiency, it is more likely to obtain satisfaction at the right time.

Investing in cloud and data strategy

Effective transformation is achieved by prioritizing certain technical capabilities. According to analysts, the strength of the top performers lies in the ability to develop and monetize proprietary assets, mainly software, and data. Companies build their competitive advantage on applications, while data can be used to customize the service and improve the customer and employee experience, as well as direct monetization hypotheses (e.g., Telco data is attractive to retailers) and the development of new business opportunities.

The cloud enables enterprise modernization under various profiles. It is at the root of the cloud-native phenomenon in terms of the development and updating of the applications that power the business, and it provides scalability and resilience combined with a “per-use” cost model that allows it to be adopted by all companies, not just those capable of courageous investments. Above all, cloud technologies are a clear manifestation of innovation: not exploiting them means giving competitors an advantage in competitive terms.

A data strategy is essential for any company since data hides untapped potential. Their valorization makes it possible to improve decisions (also thanks to the adoption of AI), build new businesses, and highlight efficiency opportunities to build one’s future.

Invest in skills, or rely on those who have them.

Going back to McKinsey’s survey, among the elements that determine the success (or otherwise) of digital transformation are the skills a company can count on.

Analysts break the issue down into two areas: that of frontline talent, i.e., technical personnel who develop solutions in favor of the business, and that of executives, who must certainly develop a rather advanced literacy towards technologies and, above all, data. The phenomenon has an impact both at the enterprise level, where the entire C-Suite must be adequately prepared on digital issues (and not just the CIO and CTO) and at small and medium-sized enterprises, where the entrepreneur must have an obvious connection between digital and business enhancement, promoting transformation initiatives. Obviously, issues such as upskilling and reskilling find more fertile ground in IT personnel than in the executive area.

In this regard, another fascinating aspect is the integration of technical personnel within the business teams, further evidence of the strategic role of technology in the modern enterprise.

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