To businesses, “digital transformation” belongs to IT applications, Infomatics, or IT?

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In general, digital transformation means transforming the real world to the digital world. And a digital business means transferring its customers, employees, machinery and all interactions into a digital environment, as well as further apply digital technologies in business management.

Example: Applications of Information Technology (IT applications) in public administration includes 4 levels that refer to the maturity of the business in this realm. In digital transformation, however, it can also include the factor of machinery.

  • Level 1 includes just providing information (on procedures, regimes, files, deadlines, fees…) via digital channels.
  • Level 2 is Level 1 + allowance to download documents and sample forms.
  • Level 3 is Level 2 + allowance to fill in and send in documents online (with e-Signature)
  • Level 4 is Level 3 + allowance to pay fees online.

If every business is at Leve 4, we can complete all administrative formalities like taxation, custom declaration, visa application… from everywhere online. This will make people “electronic citizens” (or “digital citizens”).

In this age of new challenges as well as new working methods, IT applications had matured to its fullest (in both business abilities and new technologies needed for the transformation), and are now ready to transform to a digital environment.

IT applications are no longer just for improving operation efficiency but is now a strategy to businesses. In fact, digital transformation has an impact on all strategic facets of a business, from customers to competitive advantages like products/services, suppliers, supply chain, assets, modernization, globalization, structures, procedures, business models and business cultures. A business is likely to fall behind should they be lacking in implementing these applications, especially in this time where customers can easily gain access to products/services. Meanwhile, businesses that are able to provide a variety of those are likely to attract new customers and expand further, of course with the aid of technology.

“Digital transformation” is, therefore, an important term to highlight the role of business transformation and applications of IT, Informatics and Information Technology. It also creates a wave of changes in businesses, helping to expand further and reach higher. The challenges, renewals, as well as implementation of new technology also assist in accelerating the transformation.

1. New challenges

New start-ups are doing a great job of digital applications in daily life. In particular, they build new business models based on digital technologies, leading to tremendous improvement in a short time. The network effect, as well as supplements in smart ecosystems, had shaken competitive borders between different industries, further improved them, and create undefeatable competitive advantages, even against legacy groups. And this poses a challenge to businesses that are already doing well (good financial and customer structure). The new start-ups also have two major targets: improving customer experience and cutting costs with automation and new technology. Should both targets be achieved, attractive investments will be much quicker, increasing the time needed for the start-ups to reach their peaks.

It is important to note that customers get used to things much quicker than we expect: they can easily move to the digital environment and easily access and choose products or services. The existence of similar products and services, therefore, become obsolete, and nowadays products and services need to be distinctive in value.

CEOs need to ensure constant efficiency and improvement daily, while directors often ignore selective and innovation until it becomes too late. This will lead to short-term pressures like the quarter’s revenue, risks, concerns, uncertainties, and eventually become reluctant to face esteemed competitors. Businesses often stay passive for too long, and as such may crumble under the overwhelming pressure to change.

Now, start-ups will first try to take over our customers and markets – those of companies that have existed for a long time, have matured, and are now facing intense competition. Next, they will try to attract our good personnel with their innovative mindset and improvement. Finally, they will drain our assets by repurchasing them. And these will all happen under the limitation of old thinking, and short life cycle for products and strategies.

2. How to renew

Old methods may be ill-fitted in this age of new challenges, as they are often to slow in IT implementation. Therefore, instead of old, businesses should think and implement faster and simpler with mindsets like Thinking Big Start Small, Design Thinking, Lean Startup, Agile Method, DevOps, Microservice.

A good financial and customer structure will also deter businesses from changing, and they are forced to counter problem by partnering with start-ups (from budding to closely IPO ones); build an ecosystem with new complementary products/services and new sets of customers; and later re-enter the field upon maturity, open infrastructure, or support start-ups; all in order to benefit from the innovations of those firms. Businesses should also treat digital transformation as a strategy to:

  • Consolidate the current foundation: re-structure the supply chain, improve connection with customers, treat them as a network, as well as try to understand them and their behaviors better.
  • Build a new structure: a re-evaluation of core competitive power and build new structures and capabilities.

Work closely with business units to catch potential technological investment opportunities that can be consolidated, improve current business fields, establish a management board with representatives from all units to ensure cooperation. Build a company-wide technological platform that also opens to customers, partners, and competitors, or enter a new field using new technologies.

3. New rules to the digital age

The supply-based economy is shifting into a demand-based one. Before, if you want strong improvement,  you will just need to produce more, decrease prices to increase competition, or open more branches to become a big supply chain. Marketing is meanwhile shifting from 4P, 7P to 4E, 4C. The working force is also going from employees to crowd, freelancing services. Sales are moving from physical to digital, while research is going from internally to open, ecosystem-based with customers and third parties all included. Targets also changed from low costing and differentiation to connectivity, network effect, complementary products, and wealth accumulation.

4. Base technology

Matured base technologies will help things get much easier, simple, better, smarter, as well as quicker, for customers as well as businesses. Highly-expected technologies like A, Big Data, Cloud, and 5G in this age of information science are getting cheaper and more accurate, and they are becoming inputs for electronic gadgets. IoT is sensory infrastructure to correctly acknowledge the real world, as well as act as a large source of data, as well as inputs to algorithms for smart product/service. SMAC/CDN (Social Mobile Analytics Cloud) mobile-smartphone had reached every corner of the society, while Cloud competing has become strong enough to solve more complex problems. The combination of Augmented Reality, Virtual Reality, Mixed Reality (AR, VR, MR), Blockchain, 3D Print, quantum computers, Cyber Security, and household 5G Internet had ensured enough facility for a throughout transformation all over the social and economic regions.

New technologies will also increase the transformation and IT implementation speed, as it lessened the amount of machinery needed for strong calculations. Now, you only need a few hours to buy Cloud services.

To succeed, you need a digital age culture and mindset

Business usually fails because they don’t have good ability and leading mindset for the digital age, where directors do not understand fully or underestimate necessary investments. Furthermore, not enough time is spent on digital transformation programs, and employees’ ability is yet to be satisfactory. Digital infrastructure is obsolete and unsuitable for fast transformation.

  • Organization: Building a digital culture and a working mindset.
  • Procedure: Vertically gather and exploit data on the value chain.
  • Marketing & Distribution: Approach and grow online customers.
  • Product/Service: Ensure quality of digital product/service,
  • Core Transformation: Change core products into digital ones
  • Innovation: Build new products, services, and business models in the digital environment.

According to MIT in 2012, growth of digital organizations are as followed: 65% Beginners (revenue:-4%, profit:-24%), 14% Conservatives (-10%, +9%), 6% Fashionistas (+6%, -11%), 15% Digital Masters (+9%, +26%) (Digital Masters are those with wide prespectives and good management on all deparments, innovations on digital types that create measurable business values, as well as strong digital cultures).

Advice for businesses

Let’s start smart: from the easiest points that will not crumble even under failure. When successful, the leader must expand digital transformation quickly, on a large scale. Think big, but start small and smartly. Dream high but be selective. Avoid using models that require too many technologies and personnel. Instead, utilize rotation. The target is to be a near/real-time data-driven enterprise. Nobody hates changes, they just don’t want to be forced to change, and a “Cheer Leader” may be the answer to this. A leader should not impose on the employees, but rather encourage them to join the digital transformation. Set questions to partners like: How do you solve this problem of mine? – Questions that do not focus on the result, but rather on the factors to strong improvement. You will have to first redefine your strategy -> determine COTs (critical operation tasks) -> Determine programs (Strategy/3 year, Execution/1 year, Program/3 months, People/Task daily) => Simplify processes and cross-functions, infrastructure enables, Near-Real time data-driven, using new technologies.” Mr. Phuong Tram, FPT Head Counsellor in Digital Transformation, DuPont ex-CIO shared.

For full references: Digital Transformation.pdf[1]

Nguyen Van Khoai – FDX

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