The Age of Digital Transformation
BY: Emil Capino • Oct 14, 2019
One of the latest trend that is being felt, seen and heard in the corporate world is the use of modern technology combined with innovative business models that is making a profound impact on certain industries and businesses. Welcome to the age of Digital Transformation!
To appreciate Digital Transformation and discern whether it is worth the attention it is getting, let us look at what is driving this trend. Companies of different sizes and shapes are adopting Digital Transformation and initiating their transformation with two key objectives: to disrupt established business models or to avoid being disrupted by new startups.
Disruption as a key driver to transformation is a phenomenon that is nothing new. It has been happening in every industry at every turn of the century impacting not only ways of doing business but including our way of life. We have seen it during the 1st Industrial Revolution when water-powered mills were replaced by steam-powered machinery. We have witnessed it during the 2nd Industrial Revolution (a.k.a. the Technological Revolution) when steam-powered engines were replaced by internal combustion engines and computer technology helped automate manual systems. And we are experiencing it today, in the 3rd Industrial Revolution (a.k.a. the Digital Revolution) with the recent birth of electric-powered self-driving vehicles together with technological advances in mobile, the internet and renewable energy.
Looking back at history, disruption happens in various stages and speed of adoption before it became the norm. In the last several decades, the earlier disruptions were physical in nature and required more resources in the form of capital and infrastructure. Only large corporations with the right idea and capital where able to acquire or build the necessary infrastructure to produce physical or mechanical innovations. Anyone with a bright idea back then were not able to just create new products without huge capital and physical infrastructure which made disruption manifest at a very slow pace and with a low rate of adoption.
In the same way that the Technological Revolution has built up on the 1st Industrial Revolution, disruption builds on the one before it. Disruption in the Digital Revolution has gained momentum with higher rates of adoption and at a much faster pace. In fact, recent disruptions have demonstrated that anyone or any group of individuals with the right idea could create new products and services in a shorter period at lesser costs using available infrastructure which was built earlier by previous disruptions. This makes disruptive innovations to develop much faster and cheaper compared to earlier disruptions.
As an example, take the case of the youngest app developer who was invited and flown by Apple to its recent World-Wide Developer Conference (WWDC) in San Jose, California on June 2017. Meet Yuma Soerianto, the 10-year old schoolboy from Melbourne, Australia. Yuma has published five mobile apps on Apple’s App Store and has achieved accolades at the conference when Apple CEO, Tim Cook called him on stage.
Yuma is self-taught and started coding using Swift Playgrounds, an iPad app designed by Apple to teach children the fundamentals of coding in an interactive environment. The Swift Playgrounds app used gaming mechanics and friendly-looking cartoon characters to keep children engaged. Soerianto quickly completed the tutorials and enrolled in a free iTunes U Swift coding course offered by Stanford University. In less than a year after completing the course, Yuma has created and released five apps on the App Store!
For someone who just learned coding online from free internet sources, gets ideas from “everywhere” and who developed his latest mobile app while on the plane on his way to WWDC, it just takes a great idea and the right attitude to launch a possibly disruptive digital innovation. In the same way, Masako Wakamiya, the oldest developer in the Apple conference at 82 years old, developed a gaming app based on the Japanese doll festival Hinamatsuri after retiring from his bank employer. It only takes an idea and proper attitude to create mobile applications which can be published and instantly sold world-wide.
Take another perfect example in the case of Airbnb, the internet company and worldwide leader in spare space accommodations. Airbnb originally started as an airbed and breakfast service back in 2007. This was founded by a 27-year old designer school graduate and a 29-year old computer programmer. Designers Joe Gebbia and Brian Chesky were struggling to pay rent and came up with the idea of renting three airbeds on their living room floor and cooking for their guests. They created a website, airbedandbreakfast.com, and six days later they had three guests who paid $80 a night. After that initial success, they then enlisted one of their friends, Nathan Blecharczyk, a computer science graduate, to develop the website which is now airbnb.com.
Airbnb is essentially a room-letting website that allows anyone with a spare space to list and rent it out to travelers or basically anyone that needs a room for the night. The website also allows anyone to log in and book a night’s stay in someone’s spare room, apartment, tree house, a castle or even an island. Airbnb describes itself as a “trusted community marketplace for people to list, discover, and book unique accommodations and experiences around the world”. It is a pioneering peer-to-peer platform collectively known as the “sharing economy”. The Airbnb platform enables prospective hosts to list and establish their own nightly, weekly or monthly price, and offer accommodation to guests who can easily book via their mobile phones.
Airbnb derives its revenues from its service in two ways: guests pay a 9-12% service fee for each reservation depending on the length of stay, and hosts pay a 3% service fee to cover costs of payment processing and other overhead. It attracts hosts to earn extra money with no up-front listing fees and enjoy extra protection from Airbnb’s $1 million insurance for property damages by erring guests. Since its launch in 2008, Airbnb’s home-sharing marketplace has experienced very rapid growth, with more than three million listed properties worldwide and over 50 million guests that have used the service. Airbnb continues to disrupt and innovate by recently launching Trips, which allows guests to book experiences that are unique to the host city or country. Travelers in selected cities can book experiences like surfing lessons from a champion surfer in Sydney, or a chance to learn the secrets of Japanese knives with a master knife-maker in Osaka. Fast forward to seven years today, Airbnb is now active in 65,000 cities in 191 countries with 3,000 castles and 1,400 tree houses listed in its platform. Its current valuation is at $31 billion as of 2017 and is listed as the top disruptor in CNBC’s Disruptor 50 Companies.
Without owning a single property unlike hotel and resort chains, Airbnb has disrupted the hotel and travel industry. While Airbnb may not directly disrupt existing accommodations for high-end and business travelers, it is certainly creating a new demand with its innovative business model and global reach via internet and mobile devices. In the same manner as Airbnb have disrupted an entire industry, disruptive companies such as Grab and Uber are also leveraging digital technologies and creative business models to change the way we move around the city. By offering a service to rent a private car and driver for a ride, Grab and Uber is disrupting the public transport industry. Airbnb, Grab and Uber all utilize the same digital technologies that are available to corporations today: internet, mobile and cloud computing.
Digital Transformation is not exclusive to startups or kids around the block. It applies to companies in businesses old and new. The required technologies are available and highly accessible to everyone, even to 10-year old kids. However, Digital Transformation does not only entail the use digital technologies. As in any company initiative, Digital Transformation involves People, Process, Technology and Culture.
The People part of Digital Transformation involves the stakeholders and the project team who makes the strategies and plans for implementing a successful transformation. They are as important as the processes, technologies and culture that are essential to Digital Transformation. Process pertains to the framework and best practices as well as the new business processes or models that introduce innovative ways of doing things. Technologies include infrastructure for modern data platforms, artificial intelligence such as machine learning, cognitive tools and bots. And the most important success factor, the Culture that binds everyone in the entire organization to transform digitally.
Digital Transformation is here and is now becoming one of the top corporate priorities in 2018. It has been the focal point in today’s business landscape and is generally defined as the profound change that companies must undergo to leverages new technologies that requires creative strategies and innovative processes in the way products and services are delivered. Digital Transformation is a long term corporate initiative that requires thorough examination of existing models and customer interactions. It entails the re-imagining of customer experiences to deliver value adding activities which give birth to the reinvention of an existing product or service. Digital Transformation is also characterized by rapid transformation of business models that are at a much faster pace than previous industrial revolutions. This faster pace of transformation is due to recent innovations in cloud computing, mobile technologies, artificial intelligence including big data and analytics. Hence, the adoption of mobile application interfaces and cloud-based data platforms are important for a successful transformation. These technologies are key to the accessibility of “digitally transformed” products and services.
The result of Digital Transformation is very similar to how Business Process Re-engineering (BPR) in the late 80s brought significant changes to every organization and every industry. BPR is a business management strategy which focused on the analysis and design of workflows and business processes within an organization; also known as business process redesign, business process transformation, or business process change management (source: Wikipedia).
BPR has helped organizations fundamentally re-think their business models to dramatically improve customer services and cut operational costs. It has shaped and modernized businesses into world-class organizations that we know of today. Back then, only large enterprises with strong leadership and financial resources were able to adopt early and benefit the most from BPR which involved out-of-the-box analysis and radical redesign of core business processes and workflows to achieve improvements in productivity, quality, cycle times and service. The goal of BPR then was to make organizations become more efficient and deliver more value to its customers. Organizations at the time needed to adapt to meet market forces or be left behind by its competitors who are more efficient and productive with lower costs and shorter cycle times. The emphasis on customer needs and wants measured by customer satisfaction survey ratings, was a key focus for companies implementing BPR.
As BPR then was significant in the development of new business models which resulted from re-thinking and re-structuring of an organization’s business processes and methods, Digital Transformation now is critical for organizations to survive in the Digital Age. Companies must self-disrupt to challenge old business models and paradigms to succeed either by disrupting other businesses or avoiding being disrupted. Welcome to the Age of Digital Transformation.