Digital technology has changed the way most of us live our lives. When we book a holiday, we go online. When we need directions to go somewhere, we reach for our phones. But many companies have not yet made the same fundamental changes across their organisations. As Gary Hamel, visiting professor of strategy and entrepreneurship at London Business School (LBS), points out, the uptake among businesses has been slower than some anticipated.
“The ability to move information and share it at almost zero cost characterises our world,” Prof Hamel said in a recent LBS podcast. “All of us would agree digital technology has transformed our lives as consumers. That radical empowerment has not happened in our work lives.”
As pioneering companies look ahead and embrace the digital revolution, the world of business will be transformed. Here are five key ways in which they can benefit from digital transformation:
1. Improved, evidence-based business strategies
Embracing digital change allows companies to use all available information and technology to develop ambitious business plans. Pirelli's digital transformation, for example, will enable the firm to anticipate future demand from current data, helping it plan further ahead. “By working with car companies and developing new systems, we will be able to know where a certain tyre needs to be made years in advance,” says Pier Paolo Tamma, the company's senior vice-president and chief digital officer. “That means we will be able to boost output in specific factories up to a decade ahead.”
2. Better targeting of sales
Gathering customer data makes it easier for companies to understand customer needs and create targeted sales strategies. For example, when Disney rolled out a new RFID (radio-frequency identification) wristband system – called MagicBands – at the Walt Disney World Resort in Florida it allowed visitors to make e-payments, manage reservations and access hotel rooms. The resulting user data permitted Disney to make improvements to every aspect of the Walt Disney World experience, as well as develop customised options for visitors, according to a report by the World Economic Forum (WEF).
3. Reduced waste and improved sustainability
By focusing on efficiencies – such as cutting back on paper use – throughout their organisations, digitised companies are able to substantially reduce waste and minimise carbon emissions. Figures from conservation organisation WWF show that at present 40 per cent of the world's commercially cut timber is used to make paper.
4. Increased business resilience
Customer expectations are always changing – particularly as new technologies become available. Digital capabilities give companies the ability to re-evaluate their business models and respond flexibly to new challenges and demands. For example, after years of decline and reaching near-bankruptcy in 2004, the toy company Lego embraced restructuring and a digital overhaul. After assessing the market, says the WEF, the company focused on enabling customers to develop their own Lego products. Lego Mindstorms, a hardware and software platform, lets customers combine motors, sensors and intelligent Lego bricks with apps and programming software to build their own robots. By embracing more creative approaches and harnessing the power of digital, companies can open up new opportunities – and increase their resilience.
5. More integrated – and effective – operations
By enabling departments to share data and intelligence, a digital transformation encourages teamwork across the whole company. Lessons can be learnt faster and breakthroughs shared more quickly – between operations around the globe.
Already, many companies have successfully harnessed the power of digital to make changes to how they operate, but that is just the beginning. By embracing digital transformation, companies will be able to create new systems that connect them with customers and unlock new business opportunities.