Digital Transformation

Digital transformation: the biggest challenges?

The term digital transformation is often used to express all kinds of initiatives that aim to modernise a process that was previously carried out manually, such as replacing a paper form with a digital form. But is this really Digital Transformation? Digitising a process can enable some optimisation without being a true transformation project. In this article, we will learn the difference between digital transformation and digitalisation, among other things. One is not better than the other, but both approaches complement each other.

By Yannick Hauser, Digital Transformation Advisor

Digital transformation and digitalisation?

The term digital transformation can be summarised as follows: It is about transforming all or part of one's business model by integrating one or more digital technologies to achieve a specific goal. The aim of such a step is to capitalise on an opportunity or respond to a risk of "disruption" that could affect all or part of the business model.

Digitalisation refers more to a project to digitalise a process in order to modernise or improve an existing service. An example of this is the use of digital robots that take over certain tasks previously performed by humans, but also cloud computing to optimise IT processes or chatbots that serve as an interface to solve technical problems.

There is therefore no contradiction between a digitalisation project and a digital transformation project. However, the objectives and timing are not identical. The former has a short-term goal of modernising the existing system, while the latter has a medium to long-term goal of transforming the business model.

What does it look like in concrete terms?

Take, for example, one of our customers that operates in the field of medical device development, which we supported in its digital transformation project. The company wanted to generate new revenue by improving the uptime of its medical devices. The company decided to develop a predictive maintenance service based on artificial intelligence and integrating multiple data sources into the model. This new service can be offered to its customers on a contract basis, generating additional recurring revenue. In turn, this company's customers could benefit from this service to better plan equipment downtime and thus reduce their risk of lost revenue.

The company has therefore developed a new business model that is no longer based solely on the sale of hardware, but also on the utilisation of the data generated by the devices. Data is being used as a new source of revenue. The technological platform for this project is based on our IoT framework (Connect, Manage, Utilise) and on Microsoft AZURE, which natively offers several services such as AZURE Cognitive Services and Machine Learning Services.

As digital transformation is neither a product nor a service, the question arises as to when and how an organisation can start thinking about transformation. The answer is quite simple: there is no beginning and no end to the process. Questioning one's own business model must take place continuously, without this meaning that one must constantly remodel oneself. However, it is necessary to analyse the opportunities and risks at regular intervals in order to be able to react quickly when an opportunity or risk materialises.

Dealing with risks and opportunities

There are several well-known examples of large companies that failed to start their transformation in time and unfortunately no longer exist or are in serious financial difficulties. I'm thinking of Kodak, Parmalat, Hertz and many others.

Even though many companies are fortunately doing better, the challenges are great, especially for Swiss SMEs. We have undisputed expertise in many areas such as machine tools, watches, financial services, bio-medicine and many others. But in order to remain competitive, our Swiss companies need to invest in innovation and we realise that this is often not the case for most of them. So there is a real risk of missing out on new opportunities or not being able to react to potential risks, which could jeopardise the existence of some companies.

Every organisation should therefore set up a process of strategic monitoring that enables it to identify opportunities, risks and potential players that could "disrupt" its business model as early as possible. One way to carry out this strategic monitoring is to rely on analysing the following three pillars:

  • WHY: This is about recognising risks and opportunities by focusing on key innovations in your industry, but also in a broader context.
  • WHAT: In a second step, the company must determine which products or services are risky and should be removed from the exploration portfolio. At the same time, new opportunities should be identified that should be integrated into the exploration portfolio in order to develop a future business model.
  • HOW: Finally, the implementation and use of the selected projects must be made possible in order to integrate them into a new business model within the existing organisation. This will have an impact on the entire organisation. For example, through the development of new technical capabilities, new sales channels, adjustments to the cost and revenue structure and, very importantly, the creation of framework conditions to support human resources in this change process. In short, a major challenge!

Digital transformation - myth or reality?

So digital transformation is not a myth, but in order to achieve it, a few prerequisites are necessary. It is not enough to set up an "innovation team" and hope that the members will do all the work themselves. An established company will naturally find it even more difficult to change, as its structure and organisation are not designed for innovation, but to deliver a product or service efficiently.

One of the first prerequisites for digital transformation is the unconditional support of company management and the Board of Directors in the introduction of innovation governance. Without this support, any initiative is likely to be quickly cancelled. It will then be necessary to create a structure that enables new ideas to emerge. An example of this would be creating a dedicated team in an innovation-friendly environment such as a digital lab or a university campus (as has been the case at Swisscom Ltd for several years). The corporate culture also plays an important role. Innovation cannot mean always being successful; mistakes must be part of the transformation process. It should therefore be avoided to set short-term profitability targets for the teams tasked with developing innovations. Open innovation, the creation of a think tank or initiatives that encourage collaboration within the company will also help to dynamise this process.

In summary, every organisation, regardless of its sector and market position, will sooner or later be faced with questioning its business model and therefore its strategy. Today, in many sectors, customer consumption habits are changing rapidly and needs are evolving depending on the geopolitical, climatic, regulatory or even health context, as we are currently experiencing with the coronavirus pandemic. Digital transformation is and will remain a key issue for the continued existence of a company, and this fact will only intensify in the coming years.

Swisscom supports numerous customers in digital transformation and digitalisation projects with a rich ecosystem in various areas such as cloud, security, data analysis and the Internet of Things, to name just a few.

The word of the expert - Video interview with Yannick Hauser, Digital Transformation Advisor

Yannick Hauser

Yannick Hauser

Digital Transformation Advisor

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