Scope of Digital Transformation

In the previous blog, the history of digital transformation, we looked at how companies in the past defined their version of what digital transformation meant to them. In this one, we at Celeix Digital will give you a broad outlook on how you could define digital transformation in your own words. 

The heart of digital transformation - Business Models 

A business model is the basic logic of a company that describes what benefits are provided to customers and partners. A business model answers the questions of how the provided benefits flow back into the company in the form of revenue. The created value enables differentiation from competitors, the consolidation of customer relationships, and the achievement of competitive advantage. A business model involves the following dimensions and elements. 

— The customer dimension contains the customer segments, customer channels, and customer relationships 

— The benefit dimension includes products, services, and values 

— The value-added dimension includes the resources, skills, and processes 

— The partner dimension includes the partner, partner channels, and partner relations 

— The financial dimension includes the revenues and expenses 

The objective is to combine the business model elements in such a way that they mutually reinforce each other. This makes it possible to achieve growth and makes imitation by competitors difficult. 

Digital Transformation of Business Models 

The digital transformation of business models relates to individual business model elements, the entire business model, value-added chains, as well as the networking of different entities in a value-added network. The degree of digital transformation includes the incremental (marginal) as well as the radical (fundamental) change of a business model. The reference unit concerning the level of novelty is primarily the customer, but a digital transformation can also affect its own business, partners, industry, and competitors. 

Within the digital transformation of business models, enablers and technologies (like big data) are used to generate new applications or services. These enablers require skills that enable data collection and exchange as well as the ability to analyse, calculate, and evaluate options. The evaluated options are used to initiate new processes within the business model. The digital transformation of the business model is based on an approach with a sequence of tasks and decisions that are related to one another in a logical and temporal context. It affects four target dimensions - time, finance, space, and quality. 

Ask yourself these questions 

— What does a structural approach to the digital transformation of business models look like? 

— What types of phases, activities, and results are relevant? 

— Which enablers (e.g., sensors, big data.) and which applications are relevant? 

— What examples exist for the digital transformation of business models and what are the best practices in this field? 

We analysed existing definitions, approaches, and examples of the digital transformation of business models and arrived at a roadmap for a successful digital transformation. A roadmap given here is based on the presented approaches to digital transformation and based on existing theories about business model innovation, the roadmap for the digital transformation of business models is explained as follows: 

Digital Reality - in this phase, digital reality, the company’s existing business model is sketched along with a value-added analysis related to stakeholders and a survey of customer requirements. This provides an understanding of the digital reality for a company in different areas.

Digital Ambition - based on digital reality, objectives for digital transformation are defined. These objectives relate to time, finances, space, and quality. Digital ambition postulates which objectives should be considered for the business model and its elements. Subsequently, objectives and business model dimensions are prioritised. 

Digital Potential - within this digital potential phase, best practices and enablers for the digital transformation are established. This serves as a starting point in terms of digital potential and the design of a future digital business model. For this purpose, different options are derived for each business model element and combined logically. 

Digital Fit - the digital fit phase looks at options for the design of the digital business model, which are evaluated to determine digital fit with the existing business model. This ensures that one fulfils customer requirements and that business objectives are achieved. The evaluated combinations are then prioritised. 

Digital Implementation - digital implementation includes the finalisation and implementation of the digital business model. The various combinations of options are further pursued within a digital implementation network. The digital implementation also includes the design of a digital customer experience and digital value-creation network that describe integration with partners. in addition, resources and capabilities are also identified in this phase. 

Enabler 

Enablers serve to allow applications or services to be used for the digital transformation of the business model. Four categories for enablers and applications/services are detailed below: 

Digital Data - the collection, processing and analysis of digitised data to facilitate and improve predictions and decisions. 

Automation - the combination of classical artificial intelligence technologies that enable autonomous work and self-organising systems. This reduces error rates, increases speed, and makes it possible to reduce operating costs. 

Digital Customer Access - the mobile internet enables direct access to the client, who is thus provided with high levels of transparency and new services. 

Networking - mobile or wired networking of the entire 1value-added chain via high-speed broadband telecommunications allows for the synchronisation of supply chains, which leads to a reduction in production times and innovation cycles. 

Conclusion 

The idea of defining a principle in action, with its measured results proved more effective and efficient in moving towards a better future - this is what the history of digital transformation teaches us. The scope of this learning is to be able to create a knowledge-building community where business leaders, influencers and the like-minded can compare experiences gained in deriving their lessons from their histories in different industries and company sizes. 

Another possible area of the directive would be to see the role of digital transformation within innovation management, particularly in the field of business model innovation. Lastly, companies that want to move toward the future need to establish quantifiable benefits of digital transformation.