“Digital transformation is not about technology”

“Digital transformation isn’t about technology, it’s about what you and your organization do with it.” Authors Sander Jansen and James van de Merbel of The Management Book for Digital Transformation are very clear. “It’s about what you can do with that technology to be and remain relevant in a digitizing society.”

After consulting positions at Scheer and Accenture, Van de Merbel became Chief Information Officer responsible for strategically setting up information management at BAM International. According to him, it is crucial to only use technology that actually provides added value. “Over the years, a hairball of different systems has often developed in organizations. With a structure in which IT fell under the financial director and was really only supportive. In the 1990s, there was much more talk about IT-business alignment. Although that results in more focus on systems that actually add value, that approach is not yet a strategic approach. This approach is more about doing your work more efficiently, than using IT as a strategic means to be more relevant in this digital society. For the latter you have to take a step back, to be able to make a big leap forward. Customers, internal business processes, the proliferation of technology and how to create new business models can no longer be seen in isolation.”

James van de Merbel: “Customers, internal business processes, the increase in technology and how to create new business models can no longer be seen in isolation”

One big learning curve

Jansen owns an online training platform and consultancy firm J&M Digital Transformers, which focuses on managers who want knowledge, tools and support in their digital transformation. He teaches Digital Transformation at the Hogeschool Utrecht. Jansen has previously written books entitled Strategic management of innovation and The Building Blocks of the Innovation Framework. “Originally I come from the media corner. At the then publisher Kluwer I was one of the first project leaders involved in database publishing. I then visited a modern printer, where I saw a cartoon about how to spit out books on demand. From that time on I wanted to make sure that this would actually be possible. So printing on demand. We have implemented this concept at the Zaanse Scanlaser. Digital technology in itself did not lead to success in business operations. It is not about the digital work processes, but mainly about what you do together with your employees and your business partners to make the technology a success. You cannot avoid redesigning large parts of the supply chain. In short, you really have to set up a new business model and that is one big learning curve. In our case, the change meant that we had to sell content first, then print it and distribute it directly to the end user. The ‘normal’ process but the other way around.”

Digital foundation

ICT infrastructure can be fantastic, but don’t be blinded by it, says Jansen. “Until now, we approach automation in organizations as incremental steps. Continuous improvements in efficiency and effectiveness at application level. Nothing wrong with that, but it does prevent you from looking at the total design of the digital foundation under your organization. What do I really need to set the innovation agenda in our sector?” Both men recognized this question and so they came to a collaboration to write the book The Management Book for Digital Transformation. “Also because there are models for the implementation of automation, but not for how to approach an entire transformation of the business,” says Jansen.

Van de Merbel: “The models we use encourage the use of methods in which IT and business employees work closely together to get close to the customer. In this collaboration, they arrive at processes in which tailor-made products and services can be offered to customers in a customer-friendly but scalable way. This is often accompanied by the development of new, digital revenue models. This also includes a financial component, because after the analysis phase you will have to determine which technology is of such added value that you want or need to invest in it.”

Looking over the fence

Disciplines within the company, such as IT, operations and finance, have to look beyond each other’s fences. Jansen: “As a result of the transformation, you often introduce digital processes, services and applications that no longer fit into the traditional cost structure.” Van de Merbel: “You can’t just let the digital transformation take place in one pillar, for example ICT, operations or finance alone. By definition, that would only be an incremental improvement in that particular pillar, not a transformation of the organization. You are one company with, if all goes well, one mission, vision and strategy. You approach the transformation based on those business objectives. Implementing the technology is not the goal in itself. The company objectives are your starting point. If you don’t take that as a starting point, business units start expressing wishes out of technology infatuation. A number of common misconceptions: ‘We should also be doing artificial intelligence. Or blockchain is important.’ While that may not be in line with the company objectives at all. In short, first try to sketch the overall picture, the proverbial dot on the horizon. You then formulate what the building blocks are to get there and put them away in time in a schedule. Starting with low-hanging fruit, where you are the first to pick up digitization that has a significant effect in the short term.”

“You can’t just let the digital transformation take place in one pillar, for example ICT, operations or finance alone”

Of strategic importance

Digital transformation is a must, conclude the gentlemen behind it. Van de Merbel: “If it wasn’t to remain relevant in this digital society, it was to attract and retain young talent. Young professionals increasingly want to feel that they are part of an organization that has its affairs in order in this area. An organization that is a winner.” Jansen: “To become a winner, all managers of your organization will have to be convinced that this is of strategic importance for survival. They must understand that the transformation cannot be tackled per pillar, but must be tackled organisation-wide. That also means that, based on those business objectives, directors have to break free from their own ICT projects in their pillar.” Van de Merbel: “The role you set in your board of directors for this differs per situation. It can be a chief technology officer, a transformation officer or chief data officer. I do not care. I am not advocating an IT manager under a CFO. Then, viewed from the perspective of the finance discipline alone, it becomes too narrow. While you want an organization-wide role, with a mandate from the Board of Directors over the entire organization. Just someone who can keep an eye on the big picture. And so you can also see which technology needs to be invested in to remain relevant in five to ten years.”

Don’t want to be the cheapest
Jansen concludes that anyone who only uses technology to become the cheapest will not win. “Technology is developing at lightning speed. A competitor who invests a year later is very likely to be more efficient than your organization. And so you have to invest again quickly. You can do this if the Return On Investment turns out positive with a calculation of a period of one year. But in order to recoup the investment within one year, an organization has to run either larger volumes or with more margin. That’s the crux of the matter: you only get a larger market share if the cost savings that the investment yields is directly translated into lower market prices. See here: the rat race to the bottom. There is no winner in such a battle. My advice: don’t participate in this and stop investing in digitization alone to become more efficient. Stop being a traditional organization and start the real digital transformation.”

You are not a start-up

Van de Merbel concludes that it is not wrong to be inspired by start-ups. “But please note, as an existing organization you are not a start-up. You already have existing business. In addition, start-ups often struggle with their business model. That does not matter on the scale at which they operate, but on a corporate scale. Nor am I a fan of the popular corporate start-up model showing how the digital game is played. These often snowball in corporate environments because too many corporate disciplines interfere with the start-up and they have too little power within such an organization to go their own way. This also means that you do not have to deal with the urgency of a transformation for the entire organization. After all, you want a clear path for the entire organization for digital transformation. With digital products and services and a data-driven culture that employees embrace.”

The example of Nike

The authors come into the book with the example of Nike. This company mainly produces clothing and shoes in low-wage countries. Jansen: “Sixty percent of the consumer price remains in the logistics distribution and retail channels. But now they also have design and product in high-wage countries. You can design your own shoe via a configurator on a website and have it made. Nike will send it directly to you. That is less cheap than a shoe from the store, but it is your unique shoe. The advantage for Nike is not only that they can now keep that sixty percent for retail and distribution in their own pocket, but also that they know more about you as a customer. About your size, your style, the type of shoes you wear and what you are willing to pay. Information they don’t have from their retail channel. That way you attract the data to you.” Van de Merbel: “By engaging in digital transformation, those kinds of gains automatically come to you. You gradually learn more about your customer and then you see unexpected opportunities.”

Sander Jansen: “Stop simply investing in digitization to become more efficient”

Own digital strategy

The two authors come to a conclusion. Jansen: “I hope that administrators will be able to create their own digital strategy after reading the book. We offer various tools for this in the book, including an e-learning program that is an integral part of the book.” Van de Merbel agrees: “Digital transformation starts with what you want to be as a company. First you look at where you are now and how you get where you want to be. After reading the book, I hope that readers will understand that digital transformation is not about technology, but rather about your business and your revenue model. And that, if you have charted a course for that digital transformation, you must also follow that course. You transform for the long term, by implementing successes along the way.”

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