Beyond Digital Transformation

According to Google Trends, the term "digital transformation" started to gain traction globally in 2012 and interest is still rising in January 2024.

Looking back at some (very) old presentations, the original scope and thinking around digital transformation seems very narrow. Back in 2012, digital transformation was primarily seen as a company's response to the emergence of a small group of disruptive technologies — ecommerce, mobile, social media and data/automation. Those technologies (and the ecommerce and social media companies that leveraged them so effectively) were seen to be re-writing the rules and disrupting value chains end-to-end, from business models to customer experience to supply chain and operations.

The first set of disrupted sectors were those where the product and distribution model could be digitized (e.g., telecoms, media and parts of financial services and retail) but ultimately the impact would ripple through to every sector.

12 years on and there's still huge interest in the term "digital transformation." But personally, I think the term has had its day — feel free to disagree with me! It simply doesn't do justice to the range of transformative technologies, market forces and the scale of the change required (across front, middle, back office and eco-system) to survive and thrive.

The range of disruptive technologies impacting business and society has exploded way beyond the original, narrow scope of what was originally considered as "digital" (e.g. AI, quantum, SpaceTech, advanced materials, biotech, hardware robotics, 5G and autonomy). Additionally, those technologies are becoming intertwined with a broad range of market and societal trends (e.g. sustainability, social equality, demographic changes and geo-politics). It's almost impossible to pull these technologies and trends apart as their impact is combinatorial.

So where does that leave “digital transformation”?

Firstly, I think we need a new term. I’ve challenged industry analysts, clients and my own team to try and find a better term for what comes next after "digital transformation". Most seem to agree with the premise of the question, but no one yet has come up with an answer! The “fourth industrial revolution” is still used widely, but it seems to describe the mega-trend rather than the company’s response to the mega-trend.

Secondly, the nature of a company’s response to the technologies and market forces has to be more integrated than ever. For example, I don’t think it makes sense to separate the digital world from the physical world, nor does is make sense to separate “digital” completely from mega-trends like "sustainability” — there's an important intersection where the two meet, as proven in the 2023 EY Sustainable Value survey, where 75% of sustainability executives said data and technology are an accelerator to their sustainability agendas. Additionally, we’ve seen companies get bloated and more complex during the pandemic-induced digital transformation years, where there was a scrambled reaction to accelerate digital innovation and adopt remote working. We’re now hearing from clients about their desire to simplify operating models and focus on cost-out opportunities. Start with the customer and work backwards to zero-in on process excellence, automation and simplification of the operating model.

Thirdly, I'm strongly of the view that the "customer" is the canary in the coal mine. It's easy to get dazzled by a technology or focused on a trend, but a stronger response is to start with the customer. Every time a customer “cuts the cord,” switches to an EV or invests in ESG funds, every time a B2B client switches suppliers due to Scope 3 emissions or partners with a company with more innovative technology, and every time a citizen stops voting due to apathy or a patient takes control of their health via data, the customer is speaking.

Whatever we call “digital transformation”, effective change through turbulent times starts by noticing those small changes in customer behavior and by creating a response that is grounded in customer needs and outcomes and holistic in response.