on Digital Transformation

BY THOMAS LUCAS-NÜLLE

(Published in The Produktkulturmagazin issue 3 2015)

Everyone in the business world is talking about the second internet revolution. The Internet of Things directly connects products and devices with each other. The digital transformation of the economy is well underway and in some branches, has left no stone standing.

How do you assess the current development of this transformation process for your customers, particularly from the perspective of a German CEO in an American company?

Dirk Häussermann: In a nutshell –  digital transformation can no longer be stopped. Whether you find the trend good or not is irrelevant, as companies have to adapt and carry out the transformation in order to remain competitive and address the demands and needs of the customer. Quite apart from that, digital transformation offers a great deal of potential for new innovation, products and services – and as a result – growth. Companies which fail to do this will have a harder time competing in the future. American companies are somewhat more courageous here than the German SMEs; but even here, German firms are starting to and rethink and take action. Providers such as Informatica are developing suitable solutions and technology in order to support companies in developing and putting their valuable data at the centre of their business processes. But the transfer of business models into the digital, mobile sector also presents challenges. The more digital the processes, the more data has to be processed – key word ‘big data’. As the saying goes, ‘data is a valuable commodity’, but we have to first find the data in the flood and evaluate it in order to be able to efficiently use it. It is far from completed merely with the digital transformation. Only with the help of the right data can companies develop strategies to continue their growth, improve performance and put the customer at the centre of their actions.

In your opinion, what specific changes have there been in companies in the last two to three years? Until now digital consciousness has not been so evident.

d. h.: Companies have recognised that the digital transformation is not and option but a must in order to continue to be successful. However, it is important that not only part of the company is transformed, but that a comprehensive and customised strategy specifically for that company is developed and implemented. Only in this way can the transformation be successful. At the same time, many companies change or expand their business models around the data. The data is the ‘new oil’ for the company during its development.

How big do you think the risk of being forced out of the market by digital pure players from Silicon Valley is for companies?

D. H.: These companies recognised the trend early and established it as a basis for their business models. Of course, this sets the ‘traditional’ company under pressure. But those companies which carry out the digital transformation in good time and with a lot of thought should be able to catch up with no problems.

What challenges are facing industrial and retail companies that now have to jump on the bandwagon of digital transformation?

PETER VAN REIJMERSDAL: If a company still has to start the process of digital transformation in 2015, the fact is that they are very, very late to start. Besides the risk of not making the transition in time at all compared to competitors – both local and international – the costs of making the transition now are much higher than they were 3-4 years ago. Today we have the challenges of increased competition through loss of market share and decreased cash-flow to finance the transition. In addition, altered market circumstances prevail due to new competitors and changed business models.  The right people with the right talents have to be found  in order to realise the transition, whereby predominantly backend IT systems, which are not completely up-to-date, are currently being used to provide the data needed for the digital transformation. And of course also on a managerial level, experience and focus on the digital transformation process itself.

What should a company account for strategically if it wants to begin and consequently realise the digital transformation process?

P. v. R.: The transformation process itself requires a company to fulfil some pre-requisites, partly based on the challenges as described in the previous question. Full attention and support has to be present across the whole managerial level and at all levels of hierarchy. Additionally, a CDO – Chief Digital Officer – has to be appointed, who is directly responsible for the digital transformation and directly reports to the CEO (and cooperates with both the CIO and CMO). Furthermore, there has to be planning regarding appointing adequate resources to all related projects, whereby the accountants and the employees have to be freed from their daily tasks for these projects. Experienced people and external advisors have to be hired to guide them through this process.

Besides the transformation projects themselves, the organisational changes and change management projects are perhaps even more important. My advice: Create a strategic plan for the coming 2-3 years and start immediately with the first implementation of the digital transformation. Start actively with small things and make the necessary adaptations in this way.

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Picture credits © Osudio, © Informatica