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Thinking Strategically in Leading Digital Transformation

A new wave of pervasive digitalisation is redefining the role of digital transformation in business. Digitalisation is now moving beyond integrating tasks and people to connect with intelligent objects as well through innovations such as AI and the Internet of Things.

Rapid digital adoption is occurring at every level of business – from hawker stalls to Fortune 500 companies. The advancements in digital technologies coupled with the business exigencies brought on by the Covid-19 pandemic have unleashed an unprecedented wave of digital transformation.

While businesses have gone through earlier waves of digital transformation – like automation, ERP and e-commerce – the disruption is different this time around. Digital technologies are being integrated into businesses, changing the way a company operates and delivers its products and services to customers.

This is ushering in a new wave of pervasive digitalisation. A new paradigm has emerged, where digital is fast-becoming the default mode of interaction.

Digital transformation is more than digital tools

Earlier the sole privilege of the resource-rich large enterprises, digitalisation is now a competitive necessity for all. The scope of digital connectivity has also expanded. Thus far, it has been used primarily for integrating tasks (e.g. ERP) and people (e.g. e-commerce, mobile and social media). However, now it is moving beyond integrating tasks and people to connect with intelligent objects as well through innovations such as AI and the Internet of Things (IoT).

Successful digital transformations push the envelope in redefining business models. Digital banking, for example, is just the tip of the iceberg for fintech disruptions. In Singapore, DBS has digitally transformed to make banking virtual and invisible.

Moving forward, banks cannot be content with merely enabling digital-banking platforms. They need to continuously realign with the new competitive landscape to stay relevant. There are new ways of sensing customer insights and personalising digital offerings through big data and analytics. There are new opportunities for product and service innovations based on AI-derived algorithms. These include micro-deposits, micro-loans and robo-advisory services. What’s more, there are new possibilities of reconfiguring existing relationships such as disintermediation or reintermediation through digital platforms or digital asset exchanges.

Take for instance the transformation in North Asia of Ping An which has morphed from a financial and insurance service provider to a comprehensive healthcare platform. Elsewhere, Siemens is metamorphosing from an energy and industrial automation company into a new industrial IoT company.

These are massive transformation efforts that require committed digital leadership, well-conceived digital business strategies as well as competent digital capabilities in technology, data, people and partner ecosystems.

Be Strategic in Driving Digital Transformation

Many organisations today may be jumping onto the digital-transformation bandwagon but not all have the right strategy. Most often, companies spend on uncoordinated digitisation projects. They merely pursue a hodgepodge of digital initiatives via different departments of their organisations. Not enough is being done to integrate these disparate initiatives into a coherent shared vision.

Yet other digital-transformation projects are constrained by organisational bureaucracy and are too slow to seize dynamic opportunities. Finally, many projects are simply not bold or radical enough. They merely attempt to automate existing processes and connections, eking out marginal improvements.

Embarking on digital transformation should be beyond the mere acquisition of technical digital competency. There is a real need to sharpen our managerial capability to drive digital transformation. Specifically, there are four elements of such strategic thinking, i.e., alignment thinking, integrative thinking, agile thinking, and futures thinking.

Alignment thinking

For sustained differentiation, alignment thinking should form the basis of any digitisation drive. Before jumping onto a digital-transformation initiative, managers need to take a step back to understand their organisation’s unique strengths and strategic resources, its crown jewels. They should start by understanding if their traditional competitive strengths are still relevant and whether they can be repurposed to enable the organisation to seize new opportunities for leap-frogging.

Where possible, managers should wrap their digital-transformation efforts around their crown jewels for sustained competitive advantage. Take the examples of Ping An again. It was able to build a successful healthcare tech ecosystem – Good Doctor, WanJia Clinic – as its digital transformation was anchored on its long-established relationship with the government while simultaneously leveraging high-quality medical data, extensive hospital network and its massive user base.

Integrative thinking

Integrative thinking is needed to sync various initiatives into a more coherent digital-transformation vision. This is particularly problematic for large companies with a proliferation of initiatives, some pulling in different directions. Integrative thinking brings together initiatives across the various silos for greater synergistic impact.

The larger vision should also accommodate organisation-wide ambidexterity to exploit and explore. For instance, DBS is exploitative in its digital transformation journey to reposition its core business. It is simultaneously exploring new digital growth such as mobile-only banking in India and Indonesia and upstream expansion to e-marketplaces to be closer to its customers.

Agile Thinking

Given the increasing convergence of the two worlds of business and technology — be it Fintech, Medtech, or Agritech — agile thinking is critical in tapping new creative sparks. Traditional incumbents need to compete like a customer-centric tech company – think of the FAANG (i.e., Facebook, Amazon, Apple, Netflix, Google) companies – with speed and ready scalability.

Cycles of rapid innovation and fast execution can be initiated and deployed at scale through various small agile teams that have both business domain expertise and technical competency. Managers need to enable and align their agile teams and give them the autonomy to continuously experiment and innovate.

Futures Thinking

Finally, there is a need to help managers make sense of the convergence of the various mega-forces to reimagine possible futures. This is known as futures thinking. Progressive companies make substantial efforts to solicit expert opinions on future scenarios. They put these views through a collective validation process with their senior management teams.

DBS has “future-proofing the bank” strategic sessions with consultants to extend the competitive landscape 5-10 years into the future. It benchmarks itself against the top technology giants. It brings together senior business and technology leaders to articulate their views on alternative scenarios. Such a systematic approach helps to illuminate blind spots and develop a collective understanding of probable technology disruptions for the bank.

“Futures thinking pushes us to think hard about different future scenarios so that we have enough ideas not just to adapt and respond but also create and shape the future.”

Innovating for a Sustainable Future

These are exciting times to be in. We are just beginning to have the means to reshape the future and to address broader societal challenges beyond just anticipating the future. Already, digital innovations are being directed to the creation of a more sustainable future. Examples include e-marketplaces that reduce economic exploitation, e-wallets that extend financial inclusiveness, IoT sensors that cut waste and improve energy efficiency, drones that save lives, apps that track carbon footprints and weather systems that predict natural disasters.

These four elements of strategic thinking should help managers be more adept in driving digital transformation. Alignment thinking and integrative thinking help to ensure sustainable differentiation and strong organisational coherence for greater efficiency and impact. Agile thinking and futures thinking provide for greater autonomy to respond swiftly to dynamic business changes and greater boldness to innovate.

Professor Sia Siew Kien is the Associate Dean of Graduate Studies at the College of Business, Nanyang Business School, Nanyang Technological University. He has over 20 years of research and consulting experience in private and public-sector organisations. His main research interests are issues in process redesign, enterprise systems, complex project management, tech disruption and digital transformation. In this article, he shares with us the true essence and enablement of digital transformation and what it takes for an organisation to achieve that transformation.

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