This publication is broken up into three sections:
TL;DR - For those wanting a quick take
Summary - For those wanting a bit more context and high level points
Article - Main body of work containing full detailed article and explanations that you might want to consume over several readings
TL;DR
Digital Transformation and Digital strategy are not synomous terms.
Digital Strategy precedes a Digital Transformation.
For a Digital Strategy to be effective it requires a defined Business Strategy and Execution Planning.
A Digital Transformation can cover the following: customer centricity (i.e. orienting on how your customers consume the value you create), employee experience (i.e. the custodians and owners of delivering the Digital Transformation), business processes and operations (i.e. experience design includes everything needed to deliver your customer's journey and the associated service design blueprints), business values and culture (i.e. way of work) and finally technology (i.e. key technology capabilities and enablers).
Summary
Digital Transformation and Digital Strategy are two of the most over-used words with little shared understanding in IT enterprise organisations.
No universally agreed to definitions of these terms - depending on your frame of reference - discussing or debating the meaning of these terms can become a religious debate where it is difficult to find common ground or unifying concepts.
Strategy is best viewed as a practice and way of thinking that is able to consider trade-offs from various strategic options and choosing paths of execution despite operating in conditions of uncertainty.
Digital Strategy is a plan of action or policy that is designed to achieve a specific goal within a digital context (e.g. this digital context could be developing digital products or services, running digital marketing campaigns, optimising business operations or innovating a business model leveraging digital technologies).
Based on the work of Roger Martin, I would position Digital Strategy as about understanding firstly where as an organisation you wish to compete (i.e. being clear on the markets and specific customer desires, needs or problems that you solve or don't solve), and knowing how to win in your chosen market space (i.e. having a differentiated strategy, operating model and defined value proposition) that leverages specific digital technologies as either a key capability, or enabler or amplifier of existing organisational know-how.
A transformation when viewed from the lens of a process of changing from one state into another is an intense process that requires deep focus and commitment. Once a caterpillar is in its cocoon it is committed to changing otherwise it would risk stagnating and dying. So if an organisation wants to undertake a digital transformation in a sense they are intentionally choosing to fundamentally change almost as deeply as a caterpillar which changes itself at the cellular level. Organisations that do not transform risk becoming irrelevant at best and obsolete at worst.
The term Digital Transformation used in a business context represents a change in the form or appearance of an organisation in the digital world. Digital transformation depending on your perspective is not a new thing but rather a continuation of the microprocessor revolution that began in the 1970s given the mass deployment of micro transistors into general purpose computing devices that were being adopted by major enterprises at that time.
In some cases an organisation might need to rethink their business model, in other cases they might need to rethink their entire operating model and supporting business processes, in most cases a business will likely start with a rethink in the mix of device and channel touchpoints to best serve their internal and external 'customers' and in all cases an organisation would have to refresh their purpose or mission, values and cultural operating model as part of a digital transformation.
If you are considering a Digital Transformation, I would suggest that you first develop a new or refine an existing Business Strategy with a specific call out on Digital Strategy i.e. so figuring out where to play (e.g. markets and specific customer segments and experiences that new digital technologies enable) and stating or hypothesising on how to win (e.g. the differentiated digital capabilities that can be leveraged to create business outcomes, impact and value).
Your Digital Transformation program at a minimum will need to cover customer centricity (i.e. orienting on how your customers consume the value you create), employee experience (i.e. the custodians and owners of delivering the Digital Transformation), business processes and operations (i.e. experience design includes everything needed to deliver your customer's journey and the associated service design blueprints), business values and culture (i.e. way of work) and finally technology (i.e. key technology capabilities and enablers).
Article
Over the past few months I have been dealing with how best to explain the difference between Digital Transformation and Digital Strategy to business executives.
Context
Some argue superficially that the two terms are interchangeable. I would like to present a point of view on how the the two terms are distinct but related. Before we get there maybe lets share some data insights on the two terms. According to Google Trends data covering the period 1 January 2010 to 31 December 2021, we have passed peak Digital Transformation and that the term Digital Strategy is almost half as popular as compared to Digital Transformation.
Setting the Scene
What comes first, a Digital Strategy or a Digital Transformation? Does every Digital Strategy need to be accompanied by a Digital Transformation implementation plan or does every Digital Transformation need a Digital Strategy? Whilst some may have a view that execution matters above all else and that strategy is a secondary issue I would argue that both are required and equally important.
What is the difference between Digital Strategy and Digital Transformation? Depending on your professional experience, what you read or who you speak to or the people or institutions that you follow, you will hear a variety of perspectives as to what these terms mean.
Some working definitions
These two terms are some of the most over-used words with little shared understanding in enterprise organisations with ‘IT’. Some people use these terms loosely and interchangeably but there are nuanced differences.
Even though there may be no universally agreed to definitions of these terms - depending on your frame of reference - discussing or debating the meaning of these terms can become a religious debate where it is difficult to find common ground or unifying concepts around which useful discussions and actionable conclusions can be had.
Given this background, can we develop a coherent view of what these terms mean if we take a first-principles approach to the terms Digital Strategy and Digital Transformation? Oxford Languages provides various definitions for the unique individual words, however these terms can have varying meanings depending on the context of use. For example:
Digital - (of signals or data) expressed as series of the digits 0 and 1, typically represented by values of a physical quantity such as voltage or magnetic polarization. General everyday use of this word also refers to computing devices.
Strategy - a plan of action or policy designed to achieve a major or overall aim or goal
Transformation - a thorough or dramatic change in form or appearance
Applying the Concepts
Strategy is best viewed as a practice and way of thinking that is able to consider trade-offs from various strategic options and choosing paths of execution despite operating in conditions of uncertainty. Any well considered strategy always has trade-offs, the question anyone pursuing a strategy has to ask themself is what are you willing to give up in order to realise your vision and strategy. Steve Jobs alluded to this concept as going "inch wide, mile deep" to show how focused you had to be to create great products that create meaningful value for your customers and meet your organisation’s strategic intent.
When you mention Digital Strategy you are speaking of a plan of action or policy that is designed to achieve a specific goal within a digital context (e.g. this digital context could be developing digital products or services, running digital marketing campaigns, optimising business operations or innovating a business model leveraging digital technologies).
Based on the work of Roger Martin, I would position Digital Strategy as about understanding firstly where as an organisation you wish to compete (i.e. being clear on the markets and specific customer desires, needs or problems that you solve or don't solve), and knowing how to win in your chosen market space (i.e. having a differentiated strategy, operating model and defined value proposition) that leverages specific digital technologies as either a key capability, or enabler or amplifier of existing organisational know-how.
Below is an example of how Google has pursued various product strategy tracks or ‘options’ in support of their overall business strategy of building Web applications that will get more data and more people onto the World Wide Web. Despite the fact that not all of Google’s products have been ultra successful they have enabled strategic and business optionality. Thanks to Itamar Gilad for this synthesised view highlighting Googles strategic intent, it is definitely worth your time to read his work.
The term Digital Transformation used in a business context represents a change in the form or appearance of an organisation in the digital world. Digital transformation depending on your perspective is not a new thing but rather a continuation of the microprocessor revolution that began in the the 1970s given the mass deployment of micro transistors into general purpose computing devices that were being adopted by major enterprises at that time.
If we want to understand what transformation is really about just look at the natural world for inspiration. When I think of a transformation that is deep and holistic, an obvious candidate is the caterpillar. In order for a caterpillar to transform into a butterfly it has to go through metamorphosis whereby the old form is done away with in order for new functions to be developed which manifest in the new form of a butterfly. For a caterpillar to turn into a butterfly it digests itself using enzymes triggered by hormones, before sleeping cells similar to stem cells grow into the body parts of the future butterfly. In a sense the transformation of caterpillar into a butterfly is a great example of the design adage that form follows function.
A transformation when viewed from the lens of a process of changing from one state into another is an intense process that requires deep focus and commitment. Once the caterpillar is in its cocoon it is committed to changing otherwise it would risk stagnating and dying. So if an organisation wants to undertake a digital transformation in a sense they are intentionally choosing to fundamentally change almost as deeply as a caterpillar which changes itself at the cellular level. Organisations that do not transform risk becoming irrelevant at best and obsolete at worst. The significant churn witnessed in major global stock exchanges is a testament to the fact that not enough organisations are adapting but instead are disappearing into obsolesence. Andy Grove's stark phrase "only the paranoid survive" captures succintly the frame of mind required to adapt and stay relevant in an increasingly digitised world.
Making Decisions
So what should you be thinking about right now?
So what does a holistic digital transformation include? In some cases an organisation might need to rethink their business model, in other cases they might need to rethink their entire operating model and supporting business processes, in most cases a business will likely start with a rethink in the mix of device and channel touchpoints to best serve their internal and external 'customers' and in all cases an organisation would have to refresh their purpose or mission, values and cultural operating model as part of a digital transformation.
One could argue that a Digital Strategy is a necessary but not a sufficient requirement for a Digital Transformation. If you are considering a Digital Transformation, I would suggest that you first develop a new or refine an existing Business Strategy with a specific call out on Digital Strategy i.e. so figuring out where to play (e.g. markets and specific customer segments and experiences that new digital technologies enable) and stating or hypothesising on how to win (e.g. the differentiated digital capabilities that can be leveraged to create business outcomes, impact and value). Only once you have a Digital Strategy in place should you embark upon operationalising a Digital Transformation program which is not an event but rather a journey with no defined end in sight yet.
Where can you start?
Your Digital Transformation program at a minimum will need to cover customer centricity (i.e. orienting on how your customers consume the value you create), employee experience (i.e. the custodians and owners of delivering the Digital Transformation), business processes and operations (i.e. experience design includes everything needed to deliver your customer's journey and the associated service design blueprints), business values and culture (i.e. way of work) and finally technology (i.e. key technology capabilities and enablers). When the forementioned ingredients are in the mix your chances of transformation success improve.
Given the present mainstream focus of Digital Transformation on the adoption of various technologies a major blindspot has been ignored for too long, "it's the people, stupid". Digital Transformation is ultimately a process where an organisations employees will be the final judges of whether a transformation joins a rare breed of successes or becomes part the undifferentiated mass of Digital Transformation mediocrity. In future articles I hope to address some of the conditions required for Digital Transformation success for example employees that are empowered to scope, define, solve problems and implement meaningful changes in ways of working that drive both societal impact and business outcomes within approved organisational guardrails (i.e. constraints).
If organisations only remain focused on the technology aspects of Digital Transformation they risk missing out on taking advantage of what Carlota Perez refers to as the deployment phase that every general technology paradigm goes through where the most profits are generally made. Given that we are still in the digital computing paradigm that started gaining mass adoption in the 1970s this is an opportunity that enterprises can ill afford to lose out on.
In a sense Digital Transformation is the next Business as Usual.
#strategy #digitalstrategy #digitaltransformation #rogermartin
PS. If you are moved please leave feedback so I can improve the publication and topic coverage.
Resources
Metamorphosis Explainer by Scientific American
Caterpillar turning into a butterfly by Tibi Puiu of ZME Science
History of Microchips by Computer History
Playing to Win by Roger Martin
Technological Revolutions and Financial Capital by Carlota Perez