The 4 Evolutions of Digital Transformation


Most things in life are cyclical, they certainly are in business, “we are expanding into new areas” 5 years later “we are focussing on core business”, I bet Carillion wished they had done the latter. I remember Big Blue “our work force should lead the world by example and work from home”, (ignore the vast sums that arrived by selling off vast swathes of the Blue real-estate portfolio), not too many orbits round the sun later and you guessed it, “we need to be more collaborative and drive collective innovation, lets all work together in a single office”, another cyclical vacillation that will no doubt repeat itself.

So this BRAND NEW Digital Transformation stuff, you know what’s coming, that’s right not so new after all. The highly ethereal Digital Transformation mist is another example of the cyclical nature of business, as markets have become saturated with similar offerings, we once again have to take a look across our collective products, processes and systems to see if we’ve missed an area to add value and efficiency or identify some value holding assets that are not being exploited to the fullest.

That is not to say that we do exactly the same thing again and again, every time Flared jeans come out they tend to be slightly better than the last time…..if that’s possible! Each iteration usually builds on or at least learns from the last one, in Digital Transformation this learning and capability increase is even more fundamental and is why I refer to it as an evolution.

Each generation of Digital Transformation harnesses the assets created from the previous evolutionary step. At each evolutionary stage a holistic review of systems and products should reveal an often exponentially larger set of possibilities than there had been on the previous lap around the daffodils. So ignoring the industrial revolution, which was largely analogue, when did all this “Digital” stuff start and what did the journey look like to get to where we are today.

Digital Transformation v1.0 – Manual Process Rationalisation

The fact is that real Digital Transformation v1.0 began with the Mainframes and Unix based host systems of the 60’s and 70’s, the most prolific impact outside of government was probably HR and Accounts processing, with automated time keeping, payroll and general ledger systems emerging. 

Many man hours sliced away by the digital capture and automation of the individual tasks of collating time sheets, creating payroll checks and simplifying a fundamental employer-employee relationship. Similarly, the vendor-client relationship with invoicing for orders and paying suppliers. 

Digital Transformation v1.0 really did encapsulate the 3 phases of Digital Transformation (covered in another one of my articles), but the key difference was the end product, v1.0 transformations largely benefitted organisations with internal efficiencies and time savings, mass transaction processing was great but did have downsides, witness the birth of the printed paper mountains, as reports where huge and often required wagons to be karted around to would be recipients.

Digital Transformation v2.0 - Inter System Process Automation

Digital Transformation v2.0 arrived in the late 80’s (normally with analogue end points), grew stronger through the 90’s, with things like EDI, and has become just what happens today. So our orders are processed by our internal fulfilment systems, largely the result of the v1 process, but now email and latterly more broadly the internet (interconnectivity) allow those orders to be placed directly by customers into our fulfilment system and latterly resupply to happen automatically with electronic orders sent into the value chain.

At the customer end this facilitated a multi channel go to market model to exist. At the supply chain end this removed the need to worry about maximums and minimums and subjective physical stock ordering processes that often saw mistakes with over stocking, including the cost to cash flow and under stocking, including the loss of sales. I personally refer to this the Kanban era, Henry Fords’ vision of Just in Time coupled with Japanese precision engineering really becoming manifest and delivering value.

A great example of v2.0 not going well is MFI (large European flat pack furniture vendor), MFI moved from a legacy green screen ERP system to SAP. Little did MFI realise a critical logic flaw in the migration to SAP meant the new system had no concept of a partially delivered order, so if half a bedroom/kitchen arrived at the customer it would show as still requiring fulfilment, to the extent the system could automatically reorder the furniture electronically from the supplier. This caused the cashflow crisis that ultimately took MFI out of business.

Digital Transformation v3.0 – Inter Ecology Product Creation

Digital Transformation v3.0 arrived in the noughties and is still very much the beast being wrestled with or at least attempting to be tamed. How can we leverage our digital assets to create new value or products, or more recently how can we work with our ecosystem of partners, customers and suppliers to create new commercial opportunities or collectively created new or enriched products.

The travel industry provides many great examples of this relationship, I often talk about Expedia, but it could equally be Priceline or Parcel 2 Go. Expedia aggregates many third-party products to create a new greater product, that is more accessible and more easily understood. Also leveraging social media to de-risk potential offerings by score carding related peer reviewed products.

These are the 21st centuries answer to the check-out offerings you see whilst queuing in the supermarket. However, it being the 21st century, it is far more sophisticated as it captures someone in a product sympathetic buying cycle, at which point we are far more susceptible to related purchases. The travel example is even more powerful as it de-risks destination related uncertainty with offerings that comfort and support the primary offering.

Digital Transformation v4.0 – Intelligent Systems Driven Opportunity

Digital Transformation v4.0 is again only made possible by the existence of the asset set created from the previous generations, there is no short cut on this journey for traditional vendors I’m afraid. The exception being new entrants that are not burdened by the journey for the simple reason they leverage the products of companies that have already travelled the transformation highway.

Digital Transformation 4.0 focuses on the introduction of intelligent systems, wholly distinct from the often incorrectly overused AI (artificial intelligence), intelligent systems have the ability to recursively question or provide answers that drive outcomes. If you read the headlines you would believe we were well into this phase, but most organisations are nowhere near this yet in anything but “in name only” systems or low hanging fruit opportunities to dip the toe in the water, a good example would be Chat Bots.

Inside large organisations we see this with robot process automation solutions (RPA). The ability to sit above a set of processes that were traditionally brokered by a human with simple and often repetitive decisions being made that drive process direction or outcomes. Again this isn’t new, these automation systems have been around for over 20 years, but 2 subsequent digital transformation generations have exponentially increased the opportunity for end to end instantiation.

At the tertiary end the ability for intelligent systems to query across your estate (CRM, Services, Products) and that of your eco system, building out further to checking product social reference-ability, coupling this to a potential or existing customers social profiles and behaviours.  This enables the intelligent system to provide a completely tailored offering.  The offering is intelligently started by a derived 1:1 directly marketed suggestion and then coupled to a personalised buying experience which seamlessly takes a given prospect on the complete journey.

The Net Net

Digital Transformation has been around for a long time, we just called it different things before. Each generation fundamentally provisions and feeds the next. The key point of interest for most organisations right now is that the Re-Invention stage of Digital Transformation v3.0 can potentially create wholly new products, products that can aggregate a number of vendor propositions into one and then deliver it in sympathetic buying cycle that greatly amplifies the resonance and in turn the volumes of sales.