Thoughts on digital transformation in 2023

I recently saw a comic strip on LinkedIn where digital transformation was compared to a caterpillar transforming into a butterfly. But a butterfly is not a caterpillar with rocket boosters. This means that digital transformation is not about doing the same thing faster or cheaper. It is about doing something different or at least quite differently.

Ilkka von Schulman

13.12.2022

Another thought-provoking moment for me was in December during the CIO Nordic 2022 event, where we extensively discussed strategy, culture, and change. Peter Drucker’s famous quote: “Culture eats strategy for breakfast” still seems to hold. But digitalisation and related new strategic directions strongly challenge the status quo. This begs the question: How can we change the culture?

The third, slightly alarming, observation is that the problem with digital transformation no longer seems to be a lack of solutions. Nor does it appear to be time to market or development speed. One digital leader recently said that they have more or less all the whistles and bells in place, but only 3% of their revenue comes from digitally enabled channels and services.

Pulling these lines of thought together led me to “new” observations, or at least new guiding principles for contemporary digital development. Many companies and organisations have been developing digital solutions for at least two decades now. There have been ups and downs along the way. Most of the development until today has been about proving the viability of digital solutions and learning how to develop them. There have been various digital spinoffs and rebellions to speed up the development. But this development has also been struggling with lacking backend capabilities, ageing IT systems or wrong people skills.

The companies that have been successful at digital transformation have often experienced similar problems but have also found a way to build digital infrastructure. And in many cases, their existing business model has been exposed to high levels of competition or is simply declining. This has forced them to find new business opportunities, which by default have then been digitally enabled. If we look at these winners now, they have truly transformed in a way which would have been almost impossible to plan when they started the journey. The ability to learn and resilience are the key success factors. 

The low adoption rate of digital solutions has been argued to be due to poor solutions. If only we would develop better solutions, they would work. Really? I feel like the slowness is now more due to cultural and personal resistance to change. Who would like to start using one more app? Of course, services need to be good and useful, but that is not the whole picture here.

Covid-19 has been the best digital transformation driver we could have ever wished for. The lockdown has boosted digital solutions adoption like nothing else. Because the epidemic lasted for so long, it has created new digital habits. Now is a great time to continue expanding this digital adoption. It is time to have digital as the leading design principle, both in operating model and service design. Of course, the role digital technologies will play will vary by customer and solution. For example, customers in elderly care have limited digital skills and capabilities, yet there are digital solutions which can serve some of their needs, like intelligent bracelets sending automatic falling alarms.

To summarise, digital transformation in 2023 is no longer about the accelerated development of digital solutions. At least, not primarily. It is rather about having both the resilience to continue investing in digital infrastructure and a digital first mindset in business development. This is a marathon, not a sprint. 

A lot of contemporary digital development is not obvious and visible. It can be, for example, better organisation of your product data structures and assets, which in turn can enable something new. Or it can be an AI working in the background to simplify or improve complex decision making. I hear a lot of talk about information or fact-based management being a business goal. But most organisations struggle with their management of data, and this currently prevents their better utilisation of data – at least to the extent sought. Data management is one of the digital megatrends for 2023.

Adoption rates climb slowly, but Covid-19 has helped to boost this a long way. It is time to get the most out of existing digital capabilities through stronger marketing and selling. And when ecosystems and people get used to new operating models and services, they simply become recognised as the new standard.