Six Strategic Initiatives for Digital Transformation

Measure 1: Establishing the vision of becoming a Digital Native Enterprise (DNE).

Establishing the vision of becoming a Digital Native Enterprise (DNE) is to master the characteristics of the digital economy and integrate them into the core of business operations and corporate culture.

Digital native enterprises have the ability to expand their business and innovation at a high speed, be customer-centric and fully arm their employees, be able to take risks while innovating continuously, technology and data are the lifeline, can achieve more efficient operations, create new information-based revenue sources, Continuously improve customer loyalty and other characteristics.

The digital economy has three major characteristics. First, information and how to use information are the keys to success; second, consumer participation and large-scale development are the foundation of development; third, ecosystems are as important as core intellectual property rights.

Measure 2: Use the latest ICT technology to explore and change the traditional business model of enterprises.

According to IDC, by 2020, 50% of the global top 2000 companies will rely on their ability to create digitally enhanced products, services and experiences for most of their businesses. 50% of China’s top 1000 companies will do the same.

How to combine technology and business?

It can be developed from the following six frameworks. One is to expand product and service categories through digitalization, such as Amazon Audio; the other is to replace original products and services with digital products, such as capsule gastroscopes; the third is to create new digital products and services; Use digitization to transfer value proposition; fifth is to use digitization to create new customer experience; sixth is to reorganize the supply/distribution chain or disintermediate.

Action 3: Assess the maturity and performance of digital transformation.

According to the digital transformation in China, the world, and the United States, the maturity can be divided into five stages. The first stage is a single-point experiment, which is a digital starter; the second stage is a partial promotion. , Is a digital explorer; the third stage is expansion and replication, a digital organization; the fourth stage is operation management, a digital transformation person; the fifth stage is optimization and innovation, a digital disruptor.

Compared with the United States and the world, China is still relatively backward, especially in the fourth and fifth stages. In the fourth stage, China was only 16%, while the United States was nearly 30%, and the world exceeded 20%; in the fifth stage, China was only 0.9%, the global average was about 5%, and the United States was 6.5%.

According to the five major challenges facing digital transformation, how should digital native companies set up score cards for quantitative evaluation?

It can be carried out from five dimensions: overall digital transformation, leadership transformation, comprehensive experience transformation, information and data transformation, operation model transformation, and work resource transformation. The overall digital transformation can be divided into product service innovation rate, customer value proposition, data capitalization, process service effectiveness, work and labor supply, etc.

Leadership transformation can be divided into digital intelligence quotient, product and service innovation rate, ecosystem construction, digital risk tolerance, core business digital transformation share, etc. All-round experience transformation can be divided into customer value proposition, customer’s net recommendation value, experience and personalization capabilities, and a single 360-degree customer view.

Information and data transformation can be divided into data capitalization, data market, application programming interface-APIs, privacy and governance, etc. Operational model transformation can be divided into digital-related assets, IT as a business capability, product life cycle, and process service effectiveness. The transformation of work resources can be divided into work and labor supply, employee net recommendation value, employee technical quotient, and innovative incentive mechanism. Through these assessments, finally find the gap and future direction.

How to establish new performance appraisal indicators?

CEOs and CFOs are more concerned about the three major indicators of financial KPI, business KPI, and operation KPI. These three indicators are combined with the five aspects of digital transformation, including innovation capabilities, customer relationships, data monetization, business operations, and human resources. Some digital indicators will be presented.

These indicators can be used as a reference for the future transformation of enterprises. According to IDC’s research forecasts, financial KPIs for innovation capabilities, by 2020, 40% of company capital expenditures will be used for digital transformation initiatives; business KPIs, by 2020, 80% of digital transformation innovation initiatives will be approved for implementation; operational KPIs In the past 3 years, the company spent less than 10% on failed digital transformation projects each year.

Financial KPIs for customer relations, adding more than 20% of profitable customers each year for 3 years; business KPIs, by 2019, increasing customer NPS scores to 50-100; operating KPIs, increasing non-profit products by 50% within 1 year Customer interaction.
Financial KPIs for data monetization. By 2019, the platform strategy will promote data-related investment to exceed 25% of total IT investment; business KPIs, platform-related revenues will account for a 10% increase in total revenue per year for 5 years; operations; KPI and API have reduced the cost of data acquisition and sharing by 50% in 3 years.
Financial KPIs for business operations. By 2020, digital transformation-related products or services will account for 50% of the share; business KPIs, for the next 3 years, launch a new digital transformation-related product or service every year; operations KPI, the digital transformation products delivered must meet 80% of sales, customer, and scalability expectations.
The financial KPI of human resources, 50% of executive compensation is related to the realization of digital management goals; business KPI, the working hours of knowledge workers who pay on demand will increase by 10% every year for 3 years; operational KPI, 10% of the year Repetitive interactive work is replaced or enhanced with artificial intelligence for a duration of 3 years.

Action 4: Choose the application scenarios of digital transformation in the industry.

Digital transformation is closely related to all businesses of the enterprise. It is impossible to be comprehensive in the process of transformation and needs to be focused. IDC has conducted research and definitions on 14 industries around the world, and refined the application scenarios of digital transformation in these industries, including industry digital transformation missions, strategic priorities, action plans, and specific business application cases.

The case of engineering-oriented manufacturing digital transformation framework takes the engineering-oriented manufacturing digital transformation framework as an example. Its digital mission is to create an ecosystem with excellent experience. Focusing on the mission, four strategies have been proposed: digital supply chain, intelligent manufacturing, connected customers and channels, and product as a platform. Under these four strategies, long-term projects and their respective landing use cases have been set.

Action 5: Establish an organizational structure that supports digital transformation

From a global development perspective, there are four main types of organizational structures that support digital transformation. One is the special project group for digital transformation. The goal is to explore and discover, and then define the vision of digital transformation And mission. Led by the board of directors or CEO, there is a cooperative relationship with various departments. This type of organizational structure is suitable for companies that are just beginning to undergo digital transformation. The second is the Digital Transformation Office.

The goal is to establish a governance structure and at the same time determine the priorities of the digital transformation of enterprises. The third is the embedded digital business group, the goal is to accelerate the implementation of digital transformation covering the entire scope of the enterprise.

The fourth is the digital business unit, the goal is to optimize innovation and create disruptive product services and business models. Of these four types of organizational structures, the first type of organizational structure accounts for 30%, the second type accounts for 46%, the third type accounts for 20%, and the fourth type accounts for 4%.

For the IT department, it should do a good job in the three major business sectors. One is to ensure the operation and maintenance of all IT systems; the other is to track emerging information technology and integrate it with enterprise business to consider optimizing different business processes. The third is to set up a department to support business innovation.

IT departments and business departments look at digital transformation from different perspectives.

IT departments and business departments look at the dimensions of digital transformation. IT departments mainly consider how to achieve reliability and security, system upgrades, cost control, maintenance and governance, self-built or outsourcing; business departments more What is considered is how to make the business more rapid and agile, automatic and intelligent, extraordinary experience, promote sales, and increase productivity.

How the IT department and the business department cooperate and understand each other is very important. On the one hand, IT personnel need to understand the business requirements, and the business also needs to understand the IT deployment. CXOs, CIOs, and even IT managers often need to report their work to the board of directors or the CEO. The content of the report needs to be organized around a main line. First, the most important goals must be clarified; secondly, the leaders must be clarified; then the implementation steps should be clarified; and KPI indicators should be set finally.

Action 6: Choosing the right technology, platform, and partners.

To choose the right technology, platform, and partners, you need to think deeply about whether you have a global vision, technical strength, innovation ability, industry experience, etc.

The action guide clarifies the six strategic measures before taking action.

Three guidelines must be followed in the course of action.

One is to start small and focus on advantages;
the other is to iterate quickly and give play to speed advantages;
and the third is to think big and have target advantages.

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