As it should be clear from the discussion on Digital Transformation, the changes are clearly leveraging on data and technology to exploit them but the crucial issues are twofold:
- Identifying and applying a business model that can generate revenues from the data exploitation
- Re-thinking the organization to be in synch with the business model and technology adopted
By far these are the real hurdles facing an enterprise/institution and the stumbling blocks that can lead to a failure. Let me start to discuss the second point, the re-engineering of the enterprise.
Most companies adopt technology in a way to fit their current processes and support their current business models. Let me state it clear once time more:
- This is NOT Digital Transformation.
It can be a way to make the company more efficient, to increase automation (although to really exploit the technology you need to re-engineer the company’s process).
Failing the re-thinking of the organization the company runs the risk (very real!) to actually increase its cost because technology investment becomes an “add on” on existing cost.
Most of the times companies are or become aware of that and embark in a -sometimes limited- rethinking of their processes. In my experience, most public institutions are either not aware of the need to re-engineer their processes or are unable to do so because of regulations/laws they have to abide.
The challenge in re-engineering an organization is that this affects the resources, its assets. Sometimes the assets affected have a weight on the company valuation (stock market). Think about a telecom company that shifts its operation from the physical space to the cyberspace, using virtual resources in place of physical network resources. Their “book value” can no longer list those physical assets and this is bound to decrease the overall value of the company that, most likely, has been used as a guarantee in borrowing capital from banks ( a very similar situation, still in the telco domains, applies in the transition from copper to fiber with a devaluation of the copper infrastructure).
In addition to a possible, likely, devaluation of physical assets there is, most likely, the issue with the human resources.
Shifting operation to the cyberspace can:
- Decrease the need for human activity (because of automation – activity is now performed by a machine/software, or because of the disappearance of that activity)
- Require human resources with a different set of skills (re-training current resources is not always feasible, nor -often- economically affordable)
In many cases both apply.