Organisations have built growth strategies on digitisation and digital transformation for many years now. The term ‘digital transformation’ was originally created to describe how digital technology could ignite growth by disrupting the marketplace through the digitisation of non-digital products.
During the pandemic, businesses prioritised digital transformation initiatives as teams transitioned fully to remote working and online transactions. Now, as we continue to reinvent how we do business and connect with each other, ‘digital transformation’ is still a buzzword.
Yet everywhere you look, every business now has some kind of digital footprint. Because of this, the term ‘digital transformation’ no longer seems relevant. Instead, we must talk about ‘digital evolution’ and adopt an evolutionary mindset.
Digital evolution is the continued adoption and refinement of new and emerging technologies to improve business efficiency, reduce costs, overtake competitors, and achieve better outcomes.
Money and mindset
Unfortunately, it’s not as simple as merely saying that your organisation has shifted to a new way of thinking and being around digital—you must make certain changes. Chief among these is to the financial mindset.
The typical, traditional, financial mindset for digital transformation is significant upfront investment. However, the danger here is that money is spent quickly and easily with very little left over. Often, these types of projects run over budget, and fail to deliver on key objectives, leaving stakeholders frustrated and leading to leading to digital project failure.
Instead, digital evolution requires regular, sustained investment over a long-term period to achieve meaningful improvement. Some key factors for board directors and senior leaders to bear in mind include:
1 Prioritise products over projects
Part of the shift to a financial mindset is reframing your thinking to consider smaller, regular product releases over larger, longer-term projects. With digital transformation, there’s a tendency to view a large capital investment to evolve digital capabilities as a one-and-done initiative, after which it’s time to press pause to reflect.
Without regular refinement of your digital estate, you risk standing still against a tide of ongoing technological change.
By applying a different financial mindset to digital evolution, you can shift your organisation’s focus from larger, more costly digital initiatives to smaller, incremental product-driven improvements, while still being mindful of budgetary concerns.
This has a number of benefits. Small-scale iterations of products force you to be lean, focusing spend on the maximum value for your customer or end-user. You also have the ability to pivot your product when needed, using data and analytics to continually measure the things that matter for your audience.
2 Recognise lack of innovation as financial risk
While expenditure on digital initiatives needs to be considered in careful terms of ROI, it helps to equally consider the financial risk of doing nothing. The technology industry is littered with examples of businesses that failed to innovate.
Nokia’s chief executive’s infamous internal post to employees stated, “We are standing on a burning platform.” The smartphone giant had failed to compete with the superior software-focused solutions from Google’s Android and Apple’s iOS platforms, resulting in a loss of market dominance.
A lack of innovation can have serious financial consequences for your customer. Your customers and end-users may seek out competitor products and experiences that better meet their needs, resulting in churn. It may also be extremely damaging for your reputation and brand, as your audiences may hold and amplify a negative perception of your digital products, services and experiences, as outdated.
Flipping this situation on its head, consider the value attached to a positive customer/end-user experience in terms of satisfaction, positive outcomes and driving of referrals. A product and user experience review of the products and services of competitor or comparator organisations versus your own can be an effective yardstick. This can help you to identify capability gaps, productivity barriers and financial risks.
3 Tune in to your customers
When applying a financial mindset to digital products and services, it can be tempting to focus in on topics such as market awareness, market share, product/service attach rates per customer, licensing revenue versus overheads, customer segments, commercial risk, budgets and profit.
While these are all crucial measures, it’s important to never lose sight of customer or end-user value. If your focus is on chasing profitability, you may be outpaced by competitors who are laser-focused on meeting their audience’s needs.
Consider, for example, how challenger banks and fintech startups such as Starling, Revolut and Monzo have disrupted the banking market, with a focus on delivering intuitive mobile banking services and experiences that their customers want.
4 Use KPI data to shape resourcing
Your organisation’s technology leaders are continually tasked with identifying best fit technologies and platforms that help deliver value for their audiences and stakeholders, while also driving cost savings, productivity and efficiency gains, and new capabilities. Applying a financial mindset alongside KPIs helps you know when to refocus digital spend on areas that will deliver the greatest benefit, competitive advantage or audience value.
With the smaller investments of digital evolution, you can more readily “course correct”, based on your KPI data, diverting funding or resources to other products or services while limiting your financial exposure to underperforming ones.
By applying a financial mindset to digital evolution, you can ensure, as a board director, greater agility and control over your organisation’s digital products and services, while reducing costs and mitigating the risks of industry change or disruption.
Greig Johnston is CEO of software applications provider Vidatec