Jorge Simões, Advisor to the Board of Directors, EDP Inovação – @jorgefsimoes

In the last few decades, our lives have been increasingly permeated by digital technology in almost every dimension. The digital ecosystem, powered by cloud computing, open source software and the growth of Artificial Intelligence, evolves at an unstoppable pace; new developments emerge daily, feeding on readily available technology and fueling more innovation. The dynamics around this digital driving force and its impact on businesses, from strategy to operations and beyond, has been generally referred to as “Digital Transformation”. It is largely accepted that incumbent businesses must either adapt and transform to embrace the digital realm, or be disrupted by agile digital newcomers.

Rather than painting a comprehensive picture of the impacts of Digital Transformation in businesses, this short article aims instead at highlighting a few opportunities and potential pitfalls of digital transformation that Business Leaders should consider to leverage digitalization for innovation and growth.

Firstly, take advantage of the additional flexibility provided by digital tools and technologies, train the organization on agile frameworks and adapt product lifecycles accordingly. The “fail fast” philosophy epitomized by Silicon Valley startups, focused on fast prototyping, quick testing for customer acceptance and incremental product development, is largely built on digital tools and agile methodology. Be prepared to throw away failed prototypes and pivot towards a minimum viable product, incrementally building the features that customers will value most over time. In mature businesses, beware of natural resistance to change long-ingrained practices: the agile approach is best nurtured in a protected sandbox environment first, before scaling to the rest of the organization.

Scalability and reach are other business factors greatly powered by digital technology: the elastic components of modern cloud platforms scale services up or down at the click of a button; many cloud services including fully automated management are now common, such as elastic databases that automatically scale as data grows. This, in combination with the fact that reliable internet connections can now be found in most of the world, makes going global easier than ever, digitally speaking. Business leaders should embrace this new perspective and challenge their teams to build more ambitious offerings, with global reach built-in from day one.

Digital tools foster new interaction dynamics, both within corporations’ walls and beyond. Teams have powerful communication and collaboration tools at their disposal, with mobility and co-creation platforms having dramatically changed both where and how ideas are generated, developed and implemented. Today’s “always connected” lifestyle and the virality enabled by smartphones and social networks have also transformed the relationship between businesses and their customers. Business leaders, rather than simply equipping their teams with digital collaboration tools, must engage with them and champion a digital work culture. Moreover, they should take advantage of the new digital customer relationship dynamics to promote process improvement and product development through digital feedback loops, social network engagement and online communities.

Digital systems generate data, and the growth of digital technologies has triggered an exponential increase in available data, often referred to as the “data deluge” (a term originally coined by The Economist in a February 2010 edition). For Business Leaders, using data as an asset to create competitive advantage and promote growth demands more than investing in Big Data tools and hiring Data Scientists. It requires a cultural transformation, specifically in structuring challenges and approaching decision-making. Big Data has many hidden answers, however the key to success is in framing the right questions, leading to extract insights that fuel growth: Business Leaders must define clear objectives for data analytics projects and set key metrics allowing to quantify results. On the other hand, the abundance of data should help reduce the need for guesswork; there still is room for intuition and gut feeling in management, however Managers should carefully balance the role of these traits against hard data in decision-making – assuming data quality, effective processing and rational interpretation. A final note on this last remark with three considerations about data that are paramount for digital success for Business Leaders:

1. Design products and services to produce high-quality data at all stages of their lifecycle, feeding the analytics loop and allowing for timely pivoting;
2. Create conditions for efficient data processing, ensuring that your tech team, your product team and your data science team all interact effectively in defining and implementing the infrastructure, tools and data models that will support business operations – this sounds obvious, but often fails to happen;
3. Do not be intimidated by Data Science and ask your analytics team a few key questions: how was the original data collected, what cleaning processes did they perform, what domain experts were consulted in feature engineering, whether there are significant outliers, and most importantly, what did they learn about the business in their last assignment – this will tell you how much your analysts interacted with the actual business experts versus focusing on the data itself.