As shown in the chart below, the digital transformation of a business consists of three cornerstones and two growth flywheels. The three cornerstones are composed of the trinity of body, use and potential. The body is the digital strategy and digital organization, which is the direction and internal driving force of digital transformation; Use process, scene and digital technology, that is, the path to digital transformation; The potential is digital assets and digital capabilities, both digital inheritance and accumulation.
The three cornerstones and two flywheels of digital transformation in Tu-1
The relationship between body, use and potential is: digital strategy leads the path of digital realization, and the construction of self-driven digital organizations and the setting of positions have generated a strong internal driving force in the enterprise, enabling organizations and employees to burst out strong enthusiasm and vitality for digital innovation and transformation, and constantly use digital technology to optimize processes and scenarios to promote digital transformation; The application of digital technology in processes and scenarios will continue to accumulate digital assets and precipitate digital capabilities for enterprises; The accumulated digital assets will provide a decision-making basis for the digital strategy, and the precipitated digital capabilities will provide support for the construction of digital organizations and job settings.
The three cornerstones build the body of digital transformation, and in order to make it work and continue to generate business value, two growth flywheels are needed: 1. Digital strategy undertaking and continuous value operation; Four major digitalization-related areas continue to innovate.
The following part of the article mainly introduces the two major growth flywheels of digital transformation. ，
(1) Growth Flywheel I: Digital Strategy Undertaking and Continuous Value Operation
Figure 2 Five steps of digital strategy landing
As shown in the green part of the "Digital Strategy Landing Five-Part" above figure, the growth flywheel 1: digital strategy undertaking and continuous value operation is introduced.
At present, many consulting companies can plan digital strategies, design processes, scenarios, organizations, positions and assessments related to digital transformation, and can deliver digital projects. However, there are generally two types of services missing in the market:
- Inheriting the service: how to transform the digital strategy into a model suitable for the enterprise (inherited), and then how to transform the model suitable for the enterprise into an industrialized and personalized process, scene, organization, position and assessment.
- Service of business value output: both digital system is only the carrier, and the launch is only the beginning. How companies continue to generate business value through continuous operational sources is the king of digital transformation.
1) Continuous service: digital strategy undertaking.
The most important points of this step are 2 points: a) business value definition and value drive; b) Define patterns and tipping points by the RMB method.
a) Value definition and value driven
Once the strategy is developed, each business unit must clearly define the value proposition and valuation methodology of the business unit in the group strategy with the top management of the group. Based on the value definition and valuation method approved by the group after the discussion, we will drive the design of the subsequent business model, etc.
This step must be done, and it is a big pit, and you must not guess it yourself. For example, the group defines our business unit as a cost center, and only needs us to do our job well; But we define ourselves as profit centers, and all the designs behind that will have huge deviations.
b) Define patterns and tipping points by the RMB method
Once there is a consensus within the Group on the definition of value, we will begin to design patterns and tipping points. The author has met many companies that say they want to learn from Huawei, Alibaba, etc., but many years have passed, and I have not seen which one can succeed.
In pattern and tipping point design, the design principle is: be the best version of yourself, rather than blindly imitating others. The sixteen-character policy we designed is: adapt to local conditions, adapt to the conditions of the times, guide according to the situation, and make use of the strengths and avoid the weaknesses.
- Resource
Let's start by taking stock of what resources we have. Than sales network, service network, brand awareness, assets, number of customers, customer contacts, customer traffic ...
- Mode
There are many models, such as business model, profit model and operating model. The most critical point here is that we confirm whether we want to do model transformation or model optimization according to the previous value definition. For example, our business unit was originally a cost center, and now we want to be a profit center, that is, to do model transformation. This will involve a lot of transformation and innovation, such as profit model innovation, business mode innovation, personnel ability innovation, organizational structure innovation, etc. If our business unit positioning doesn't change, just puts forward requirements for efficiency and customer experience, that's model optimization, and we focus on process optimization and digital empowerment.
- Breakthrough
The tipping point is a quantifiable improvement indicator that can be brought about in a short period of time (e.g. 1 year), and these measures are recognized by the highest levels of the group. Why? Because doing so ensures that your transformation or optimization can continue. The digital transformation of business units is most afraid of some unexpected events disrupting your process, or the success criteria we define are inconsistent with the evaluation criteria of the group leadership. In this case, even if the transformation or optimization has had a great effect, the group leader will not recognize it from his source or perspective, resulting in the transformation or optimization being abandoned halfway. Therefore, we need to constantly meet and exceed the evaluation standards recognized by the leaders of the group, continue to detonate, and constantly give the group confidence. In this way, you can get more support and help and eliminate unnecessary noise.
2) Service of business value output: continuous value operation
If digital systems are to continue to generate business value, continuous operation is king.
The biggest flaw in the current digital system is: just take care of life, do not care. Just like taking care of children, we have to do prenatal education before birth, we have to educate after birth, having children is expensive, but raising children is more expensive. The vast majority of the money and resources of digital projects are now invested in the development and go-live phase, which is the process of having children. After going online, the resources were basically withdrawn. That is, the stage of good investment and business output, we give up the input, and the chance that the child can become an excellent student is very small.
For example, if you spend 10 million yuan (excluding copyright and hardware) on digitalization, many companies will spend 7,8 million on the development and go-live phase of the project, and then pay only a small amount of operation and maintenance costs in the next few years. In fact, this kind of project is doomed to be difficult to succeed from the beginning. Because the remaining 2,3 million is not enough to improve system bugs and performance in the next few years, let alone increase the value of the business. So if you want to do a digital project, you can spend 30% of the cost in the development and launch stage for a cycle of several years, and the other 70% of the cost is spent on the system operation, optimization, and planning and design before the development and launch; In addition, in order to achieve greater business output, we want to introduce business operations. The input to the operation can be divided proportionally according to the output, so this part of the input is uncertain, it is X.
(2) Growth Flywheel II: Continuous innovation in the four major digital-related areas
Figure 3 Continuous innovation in the four major digitally related areas
As shown in the chart above, another growth flywheel of digital transformation is in the digital planning, digital design and digital empowerment phases, where we need to always design, deliver and operate digital-related innovations from the following four aspects.
- Theoretical system innovation;
- Industry application innovation;
- Valuation innovation;
- Digital application innovation.
1. Theoretical system innovation
The effectiveness of digital transformation is often limited by the innovation of the underlying building, both the theoretical system. We can think of the innovation of the theoretical system as the discovery of new tracks. For example, the emergence of new retail for 2C customers has formed a trillion-dollar track, and has also made China's digital application in the field of new retail far ahead of other countries.
However, many of the current digital theoretical systems were formed decades ago, such as 2B sales, which can be considered to be the product of the information age, and in the digital age, we must have a new theoretical system to fundamentally drive the success of digital transformation.
Fig.4 Five-dimensional model of B2B sales of CRM3.0
As shown above, it is an example of an improved innovation in a B2B sales theory system. Traditional B2B sales focus on sales process management, both L2C management, but lack the application of digital best through data-driven and AI decision-making. In the B2B sales five-dimensional model of CRM 3.0, the enterprise network resources (ECM) and project relationship management (PRM) parts of business relationship management (BRM) are added, so as to maximize the use of digital technology on complex network analysis and project behavior analysis, tell us how to improve customer relationship closeness, use employee network resources, and improve the winning rate.
2. Industry application innovation
The prerequisite for successful digital transformation is that it needs to have industry characteristics and industry knowledge, especially for enterprises that do 2B customers. The innovation required by different industries is not the same, and the digital solutions that bank customers and home appliance customers need are certainly not the same. This is also the problem that many companies that do AI, although there are many good technologies, but can not make a profit. Because they do not understand the needs of industry customers, digital solutions cannot solve industry problems for industry customers. Therefore, our digital solution must have the characteristics of the industry and the innovation of the industry.
Figure-5 Example of the transformation of the four modernizations of the home appliance industry
As shown in the figure above, according to the characteristics of the home appliance industry, the digital transformation direction of after-sales service is four modernizations: 1. service stewardship, 2. personnel customization, 3. network platformization, and 4. income ecology. However, for other industries, the direction of the transformation of the four modernizations may not be appropriate. For example, enterprise software companies such as sales CRM and ERP are all project-based after-sales services and have no outlet concept.
- 3. Value evaluation innovation
Many digital transformation projects are done before the vision of a good, the crowd is excited; After going online, criticism continued, and fires were extinguished everywhere; Then it disappeared and no one talked about it again. The reason for this situation is that there is no good value evaluation system for digital transformation, and there is no unified and objective quantifiable standard to judge the effect of digital transformation. Therefore, in the process of digital design and digital empowerment, it is necessary to design, deliver, operate and improve the quantifiable and monetizable business value evaluation index system. Otherwise, whether the direction and process of digital transformation is correct, and whether the result is successful will be undeserved.
Figure 6 Example of digital transformation value evaluation system for after-sales service
As shown in the figure above, in the digital transformation of home appliance after-sales service, I divide the service into 9 time periods and establish a visual, quantifiable and monetizable value evaluation system through three dimensions of efficiency, intelligence and experience.
- 4. Digital application innovation
Digital application innovation refers to the integration with digital technology in business processes and scenarios to greatly improve efficiency, intelligence and experience. For example, spare parts forecasting in spare parts management, robots in the interaction process, market demand forecasting in production and marketing coordination, etc. These digital application innovations are deeply bound to business processes and scenarios, need to have the depth and breadth of business understanding, and need to constantly innovate and keep pace with the times.
Summary: This article introduces the two major growth flywheels for the success of digital transformation: 1. digital strategy undertaking and continuous value operation; 2. continuous innovation in four major areas: theoretical system, industry application, value evaluation and digital application.
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Author: Jun Yang, author of "The Advent of the CRM 3.0 Era of Digital Transformation of Marketing and Services". He is currently a senior expert in Microsoft digital solutions, a former head of digital transformation and information construction of Haier Global Services, the head of IBM GBS customer relationship management digital innovation China program, and a lecturer at Peking University.