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The Digital Transformation Imperative: What It Is and What It Means for Your Business

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We live in a digital age. And we are no longer at the genesis of it. With technology evolving at an unprecedented rate, we are nearing the inflection point where economies become fully digital.

In this new paradigm, consumers – used to seamless interactions, short waiting times, modern conveniences, and bespoke experiences offered by some of the world’s most valuable brands such as Amazon, Apple, and Google – have become demanding. And they are expecting more.

  1. What is Digital Transformation?
  2. Why Should My Organisation Engage in Digital Transformation?
  3. Get Up-to-Date: What are the Key Trends in Digital Transformation?
  4. From Key Trends to Making Digital Transformation a C-Level Priority
  5. Digital Transformation: Rewriting Business Models?
  6. As a Digital Leader, What Are My Priorities and Challenges?
  7. From Leaders to Employees: How Can Digital Transformation Empower Employees?
  8. Finally, The Customer: How is Digital Transformation Revolutionizing Customer Experience?
  9. Must it Work 100% or is a Little Failure Okay in Digital Transformation?
  10. What is SAP and How Can They Help in Your Digital Transformation?

1. What is Digital Transformation?

Digital transformation is the use of digital technologies to unlock new sources of economic value. In theory, it entails overhauling every aspect of your business to keep up with the rising demands of consumers.
In practice, rather than swapping out legacy systems and processes entirely, organisations can first focus on the most crucial aspects that generates value – while mapping a broader change journey to ensure digital transformation efforts are strategic (rather than sporadic) to meet overall business objectives.

Digital transformation allows businesses to reimagine business models to discover new streams of revenue. To reinvent operations, processes, and the workforce to orchestrate superior customer experiences. And redefine your edge to thrive against increasing competition.

2. Why Should My Organisation Engage in Digital Transformation?

Southeast Asia is on the cusp of a digital revolution. Asian businesses that fail to adapt are at a considerable disadvantage compared to their more digital-savvy counterparts. The displacement of the less digitally enabled can be rapid. According to a BCG Henderson Institute study, only 2 of the top 10 global companies (by market capitalisation) a decade ago maintained their positions today. Many of the rest were replaced by digital natives.

Key reasons why Asian enterprises are engaging in digital transformation efforts:

Deliver Exceptional Customer Experience

The extraordinary adoption of digital technologies has changed the way people acquire goods and services – challenging businesses to deliver an experience that mirrors the convenience and ease their customers enjoy every day. In addition, as goods and services become commoditized in an increasingly competitive marketplace, customer experience is fast becoming the key differentiator across industries. By becoming digitalised, businesses can tap into customers preferences across all touchpoints of the customer journey to tailor contextually accurate experiences that captures them.

Enhance Workforce Productivity: Digital innovations enhance employee productivity and quality of life. By harnessing intelligent technologies such as artificial intelligence (AI), machine learning (ML), and robotic process automation (RPA), businesses can streamline duplicative work and repetitive tasks which are tedious and error prone. This enables new efficiencies and economies of scale. It allows organisations to redirect its workforce to higher value work and growth. Which also inspires and generates a deeper sense of purpose.

Extend Existing and Develop New Business Models: End-to-end digital processes allow businesses to gain a superior understanding of customer needs – which in turn can be used to create new revenue-generating offers and services. Unencumbered by established ways of doing business, digitalised enterprises are intelligent and empowered to uncover new revenue streams – such as monetizing content or data, pursuing innovative partnerships, or selling excess capacity.

Compete as an Ecosystem for a New Edge: Digitalisation expands the boundaries of business by enabling collaboration with non-traditional ecosystem partners to create a competitive advantage. Smart collaboration approaches with existing partners – such as joint planning tools for sales and marketing, or common procurement platforms – can enable economies of scale. Digitalised businesses also have greater capacity to integrate seamlessly with new ecosystem partners that can provide additional differentiation. For example, work with logistic partners that have state-of-the-art supply chains while embracing sustainable practices.

Create New Growth Opportunities in Asia: With Asia being an emerging force in digital transformation, investments in intelligent technologies create powerful synergies that the entire region can exploit. This presents more growth opportunities for every business. And elevates Asia’s impact on the global economy.

3. Get Up-to-Date: What are the Key Trends in Digital Transformation?

The road map for a successful digital transformation is unique to every organisation – depending on your industry and business needs.

While large-scale change efforts are ideal, not every company has the resources or luxury to overhaul entire sets of legacy systems and processes. In that regard, centring on business-critical areas that generates the highest value – while charting a strategic change journey with your digital transformation partners can ensure quick wins along with sustainable success.

To prepare for successful digital transformation journey, it is useful to understand the key trends and digital technologies driving results across many leading organisations.

Digital Technologies Transforming Leading Organisations:

Big Data/Analytics
Big data is the flurry of information that we, our family, our co-workers, and everyone else across the world generates in our day-to-day activities. From buying something on your mobile, to consuming energy that is tracked by machine sensors, almost every action leaves a digital footprint: Data. With Big Data technologies such as analytics and in-memory data management, organisations can store, manage, and analyse this data to get insights previously unimaginable. This includes customer insights that enables marketing to a segment-of-one. Or workforce insights that empowers hiring based on predicted skills gaps in the business.

In 2011, McKinsey already referred to Big Data as the “next frontier for innovation”. By 2018, big data analytics is deemed such a priority that over 50 percent of CEOs consider themselves the primary leader of this agenda. And that figure has been growing steadily.

Machine Learning
Machine learning uses sophisticated algorithms to “learn” from gigantic volumes of Big Data. The more data these algorithms can access, the more they can learn. This means that as businesses collect more data across different touch points, machine learning’s predictive accuracy increases. The applications of machine learning are wide-ranging – from personalised product recommendations to preventive healthcare.

The Office of State Revenue (OSR) in Queensland, Australia is an example of an organisation leading the use of machine learning. OSR harnesses machine learning to make better predictions about tax payments so less people incur debt. By evaluating millions of records with machine learning, OSR predicts taxpayers at risk of default. The ability to generate 360-degree views of taxpayer needs and behaviours means OSR can provide personalised payment plans for taxpayers to better meet their financial obligations.

IoT
The Internet of Things (IoT) is a network of connected physical objects (e.g. machines, home appliances, cars) that interact and exchange information with each other over the Internet.  Simple examples include intelligent lighting and smart fridges connected via apps. The impact of IoT however extends significantly beyond these examples.

In manufacturing for instance, manufacturers are creating connected factories with machines and systems controlled intelligently and remotely. This is enabling industrial automation, predictive equipment maintenance, and improved worker safety. Manufacturers can also deliver higher quality products, at a lower price, on a mass customization level. An example is Kaeser Kompressoren. To optimize its Sigma Smart Air Service, Kaeser deployed IoT capabilities as its innovation foundation together with an Asset Intelligence Network and a Predictive Maintenance and Service. Its new solution connects its compressors smartly in the cloud, allowing Kaeser to offer a next-generation service at a lower price.

In agriculture, IoT sensors are used to detect the health of crops, so that fertilization can be targeted. Such an approach means shaving unnecessary fertilizer costs – a large part of operating costs – and reducing the environmental footprint.

Cloud Computing
Through a variety of services, entire operations with members all over the globe can exist entirely on the internet, thanks to cloud computing. With video and chat messaging, documentation, and transactions moving online, your business doesn’t need to run from a physical office. This provides limitless flexibility for everyone involved in your company, which yields global reach and improved quality of life.

For example, healthcare giant, Zuellig Pharma, wanted to become a technological and digital innovation hub. However, its established way of business – in part owing to its dominant market position – was not helping Zuellig’s innovation aspiration. Zuellig Pharma decided to turn to a cloud-based integration suite to realize its ambitions. In doing so, it made its medical facilities more accessible in 13 Asian markets.

Cloud adoption is also a massive enabler of the standardization and automation necessary for cutting costs, speeding time to market, and improving service levels. According to McKinsey, cloud computing can reduce IT overhead costs by 30 to 40 percent, plus, lower IT incidents by 70 percent.

Blockchain Technology
Blockchain was developed to facilitate the trading of Bitcoin and other cryptocurrencies. It has since been adopted by many businesses as a digital ledger system used to track anything of value – such as land titles, loans, identities, logistics manifests. By 2025, the business value of blockchain is set to grow to $176 billion.

In the blockchain, transaction information is routed through a peer-to-peer network that requires verification from consensus algorithms. This results in ledger data that is highly difficult to compromise. An example where blockchain plays an important role is in combating counterfeit pharmaceuticals. By creating trusted supply chains from the manufacturer through wholesaler, pharmacist, physician, and consumer, everyone can be sure the medication is authentic and stays within agreed-upon parameters.

Robotic Process Automation (RPA)
Even to this day, millions of dollars are spent on repetitive processes that require human input. This practice will rapidly fade with robotic process automation (RPA), a feature that automatically replicates tedious actions with low or no added value. In that context, robots are designed to mimic humans by replacing manual clicks, interpreting text-heavy communications, or making process suggestions to end users for definable and repeatable business processes.

This will significantly accelerate the digital transformation of business processes, streamline costs, and boost productivity as employees get directed to business areas that will generate greater value.

Finance departments, for instance, can use RPA to automate manual checking of payments, eyeballing claims for approval, or tallying spreadsheets. In IT, RPA works well in automating routine helpdesk tasks.

4. From Key Trends to Making Digital Transformation a C-Level Priority

According to Bain and the World Economic Forum (WEF), digital transformation is a business transformation – not a technological one. That is because it must drive real value for the customer and improve outcomes for the business.

As such, CEOs and business leaders are in the best position to spearhead these changes to usher their organisation into the digital world. Nancy McKinstry, CEO of Wolters Kluwer, is an example of a top leader who successfully led a digital transformation. There is little coincidence she is also the top woman in HBR’s 2019 list of the world’s best-performing chief executives. In ING, COO-CTO Roel Louwhoff is the person tasked with managing this transformation. And in Nissan Corporation, the champion is its Corporate VP and CIO, Celso Guitoko:

“Nissan is a global automotive company. We are in more than 180 countries. The technologies that we have defined in our digital innovation platform are cloud technology, big data, IoT, and mobility. This platform will allow Nissan to be a leader in digital transformation. Becoming a digital company for Nissan means we will be able to better understand our customers and our products and what our employees are looking into.”

5. Digital Transformation: Rewriting Business Models?

Across industries, business models are being rewritten as disruptive new entrants innovate new ways of running. AirBnB and Uber are some examples that have reshaped the hospitality and transportation sectors respectively. To gain a lasting competitive edge, especially in disruptive times, incumbents need to innovate their business models.

Here are six innovative digital business models arising from digital transformation:

Create Outcomes-Based Models
Outcomes-based models aligns the pricing of a service based how your efforts have impacted the customer, rather than by specific products and services. This reflects the true value a company provides.

Today, a broad range of technologies such as sensors and advanced analytics can be embedded into machinery. This has given the manufacturing industry an opportunity to provide equipment priced by performance- or outcome-based metrics – instead of first selling products and delivering after-sales services. Such an approach allows manufacturers to introduce innovative but unproven products into mature markets. Or address latent demand from customers who are more risk averse – which helps them create new revenue streams or markets. The “as-a-service” model also creates a regular stream of tangible value as opposed to selling big purchases once every few years.

Hoerbiger, the biggest compression technology provider in Switzerland, utilises this model by leveraging modern technologies such as IoT to improve and track operating performance of its equipment while proactively providing superior customer service through a 360-degree view of customer engagement.

This trend is also prevalent in the life sciences industry. Instead of basing payment models on volume of procedures such as numbers of visits to the doctor, days spent at the hospital or number of medicines delivered, outcomes-based pricing focuses on the patient while aligning all efforts around the patient’s continued wellbeing.

Expand into New Markets
Companies undergoing their own internal transformations are discovering new growth areas – such as new markets they can expand into.  How? By linking together previously siloed processes, businesses are gaining a holistic view of data and operations across the enterprise not formerly known to them. At the same time, they are uncovering vast efficiencies. This is helping them to unleash new sources of value and growth.

Continental AG, the fourth largest tyre manufacturer in the world, entered the car services market. They did so by harnessing digital technologies such as predictive analytics and machine learning to create an innovative remote vehicle diagnostics and fleet analytics application to digitalise the car aftermarket. This has allowed the company to inform customers of service requirements before the repairs incur higher costs – which is enhancing customer experience and satisfaction.

Digitalise Products and Services
As organisations digitalise, intelligent technologies can be harnessed to innovate and digitalise a company’s products and services to meet that permanent need. For example, the need for entertainment was fulfilled in the past by DVD rentals in-store. This evolved to DVDs delivered to your doorstep. As broadcasting became digital, content streaming took over. Today, entertainment is revolutionized by digital technologies. Through the likes of Netflix and Amazon Prime Video, personalised content is offered to customers – when and where they want it.

On-demand manufacturing is another good illustration of digitalisation transforming goods and services. UPS teamed up with Fast Radius (3D-printing manufacturer) and SAP to establish 3D-printing factories at UPS’ air cargo operations. This extended UPS from a global supply chain logistics provider into an on-demand spare parts manufacturer. The partnership offers UPS customers extreme lead-time reduction – with orders shipping as early as same day – as well as complete demand visibility through just-in-time production enabled by virtual warehousing.

Compete as an Ecosystem
The power of the ecosystem is that no single player needs to own all components of the solution. The whole is greater than the sum of its parts. This has been true for a long time. But never has such large-scale collaboration been so easily realized. And with so many benefits.

Digitalisation gives businesses the capability to take a broader view of the marketplace. And leverage value across a value chain to fully realize the potential of disruptive innovation. For instance, by combining each company’s strengths through an IoT collaboration, Concur Technologies, Hertz and Nokia have created an intelligent, automated experience for business travellers and consumers requiring rental cars – from car rental and payment, to integrated navigation and expense management. By making interactions seamless and experiences convenient, this ecosystem of companies is giving customers a strong reason to choose and stick with them.

The Open Data Initiative (ODI) also demonstrates the power of an innovative and collaborative ecosystem. A joint effort by SAP, Adobe, Microsoft, and other third-party systems, ODI securely combines data from these organisations in a customer’s data lake. The partnership helps businesses leverage on open data to create new solutions based on a true single view of the customer – while data remains in direct control and ownership of each company.

Capitalise on the Sharing Economy
The sharing economy – characterised by companies such as Uber and AirBnB internationally, and Grab and Go-Jek in Asia – has grown phenomenally over the past decade as digital transformation sweeps over industries and across geographies. Convenience, price, and transactional efficiency has turn community into a commodity on digital platforms created by these organisations.

Digitalisation gives businesses an opportunity to establish digital business models. And create platforms capable of exploiting the sharing economy. Loyalty on such platforms creates high-growth opportunities – evident from companies such as Grab that have extended its ride-hailing business into hotel booking services and even financial services. Other noteworthy mentions include CrowdFarmX, a Singaporean start-up that is connecting smallholder farmers directly to the global market. CrowdFarmX equips small farmers with the technology know-how to deliver higher-quantity and quality yields. By linking them to wholesale distributors and retailers, it also helps farmers gain a greater cut of the selling price. CrowdFarmX aims to speed up the on-boarding of 10 million Southeast Asian farmers onto its platform in the next 22 years.

Harness Existing Business Networks and Platforms
To keep up with the demands of consumers and business buyers in the digital economy, companies must connect with better and more cost-effective suppliers, access optimal contingent workforces readily, and have seamless travel and entertainment processes. While it is possible to create such digital networks or platforms organically, this take time and resources which may not be a luxury today. It may also hamper an organisation’s ability to compete effectively.

To overcome that while transforming successfully, leading businesses have harnessed existing business networks to thrive. And they are prospering with proven connectivity, efficiency, affordability, and a great user experience on any device, any time.

As an illustration, the Ariba Network makes sourcing and commerce more effective and efficient by connecting trading partners. It hosts more than 3.3 million companies and conducts over $1.9 trillion in business commerce through the digital platform. Fieldglass helps organisations find, engage, and manage their external workforce – contingent workers like independent contractors and freelancers, as well as services providers like consulting firms or marketing agencies. This allows businesses to identify required skillsets through proven sources and manage the entire workforce – internally and externally – holistically.

6. As a Digital Leader, What Are My Priorities and Challenges?

To advance confidently, digital leaders and the C-Suite need to be clear on what they want to achieve through digital transformation and understand the possible impediments. Here are the top priorities and challenges to keep in mind.

Top Priorities of a Digital Leader

Deliver Exceptional Customer Experience
This is the single most important requirement in today’s experience economy: Deliver exceptional customer experience. Digital transformation and customer experience go together. Companies that earn $1 billion a year earn an additional $700 million over three years by investing in customer experience73 percent of consumers say a good experience is key in influencing their brand loyalties (PwC). Today, only 61 percent of sales and 57 percent of marketing leaders agree on a definition of customer experience. Leaders need to drive a common understanding for digital transformation to succeed.

Radically Enhance Productivity
Digital transformation represents an immense opportunity for improving productivity through innovation and automation. Digital leaders need to identify where these improvements can take place and how to fully leverage them. For instance, the OTE Group of Companies, one of Oman’s foremost business groups, made their key business processes mobile. It dramatically increased productivity by delivering a world-class user experience across the enterprise.

Build the Workforce of the Future
study by McKinsey confirms that developing a workforce’s digital capabilities throughout the organisation is one of the most important factors for success in a digital change effort. Individual employee roles must be redefined so that they align with a transformation’s goals. This step can help shed light on the role and capabilities an organisation needs. Businesses also need to put specific roles in place to bridge potential gaps between the traditional and digital parts of the business: Employees or partners who can translate new digital processes into existing ways of working; and digital innovators who can lead the innovation agenda.

To that end, companies need to scale up workforce planning and talent development efforts. Innovative HR technologies such as SuccessFactors help organisations demonstrate how they are directing resources into talents. By harnessing such technologies, companies can also spot workforce trends, and address skill gaps and chasms in employee management frameworks.

Empower People to Work in New Ways
Digital transformations also require cultural and behavioural changes such as increased collaboration or calculated risk taking. As automation displaces some roles, employees need to be reskilled for new business areas. Leading businesses are empowering employees to embrace these changes by reinforcing new behaviours and ways of working through formal mechanisms. They are also ensuring senior leaders act as exemplars – be it in cross-functional collaborations or experimenting with new ideas.

Top Challenges of a Digital Leader

Decide: Run vs. Innovate
For many businesses, keeping operations running smoothly is enough of a challenge on its own. When the need to digitalise becomes a necessity instead of an option, innovating sporadically without strategic directions may backfire.

Digital leaders must closely assess your company’s role and capabilities. Working it through with a strategic, experienced digital transformation partner is also a wise step. This ensures a digital transformation plan with minimal risks and maximum benefits.

Cut Through Legacy
Established companies may carry a lot of traditional practices – from policies to protocols and business philosophies. This may be more prevalent in successful business that benefited from analogue practices (such as family conglomerates). Unfortunately, these traditional processes hold organisations back from the full potential of digital transformations. Digital leaders need to be steadfast on what they need to lose to innovate. The wins will overshadow former practices.

Create Winning Transformation Road Maps
Many digital leaders find it challenging to creating a winning digital road map. This is natural as a one-size-fits-all model doesn’t exist. Rather than mirroring your digital change efforts from a competitor, start by creating your own quick-wins roadmap and a longer-term journey.

Quick wins may entail shifting your operations to the cloud or automating key aspects of your back-office functions. As you assess the impact after these pilot projects, you will have a better sense of how to map out the long-term journey. And innovate at scale from there.

7. From Leaders to Employees: How Can Digital Transformation Empower Employees?

Humans inherently desire purpose. We also enjoy the sense of fulfilment that comes with completing a task well. Digital transformation empowers employees by providing them with the tools, autonomy, and motivation to do their jobs successfully.

Bank Danamon is a leading example of this empowerment. The Indonesian bank wanted to transform customer experience. And it recognises that its people are at the heart of that. As such, Bank Danamon took a leap forward to digitally enable its 12,000 employees and integrate all HR functions in the cloud.

Employees can now access business-critical information in real-time. They facilitate better collaboration across different branches. Employees who used to handle administrative tasks now take on a more strategic work.

They created business agility and up-valued their employees – simply by going onto the cloud.

Four Ways How Digital Initiatives Empower Employees:

Understand Organisational Vision and Mission
Digital tools help employees see the bigger picture. So they understand which aspect of the overall vision and mission they are contributing to. This strengthens the sense of purpose. And renews an employee’s impetus to perform well in their roles.

Heighten Productivity, More Meaningful Work
Administrative work such as creating reports, tallying receipts, and tracking approval statuses are demanding to employees but generate little value-add to the business. Intelligent technologies such as machine learning and robotic process automation frees the workforce from these menial tasks – while allowing the organisation to redeploy employees to more meaningful and productive activities. When employees are engaged in more purposeful work, customer satisfaction improves and the overall business benefits. At the same time, businesses gain quicker and more accurate reporting, as well as greater transparency.

Tighter Collaborations
Cloud platforms and collaborative workspaces remove distance from the equation, allowing your team to work with greater synergy wherever they are. They can also freely share information such as instructions, progress updates, and task assignments.

Access Talent and Required Expertise
One of the greatest impediments to work are skill gaps. They impede project schedules and workforce productivity. As organisations digitalise, more specialised skills such as employees with more digital and analytics skillsets are needed. Digital tools and business networks allow companies to extend their search for talent and expertise outside of the main business readily – be it contingent workers, freelancers or consultants. With the right expertise in hand, employees are empowered to move the business forward.

8. Finally, the Customer: How is Digital Transformation Revolutionizing Customer Experience?

Customer experience is everything” according to PwC. Customers are willing to pay a 16 percent premium in pricing for experiences they value. Also, 1 in 3 customers abandons a brand after one bad experience. Fortunately, digital transformation empowers organisations to offer seamless consumer journeys that customers have come to expect in today’s digital era.

Here are some ways how digital transformation is changing customer experience.

Personalisation at Scale
Consumer expectations have gone past factory perfection to wanting an experience that feels uniquely theirs. Industrial IoT and intelligent technologies are enabling marketing and manufacturing to the segment-of-one while improving efficiency. doTerra – the world’s largest essential oils manufacturer and distributor – has hundreds of thousands of orders a day, millions of lines items of products a day, from millions of customers. To get closer to customers. doTerra offers personalised customer experiences by tying the identities of their customers around the globe and identifying their common denominator across all touch points with the help of cloud technology.

Convenient Customer Journey
From that first hello to post-sales care, intelligent technologies and digital processes supports the customer without disrupting their day. No more intrusive calls from telemarketers or feedback forms to fill out. AI gathers the data for optimal next steps by pulling it from the customer’s behaviour online. Machine learning’s predictive algorithms crunch such data even before the sale, identifying the leads most likely to convert. Empowered by that information, businesses reach out to customers via the most relevant channels while nurturing the relationship based on real-time customer insights.

Big Value
Digitalisation is empowering organisations to run more intelligently – which is improving performance, shaving costs, and cutting time at every stage of the business, and every part of the value chain. These savings are reflected in more competitively priced products, services and experiences. They are also manifested through more relevant offerings. All of which means bigger, better value to customers.

9. Must It Work 100% or is a Little Failure Okay in Digital Transformation?

Businesses are hardwired for wins. So the thought of failure provokes fear. But does that mean digital transformation should be put on hold until an organisation is 100 percent confident? Far from it, according to Gartner, Companies must pick up the pace of digitalisation to remain competitive. And what experts have found is that “learning failures” are almost key for transformation success – as long as they are within safe zones.

It is understandable for businesses to see transformation as challenging. After all, it is a shift from the familiar to the unexplored. It entails breaking down old habits, processes, and ways of thinking. It involves embracing disruption – an act almost contrary to intrinsic human instincts. It also encompasses experimentation and intensive trial-and-error. In that regard, it is not uncommon for organisations to find themselves falling short on their goals.

Fortunately, there are digital frontrunners to learn from, as well as experts who can help separate hype from true transformation. These experts can also help businesses minimise risk, create momentum and overcome resistance as they pursue transformation at scale. Plus, learn how to “fail fast” within the context of design thinking philosophy and outcome-driven practice – to achieve quick wins that inspire confidence.

10. What is SAP and How Can it Help in Your Digital Transformation?

SAP is a multinational corporation that develops software to manage business operations and customer relations. SAP enterprise resource planning (ERP) systems enable businesses to run their individual processes – from accounting, sales, and production, to human resources and finance – in an integrated environment. In addition to ERP software, SAP offers other digital products and software applications to support a wide range of complex business functionalities.

The company aims to usher in digital transformation—helping businesses become intelligent enterprises through expert design thinking, intelligent technologies, end-to-end business processes that cater to specific business needs.

SAP is equipped with the expertise and experience you need to come out ahead:

Ready to set your company on the fast track to digital transformation and become an intelligent enterprise? Start now.

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