How companies master their digital transformation
New strategic partnerships often play an important role in digitization
For digital transformation to succeed and companies to achieve digital excellence, products, processes and technology must be addressed and improved simultaneously.
Online use has been on the rise worldwide since the Corona pandemic. Consumers in Germany, for example, recently even relied more frequently on digital channels and services than on analog alternatives – except for food and healthcare – for shopping, banking transactions, or dealing with the authorities, for example. Nevertheless, Germany is less digitally savvy than all other European countries, with the exception of Switzerland. These are the findings of a representative study (German Study) by McKinsey & Company published at the end of May.
The reasons given by respondents in Germany for the still comparatively low acceptance of online services are interesting. According to the study, user interfaces in other countries are much more user-friendly. Poor customer service and incomplete product ranges also encourage a negative attitude.
Digital transformation often comes to a standstill
There is also often dissatisfaction on the part of companies with regard to their digitization and the provision of attractive online offerings. For example, many decision-makers complain that they are not making the desired progress with digital transformation, even though in many cases the journey initially began with promising successes and rapid progress.
If digitization initiatives stall or even come to a complete standstill, this is often due to the fact that organizations only focus on one aspect of their digital transformation: new products, new processes or new technology. Such a strategy may be successful for a while, but in the medium term it is doomed to failure because all three aspects are closely interlinked – and any chain is known to be only as strong as its weakest link.
However, modernizing products, systems and processes at the same time is a highly complex undertaking, because it means a large number of open and mutually influencing construction sites that have to be worked through in parallel – and without interrupting operations. So what do you have to watch out for to ensure that open-heart surgery succeeds?
New digital products and services
Many companies from the so-called old economy start their digital transformation with products and front ends that are aimed at their customers. That’s right, because these projects are relatively simple and promising. They also have a high internal and external appeal, so they can act internally as a guide and motivator for the entire organization. Even more important, however, is their external impact. The reason: customer experience (CX) is a decisive competitive factor today, thus the development of new offerings with a focus on the needs and wishes of customers promises strategic advantages.
Unfortunately, providing customers with an appealing-looking user interface (UI) is no longer enough for good CX. For an application to be perceived as helpful, it must also simplify processes and lead directly to the desired goal. For this purpose, user interfaces mostly have to access systems in the backend. However, these often map complex processes and dependencies, as they are designed to provide stable support for day-to-day business and compliance requirements. If UIs align with the structures in place here to extract data, this often has negative consequences for CX.
A proven option to overcome this challenge is to separate front-end and back-end. This is where comprehensive API management platforms or API gateways help.
Despite the impressive successes and quick wins that become possible in this way, in the long run there is no way around it for companies to transform their monolithic legacy IT into an IT landscape based on microservices and APIs. This is the only way they can continuously and quickly develop and scale new offerings.
Modernization of the IT infrastructure
The fact that there is no way around modernizing IT as part of the digital transformation is all the more true because legacy systems not only make it difficult to develop appealing digital products and customer interfaces. They also do not optimally support new technologies such as AI or Big Data and fundamentally suffer from poor integration options with new digital solutions. In addition, there are other modernization drivers, such as steadily rising maintenance costs, security concerns, or even dwindling expertise from developers who have knowledge of certain required programming languages and are retiring in the next few years.
The key challenge in IT modernization is that organizations cannot simply shut down their legacy systems and develop everything from scratch. The knowledge contained in the IT infrastructure is mission-critical and cannot be easily transported or replaced. So while core processes such as enterprise resource planning (ERP), customer relationship management (CRM), or the manufacturing execution system (MES) are digitized and modernized, they must continue to support day-to-day business with consistent quality – anything but a piece of cake.
Restructuring and flexibilization of processes
Almost always, nested software in the backend reflects the reality and needs of the organization in which it is used. So if the software is (unnecessarily) rigid and complicated, the corporate structure and established processes usually are as well. Untangling one and making it more efficient without doing the same with the other is virtually impossible.
For this reason, breaking down corporate boundaries (silos) and networking previously isolated business units enjoy top priority. An important result of such reorganization projects is a uniform data basis and data governance that support data-based business models and the automation of business processes.
In-house or outsourcing
At what point an organization has successfully mastered its digital transformation and secured its future viability is difficult to generalize. In the ideal state, there is a sustainable business model, unnecessary costs are reduced to a minimum, business processes run smoothly, and different business departments work together transparently and efficiently across the entire company. This results in further benefits, such as a high speed of innovation, motivated employees, always available and reliable applications, IT security that commands respect and, last but not least, increased attractiveness as an employer.
Organizations can go this route alone – at least in part. However, the triad of parallel optimization of products, processes and systems entails enormous effort and a whole series of challenges. Experience has shown that at a certain point, the lack of IT specialists is simply too great and the time pressure too high for many traditional companies to drive digitization forward completely on their own. For this reason, external support and new strategic partnerships are an important prerequisite for them to find their way into the digital age.
Technical expertise, professional understanding and extensive experience with similar projects are the minimum requirements that organizations should set when looking for a suitable partner. At least as important, however, is the question of whether this partner is willing not just to do a job, but to pass on its know-how to the internal IT department. After all, it is precisely this point that will determine whether a company remains permanently dependent on external support or whether it can take the reins back into its own hands at a later date.