How digital transformation affects business strategy frameworks

 Technology has by definition never been at a standstill, and there is always something new being developed or launched. In the past few decades, though, the pace of change has touched new heights, with digital transformation becoming an inexorable necessity to succeed in the future.

What has been the effect on companies?

Emerging technologies such as artificial intelligence, big data, blockchain, the Internet of Things (IoT), and machine learning have contributed to the high speed of digital disruption in the world of business. Consequently, companies that failed to adapt or modify their business strategy framework to keep pace with digital changes suffered as a result.

Which lessons have this digital disruption taught?

Corporate leaders have had to change the way they think about business strategy, driven by the force of technological change. Here are the key lessons:

• Traditional business models are losing ground: Companies are learning to work on new business models, fueled by new technology. The merit of this approach is proven by the fact that current most valuable companies did not even exist a few decades ago. They can consequently generate higher value for their customers by innovative monetization methods and other changes to their business strategy frameworks.

• Technology is transforming businesses: Technology is not a mere capital investment and is increasingly becoming a whole new way of doing things. It is leading to changes in organizational structures, skills employed, and customers served. The process required more time and money, but the returns are significantly higher as well.

• Companies experiment in different aspects: Crucial competitive parameters such as markets, positioning, and pricing are no longer set in stone or in decades-long time horizons. Firms experiment with all these aspects, in significantly shorter time horizons.

• Data and talent are critical: Competitive advantage does not come only from technology. Companies are fast realizing that keeping the core technology shared is a wiser choice, with different companies working on the open-source core. The user data that companies possess and the tech employees who work with them are more significant and need to be developed further.

• Pricing is leveraging algorithms: Algorithms are increasingly coming to the aid of companies looking for better pricing mechanisms. In online markets, in particular, pricing algorithms help to set better-targeted prices, in turn altering how a firm competes. New sets of rivals could come into focus, and the resultant new direction of operations could necessitate different personnel, investments in IT, and new product decisions.

• Cloud computing implies lower barriers to entry: Digitally-enabled industries are seeing higher competition, with digital transformation leading to companies leveraging the cloud to expand their offerings and customer base.

How can companies stay ahead of the curve?

The fast pace of change could well leave many businesses tottering in its wake. Here is what they can do:

• Plan the path: Impulsive reactions are not good responses to disruption. Business strategy teams must step back and plan what the company needs to change to realign itself and leverage the technological changes. Such plans are not one-time affairs but ongoing work.

• Stay focused on the customer: Managing technological changes should not be at the cost of the customer; on the contrary, technology should be used to not just enhance but in fact to revolutionize the customer experience.

• Do not ignore the change: Learn to work with digital disruption, and figure out how to leverage it for better products, customer delight, and of course profitability. Look to competitors and see what their experiences can teach.

• Boost the brand: Disruption does not imply a complete loss of identity. The business needs to find a new USP by strengthening its brand and identity and leveraging its capabilities and strengths to stay ahead.

• Work with vendors: Businesses cannot operate without their vendors, and it is critical for the important vendors to either make suitable changes to their processes or for the company to find more vendors.

• Look ahead: Disruptions will come and go, and businesses must visualize the next possible change and make plans accordingly.