TECHNOLOGIES SUCH AS artificial intelligence, blockchain, and big data are rapidly changing the way in which companies do business. In fact, it’s safe to say that a digital transformation is taking place. In today’s corporate context, this term refers to the process by which companies use digital technologies to solve traditional problems and become more efficient, effective, and transparent.
However, digital transformation is more than simply digitizing content and processes. For example, when a news outlet expands from being print-only to providing content online, it hasn’t undergone real transformation—it’s just changed the way it delivers its product.
Digital transformation does not occur when the IT department simply adapts new technology to the current business model; it does not occur when the company uses technology to improve existing products or services. Digital transformation takes place when the span and scope of technological change is so wide-reaching that it replaces many of the ways in which a firm previously did business. It takes place across multiple levels and dimensions of an organization and focuses on creating substantially better connectivity.
Change at this level can be clearly seen in many banking organizations that have launched digital solutions in the fintech space. For instance, ING has used technology to implement agile methods into its business structure, allowing the company to respond to customer needs in an effective and timely fashion. More important, digital solutions enable ING to design its future products and services around customer needs. Other banks in the U.K., such as Barclays and RBS, are also well on their way to exploring new opportunities
with digital transformation.
Within the financial services sector, such technological changes are becoming more commonplace. What is unique here is that many of these disruptions are being created by companies from outside of the banking industry—namely, tech firms. These firms have been able to pinpoint specific areas of the industry and use core technology to take business away from traditional banks. Similar scenarios are also playing out in other industries, as outsiders use technology to encroach on established incumbents.
This is just one of the reasons why business leaders need to be aware of, and understand, digital transformation. They need to consider how they can use technology to best address the pain points in their current business models and remain competitive.
Digital transformation takes place when technological change is so wide-reaching that it replaces many of the ways in which a firm previously did business.
Today, more than ever, business leaders must look at the entire ecosystem when attending to stakeholder needs. To create value, they must align the priorities of a whole host of different parties, including shareholders, potential partners, employees, and even competitors. Leaders need to ask, “How can new technologies help us tackle these existing challenges?” and “How can tech companies take business away from the traditional players in our industry?” By answering questions like these, leaders can develop strategies for using emerging technologies to strengthen their own businesses and to address critical issues.
It’s essential that business leaders stay up-to-date on new tech trends and that they are aware of the scope of the digitalization in their fields. They also need to have a deep understanding of the nature of their businesses. There are three ways executives can take the pulse of their industries: engage as much as possible with stakeholders and experts working within the tech space, embrace open innovation, and take advantage of executive education offerings at business schools.
At Imperial College Business School, for instance, we have made digital transformation one of our core strategic directions. We offer an MBA, master’s programs, and executive education courses designed to develop digitally driven leaders. Courses on digital banking, AI and machine learning in financial services, and fintech provide executives with the theory and practical experience they need to understand digital transformation. Our location in London enables us to expose students to industry experts who are using innovative technology across different sectors. This is essential for business leaders, who can often gain valuable insights about their own industries when they learn what is happening in other fields.
For business leaders, it is key to understand what technology is available and what this technology can achieve. Once they know the impact of harnessing new technologies, they can consider whether these technologies will actually support their strategic plans. The purpose of digital transformation is to improve a business, so it’s not necessarily beneficial for a company to pursue new technologies simply because they are available. However, if business leaders are clear on the challenges they want to overcome and strategic about how to address those challenges, digital technologies can be their greatest asset.
|Ying-Ying Hsieh is an assistant professor of innovation and entrepreneurship at Imperial College Business School in London. Her research focuses on technological innovation and the fintech industry, and she teaches innovation management and fintech courses.
This article originally appeared in BizEd's January/February 2020 issue. Please send questions, comments, or letters to the editor to firstname.lastname@example.org.
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