Digital Transformation is not new. It’s maybe not even the hot topic everybody talks about anymore – it is something that just needs to be done. Everyone agrees, many companies already started, but just as many are quite lost where to begin. And all the time, Digital Transformations fail… some fail quietly, some spectacularly, but it happens far too often. One major issue that companies run into at some point is that they don’t realize that a Technology Transformation alone is not enough. What people call “Digital Transformation” are in fact three transformations!
But what does that really mean? How can it be done? What should be the focus? And what are the key milestones and drivers? It’s time for a comprehensive Model of Digital Transformation.
We want to give an overview of all areas of Digital Transformation and some follow ups with best practice tools and ideas. This is a longer series with 10 parts planned so far.
The reason for all this is simple: It’s important.
“When digital transformation is done right, it’s like a caterpillar turning into a butterfly, but when done wrong, all you have is a really fast caterpillar.”George Westerman, MIT 
But now, let’s dive right into the Digital Transformation Model, what it is, how it works and why it all matters!
Why Digital Transformation?
Digital Transformation is always done with a purpose. And we are not talking about the little things, like using a digital tool to save a bit of time here and there, but about real transformations. One of the big drivers of Digital Transformation is to improve the capability of your company to be more innovative. Innovation is the key driver of all growth.
Innovation can be broadly classified as Incremental, Radical or Disruptive Innovation. Incremental innovation improves an existing offering (product or service) without challenging its technology, general approach, or target market. Radical innovation challenges the existing approach to solve a need, be it the technology used, the general approach or its market targeted. Disruptive innovation is about creating whole new markets, technologies and customer segments and massively disrupting the status quo. Although all types of innovation exist in parallel and all have their values, there is a clear advantage to be able to cover all levels of innovation in a business. Incremental innovation improves your cash cow and ensures its market share and profitability. Radical Innovation presents new opportunities but involves higher risks as well and is harder to pull off consistently. Disruptive Innovation makes it possible to transform your business as a whole and allow completely new dimensions of growth opportunities.
Now, how can you unlock access to all three levels of innovation?
There are two areas that help a company innovate more easily and reliably. Mindset and Technology. One way to improve your ability to innovate is to change how the organization is set up, how the people think and act and what their driver behind their actions is — to change its Mindset.
“Innovation comes about through combining disparate ideas and disciplines in ways that seem weird at first. Get comfortable with weird if you want real innovation to emerge.”Ben Weinlick
A Siloed Organization does not facilitate radical innovation, it is built for stability and reliability with defined processes and a top-down hierarchy. Individual freedom and decision making is low and the highly structured organization hinders cross-pollination of ideas, teams and perspectives.
“Accenture research with IDC shows that an overwhelming 86% of companies are stuck in caterpillar mode, meaning they’re using digital technologies in pockets, rather than at scale and to their potential value.”Caterpillar or Butterfly with New Technology | Accenture
An Agile Organizationis set up to deliver radical Innovation by having interdisciplinary teams with high autonomy, allowed to take risks and be pro-active in their development.
But to make it possible to develop disruptive innovation you need a Living Organization that transforms itself according to the challenges it faces.
The second area you can improve upon is the digital maturity of the organization — the technological aspect. How do you handle and use Data? Most businesses might collect Data (and some data collection is inevitable) but hardly ever use it. To fuel Radical Innovation, you need to process the Data into relevant Information (following the DIKW model) to identify fields of innovation and radical new ways to fulfill identified needs.
Milan Zeleny also described the elements of the DIKW model as knowledge forms: Data is “know-nothing”, Information means “know-what” and knowledge is “know-how” . Wisdom, finally, means “know-why”.
To facilitate Disruptive Innovation, you need to generate Knowledge from Information. Only with this growing Knowledge that has its roots in Information derived from your Data you can grow and transform a market or create a completely new one.
Of course Digital Maturity is about more than Data alone, it’s also about the ability to rapidly develop, test and deploy innovative (digital) processes, products, and features. To be disruptive in today’s economy you must be able to deliver extremely fast and extremely scalable solutions that inspire people.
Making use of innovation
Above all, innovation is not invention. It is a term of economics rather than of technology.Peter F. Drucker
Being innovative through a well-done Mindset and Technology Transformation is not enough. You also need to be able to capitalize on your innovations by having the right business model to place your innovation in the market successfully. This means transforming your Business around your Innovation, tailoring it to generate the maximum benefit. Again and again, as this is never static, but always highly dynamic. You need a setup that is resilient and adaptable to change form the out- and inside. You also need the underlying processes to scale your ever-changing offerings. This means to not only Transform the outward reaching parts of your business, but also the inner workings of the organization.
Now we can already see why it is important to think of Digital Transformation as threefold. Business Mindset and Technology. Because all three need to align to generate innovations and to then also make good use of them. Let’s see how the combination of the three might look like.
All fields need to go hand in hand — Organization Archetypes.
The combination of the different maturities in the three areas provides us with three archetypes of companies that have a certain organizational structure and digital maturity that corresponds to a certain type of innovation.
- A Siloed Organization probably collects Data and it creates Incremental Innovation. Those companies might be happy with the status quo and are often profitable, but they are not ready for the future and not growing their business significantly. The digital maturity is low overall, digital products are probably not a focus of the company.
- An Agile Organization derives relevant Information from the available Data and uses this Information combined with the Agile nature of the Organization to fuel Radical Innovation. These Companies provide growth and are set up to be future proof as long as they can keep up innovating. The digital maturity is medium, the company is able to deliver digital services and products well.
- A Liquid Organization that generates Knowledge from Data is able to create Disruptive Innovation and change the state of the game. It is an innovator’s dream and capable of things other companies regularly fail to achieve. Companies like this are rare but shape their respective fields and markets like nobody imagined. A high digital maturity allows for rapid development and deployment of complex digital services and products and offering digital platforms.
Becoming a Digital Company is the target …
… Business, Mindset- & Technological Transformations are the drivers to get you there.
Digital Maturity is the scale for the Technological Transformation. Digital Maturity is a holistic concept with various complex factors, but in a very broad sense it boils down to climbing the DIKW pyramid of Data, Information, Knowledge and finally even Wisdom.
Mindset Transformation concerns the organization as a whole and has the goal of a Liquid Organization that is resilient to change and proactive in taking on challenges.
Business Transformation helps utilize a higher innovation potential to maximize growth, impact, and an advantage over the competition.
After all, that’s what it’s all about, right?
Let’s get started today!
 “New BCG research shows that 70% of digital transformations fall short of their objectives, often with profound consequences.” Flipping the Odds of Digital Transformation Success | BCG
 Making Good Choices On The Entrepreneurial Path, Elaine Santoyo Goldman (MIT Sloan School of Management)
 Are you a caterpillar or a butterfly with new technology?, Theo Forbath (Accenture)
 “Management Support Systems: Towards Integrated Knowledge Management”, Milan Zeleny (Human Systems Management)