3 Pillars Of Digital Transformation
A Conversation With EY’s Jeffrey LiuAdd bookmark
No two digital transformations are exactly alike, but most of the successful ones share a set of basic foundations.
Jeffrey Liu, a digital transformation partner with Ernst & Young, has worked in strategic advisory roles, helping organizations achieve digital transformation with a concept known as the three pillars of digital transformation.
“We would look at a digital transformation from a customer standpoint, operations standpoint, and an additional standpoint relating to the organization and employee – of course, the IT environment is a foundation for all three of those pillars,” Liu said.
Enterprise Digitalization spoke with Liu to learn about the current situation with digital transformation, and how the three pillars fit into it.
Enterprise Digitalization: What are some of the recent trends you’ve seen in digital transformation?
Jeffrey Liu: One thing is just a general prioritization of digital, and a more specific definition of digital in the C-Suite. There were periods where there have been broad operational or organizational types of trends that have implicated technology, including better customer relationship management.
ED: What are some of the biggest challenges that the C-Suites are dealing with upon a digital transmission?
JL: There's been a technical refresh in a few different areas. You are seeing some upgrading of traditional platforms. The IT world has seen that movement to cloud-based backend systems like ERP, but we're looking at a lot of companies in a better investment environment, rethinking their manufacturing plans and supply chain platforms. This is at a base or foundational level, but I think what's occurring is trying to anticipate and trying to make sure that what they're deploying or refreshing enables a more digital organization. By that I mean a big focus on data, meaning unified and clean data, to be able to utilize it in customer interactions. I think there's an understanding now that traditional IT had been managing to deliver reporting, or managing to particular divisional metrics, and can now actually be used in a value-creating way with customers. That might be with maintenance data or service data. There's an understanding that knowledge and insights can be used to create value in a customer relationship, or even monetized in some way.
ED: What is the driver of the digital transformation for C-Suites?
JL: From a financial standpoint, primarily a top line benefit in many instances. Are you able, through better customer knowledge, to produce different services or products because you're innovating in a different way, and therefore creating new channels or new market opportunities? There's definitely an understanding or an expectation that value can be created in terms of sales growth. In many cases, especially around the strategy side, you're taking a fresh look at what their purpose and business model should be. You've seen some of that in the production spaces and transportation. Certainly on the consumer end you see automobile companies, as an example, selling capital equipment to consumers on a service basis or on a per miles basis, which is more sophisticated than traditional leasing. Some industrial companies are beginning to change their products, trying to conceive or imagine how that might be delivered as a service. That requires a very disruptive strategic rethinking of what the company's purpose and objectives are. As that filters down to actually operationalizing that, this involves everything from CRM to the backend, changing the way and the nature of accounting for transactions.
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ED: How do the three pillars of digital transformation fit into all of this?
JL: Certainly it's less of a framework, but a reminder to our clients that there's a strong interdependency, and often times that interdependency rests on a spinal and a capillary system that is the IT environment. Data is very much the currency, but also the lifeblood to how you relay customer feedback, as an example, into your operational processes. In fact, this might be perhaps how you incentivize your sales employees to focus more on the relationship versus any particular transaction. If you take some of the new paradigm, like this concept of changing over your business model from selling capital equipment to selling the usage of that equipment, and that obviously changes your operational posture. It may deemphasize investment in manufacturing. It may change the nature of the types of data that you want out of your manufacturing platforms. However, it also affects the frontend, how you work with your customer, and how you show value to the customer. It's probably more important than anything, because it requires quite a bit of change organizationally. When we envision a strategy like that, and talk about enablement in those three pillars, most of the time the starting point is understanding that existing technology foundation, where gaps might be from a tools but also capabilities standpoint, and creating an organizational blueprint for that change.