“Transformation is currently still a digital beast”

Source: Het Financieele Dagblad - Transformers 200 magazine (24/06/2017); Author: Mirjam Van Immerzeel

This digital era dictates economic realities which will determine the relevance of businesses. What has the impact been of these new rules on the biggest companies in the Netherlands? Stijn Viaene, research leader of the Digital Transformation Index, explains.

Young businesses immediately swim with the tide in this new digital era, while many established large businesses see themselves facing the challenge of a monumental transformation. If they want to stay relevant, they take this challenge on, says researcher Stijn Viaene of Vlerick Business School. The highly demanding shift from analogue to digital, which affects strategic and business models as well as daily business operations, is the subject of a study over several years by Viaene and his colleague, Professor Steve Muylle, in partnership with Het Financieele Dagblad (FD). The study has resulted in the first Digital Transformation Index, which is presented in the magazine ‘Transformers 200’ (Dutch only).

What is the background to this research?

‘We have seen that large businesses wrestle with their digital transformation. The businesses recognise its significance, more or less, and they often have the will to take certain steps. But generally there is a lack of practical pointers to really get to work on it. The FD has heard this from its contacts in the field on a regular basis, so it was quick to join us in this project. As researchers, we aim to keep our finger on the pulse and offer clarity. With this first study and a few concrete cases, we want to help people see the wood through the trees.’

While innovation and digitisation have dominated in recent years, what problems do the big companies face?

‘I notice that they have difficulties separating digital transformation from digital innovation. That is not a play on words, but a crucial difference that significantly impacts their strategy and business operations. In recent years, for example, we have mainly seen the emergence of start-ups and technical innovations such as blockchain and 3D printing. How do you deal with that as a big business? Should you imitate the start-ups and launch similar innovations yourself? 

Is that what they should do? Or perhaps they should just continue buying up the fresh blood?

‘That’s an option, but at the same time it would be a very limited approach for established businesses. It isn’t enough to keep them relevant in the coming years. But they shouldn’t throw the baby out with the bathwater either. As well as with the innovation issue, big companies wrestle with the issue of transformation. Of course they need to acquire new skills, such as working with big data and artificial intelligence. But the real question is how they can use digital technology to create a lever for existing strengths and sleeping assets that are yet to be digitised. The nature of the question is holistic and all-encompassing, loaded with technical, organisational and strategic issues. In this context, digital technology is not simply an ‘enabler’ but more of a dominant factor in reinventing a company. We need to be aware of the digital beast we call transformation. Thanks to the research for the Digital Transformation Index, we can explore the extent of the pressure that big companies are under to transform as a whole. They know that they can no longer settle for a couple of innovative experiments or an incubator. That is quite a recent realisation, and certainly not everyone has reached that point yet.’

The basis of the research for the Index is what is known as the ‘Exconomy model’. That model revolves around the new ‘realities’ of the digitised economy that Viaene and his research group have formulated. The first reality the professor mentions is the high demands customers set on their digital experience of a product or service. That experience provides a significant part of the value. The physical and digital experiences should flow into one another and that sets high demands on design, among other things. Co-creation is essential. The courage and ability to continually experiment are also essential skills in the Exconomy.

Another reality that businesses need to take into consideration is the enormous mobility of the modern digital customer. Viaene goes as far as to call them ‘moving targets’, because customers no longer allow themselves to be captured once and for all. ‘Current insight into where which customers are and the situation they are in is crucial. Consider digital experimentation, the management of real-time data and the use of systems with learning abilities such as bots.’

Furthermore, according to the model, the most value can be created using an ecosystem of companies and start-ups that work together on digital platforms. That’s the theory so far. In their research, Viaene, Muylle and the team have presented these new realities to digital leaders of big companies.

RESEARCH IMPLEMENTATION
Digital Transformation Index 2017
Of the two hundred businesses that were approached, fifty cooperated in the Digital Transformation Index this first year.
‘Those fifty – including businesses active in the consumer market, the business market, or both – enable us to draw valid conclusions’, says research leader Stijn Viaene. ‘An important point to note is that, this time, we only spoke to higher level management. We are aware that this view from above can differ from the view on the shop floor. Broad employee input can add an extra dimension to research into to the progress and success of the digital transformations. Certainly when you are talking about the cultural aspects of transformation, because how many people have you actually won over within your organisation, and which ones?  That is certainly worth investigating in more depth.’  

How open do businesses dare to be about their dilemmas, investments and strategy?

‘In a study based on self-evaluation, businesses can overestimate – or underestimate –their digital skills and achievements. We explicitly asked them to benchmark themselves against other companies in their sector. We also asked them who they saw as positive examples. How do they compare themselves to businesses they see as performing better? An encouraging result is that many businesses search for role models outside their own sector. That says something about the growing awareness that the digital revolution has no borders. But you are right, being open about digital investment and strategy is still a highly sensitive issue for many companies. It was the reason why some decided not to take part in this study. Of the two hundred largest businesses in the Netherlands, we have been able to study fifty. And that’s not bad for a first edition; of course we are counting on more next time. It will also be interesting to do a follow-up study into who is making progress and how fast. We have now entered the first stage of a long-term programme in collaboration with the FD and we hope that more businesses will lend their support to this Index.’

 

Four economic realities of the digital era
1. The customer experience is leading with value creation.
2. Experiments and data keep the customer close.
3. The new strategy is to think in ecosystems.
4. Digital platforms create new growth.

 

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