Andy Wilson, Digital co-x lead partner at Vodacom Business.

Many businesses think that once they have moved applications and platforms online and into the cloud they are now digitally transformed. The reality is that, by digitising legacy systems, they’ve only scratched the surface. Have these businesses derived any new value, or have they just updated their tools, getting back to business as usual?

For true transformation to happen – the kind that creates new value for both the business and its customer – organisations need to make fundamental changes to the way they work in the context of a fundamentally changed company culture. We must start thinking about the digital imperative as it relates to organisational strategy and business outcomes, approaching it with a people-centric mind set. How will this technology improve my business while adding value to my client’s experience? The essence of transformation is an overhaul of operations and of culture, led from the top down, leveraging tech as a tool to deliver purpose-aligned value.

Capabilities first

A key operational change that many successfully transformed companies have in common is that they’ve embraced a capability-based business model, instead of a siloed functional approach. In a saturated market, the functions of two competing businesses will be the same, however, defined capabilities that are unique to an organisation will grab attention. This notion is one supported by Deloitte, which reiterates that businesses leading with capabilities have a competitive advantage, adding that it’s the key to successful transformation, which it says “revolves around the need to generate new value – to unlock new opportunities, to drive new growth and to deliver new efficiencies.”

The Harvard Business Review (HBR) gives a great example to explain this ‘function versus capability’ proposal. Functions that international brand IKEA carries out include everything from furniture design and material sourcing to furniture manufacturing and product packaging. However, the brand’s capability as a creator of stylish, practical furniture entails a unique marriage of many functions such as those mentioned, alongside its ability to design in-store customer experiences and balance costs. The way IKEA operates is based on a unique set of functions that competitors would find difficult to duplicate in the same way – this is a capability.

Another interesting point to consider on the ‘function versus capability’ front according to HBR is that capabilities are stable, while tool-reliant functions are not, often changing at the pace of tech innovations for carrying out tasks. Capabilities “represent the ways that people and resources [like technology] are brought together to accomplish work. They form the identity and personality of the organisation by defining what it is good at doing and, in the end, what it is.”

Culture metamorphosis

People are at the heart of any successful transformation and, I agree with Forbes, which notes that this starts with forward-thinking leaders creating a culture that embraces tech for innovation and advancement. In an article on the 5 Rules for Developing a Digital Mindset, Forbes unpacks traits that such leaders have, which include seeing technology adoption not simply as an operational upgrade, but as a strategic move. In migrating data from legacy infrastructure to the cloud, digital ‘leaders’, the article notes, don’t simply see the cloud as a data repository like a digital ‘laggard’ might. Instead, they view it as “a catalyst for innovation across silos and businesses”.

In other words, leaders are looking at the tech as a tool to meet business capabilities in new ways that could even open new revenue streams. The best example of this being Amazon, creating Amazon Web Services out of its own cloud capabilities. If you think about it, a local business migrating operations to the cloud isn’t simply centralising data; it’s removed geographical boundaries to doing business as it’s now able to connect with a global market. This is how we create scale, which is a value point of transformation.

Any business embarking on transformation needs to start by defining their capabilities and understanding what business objectives need to be met through these differentiated capabilities. Once this is clear, introducing technology is how to deliver value. In the hands of a business with insight into who they are and what they want to achieve, digital applications, platforms, devices and more are powerful enabling tools. With forward-thinking leadership, this tech can open doors to endless growth possibilities and a new level of agility.