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Question to write on
Name two ethical principles for digital transformation that you think businesses need to adhere to and why.
• Each forum submission consists of 150-250 words
• Each forum submission is original.
• Submissions should be meaningful: they contain relevant arguments, relate to the week’s material on LMS and contain at least 2 references (academic and/or sources commonly used in business)
• Invalid resources: blogs, opinion pieces, Wikipedia, etc.
• Use Harvard referencing style
Topic of the week
An Introduction to Digital Business Models
According to Weill and Woerner (2013), digitisation is the vehicle for companies to create a strong connection with end customers and partnership firms (e.g. suppliers, co-branding companies) to meet ever-increasing customer demands. Digitisation includes the consideration for a digital business model.
A digital business model has three components: content, experience and platform. These components work together to create the customer value proposition:
*Source: Weill and Woerner (2013)
The Amazon example
Consider Amazon’s retail customer digital business model.
Content
Amazon’s content – or what is consumed – includes digital products like movies and software, as well as information about the physical products it sells or brokers.
Experience
The customer experience embodies what it’s like to be a digital customer of the organisation, whether buying digital or physical products. Amazon’s customer experience includes the website and the digitised business processes touching the customer – like the shopping cart and payment options – as well as messaging, such as delivery alerts and email acknowledgements.
The experience also includes Amazon’s well-developed customer-created content: customer product ratings and reviews, as well as sophisticated tools like search, a detailed history of purchases and tailored recommendations.
Platform
The platform consists of a coherent set of digitised business process, data and infrastructure. The platform has internal and external components and may both deliver digital content to the customer as well as managing physical product delivery to the customer.
• Amazon’s internal platforms include customer data and all the business processes that don’t touch the customer, such as customer analytics, human resources, finance and merchandising.
• Amazon’s external platforms include the phones, tablets or computers that consumers use to research and purchase the products, along with telecommunications networks and Amazon’s partnerships with delivery companies like UPS that deliver physical products and generate text messages on delivery; all of these external platforms neatly integrate with Amazon’s internal platform
Why is this important?
The excerpt from Weill and Woerner (2013) below demonstrate why you need to develop a digital business model mindset:
To make this change more difficult, a great digital business model challenges the traditional physical business model that relies on places (such as bank branches, bookstores or department stores) and people (such as sales teams or insurance agents) to delight a customer. A digital business model challenges the physical model in three main areas: internal power, since who “owns” the customer’s experience often changes from product groups to the unit that manages the multiproduct customer experience; business processes, which require rethinking to be seamless across channels; and customer data, which become an enterprise-wide resource rather than remaining hidden in one area.
Whether you are a born-on-the-Web company, a large established company or a local business just starting to focus on the best way to connect with customers online, your enterprise needs to strengthen its digital business model.
Four Key Digital Business Models
In order to help organisations take appropriate steps in their digitisation avenues, four digital business models are suggested:
• Omnichannel
• Ecosystem driver
• Supplier
• Modular producer
Omnichannel Business Model
• The strategy is to win through customer experience.
• The digital challenges are to create a single customer experience and great digital content.
• This would be clear direction forward for healthcare providers.
Ecosystem Driver Business Model
• This model is to win by creating a destination point for a category. Ecosystem Drivers compete by becoming an end-to-end destination.
• Fosters relationships with complementary and sometimes even competitive product makers. To do this, they create the ability to plug and play between their products and other products (e.g. Amazon or Microsoft).
• The digital challenges are creating world class content, customer experience, and an integrated platform.
Supplier Business Model
• This model focuses on wining through product differentiation.
• The digital challenges are creating great digital content, digital warranties, and automated operating systems updates.
• Suppliers compete for prominence with similar products. To win, they must have true product differentiation. They offer the best products for customer needs at a point in time.
Modular Business Model
• The strategy is to win through the ability to plug and play into everyone else’s digital ecosystem.
• The challenges are to use applications programming interface (APIs) to make it easy to connect to organisations’ digital platforms.
• An example is PayPal.
The below picture gives a summary.
Operating in more than one business model
Most large enterprises operate in more than one of these models. The presence of more than one model isn’t undesirable as long as there are synergies or good reasons to diversify.
Examples – Amazon
Not only is Amazon an ecosystem driver, but it also provides many services to other businesses, some of which Amazon also uses, including fulfilment payment, and technology capability (through its Amazon Web Services), making it a modular producer as well. As part of its fulfilment service, Amazon handles the warehousing, packing, and shipping of one billion items.
Examples – Banks
Banks often operate in all four quadrants and often at significantly different profit margins. The typical large bank will act as a supplier, selling mortgages, investment products, and other services through financial advisers. Most banks also work hard to improve their omnichannel offerings, often by re-imagining the branch to be more of a customer acquisition, sales, and advisory location with most transactions done digitally — more and more on mobile devices. These same banks operate as modular producers offering various services, including payments and foreign exchange to many other enterprises, using automated platforms. And finally, many banks have made forays into the ecosystem-driver model, often by offering more complete services for life events such as buying a house, owning a car, or preparing for retirement.
Digital Business Leadership
Did you know that approximately less than 1 in 3 managers from the automotive, logistics and health sector believe their companies are well-prepared for digital transformation?! (Berger, 2015)
Achieving digital business leadership
Once the business model has been identified, what is needed for a company to obtain digital business leadership and go through the transformation process successfully?
To achieve digital business leadership, a digital transformation process is required. Think back at the key lessons in week 1 regarding constant evolution and innovation to stay on top of the game. Before transforming a business, systematic change management needs to occur. This is internally – in the minds and hearts of managers and employees.
Systematic change management
What exactly is change management and why is it so important?
Becoming a digital business leader requires systematic change. Established visions, values, goals, strategies, responsibilities, budgets, and operations, reporting paths and structures are subjected to a radical process of change. By doing so, the entire organisational and operational structure needs to be scrutinised and often-times, needs to be developed comprehensively. This also means that existing information and process silos have to be broken down.
Barriers to Change Management
There are seven major barriers to successful change management. These have to be overcome to gain digital business leadership:
• The lack of understanding of the necessity of the change process with managers and employees often-times represents the biggest hurdle in the implementation of changes.
• The lack of a leading figure for the change process at top management level undermines the acceptance of the required changes.
• A lack of experience in change processes of managers and employees complicates successful implementation.
• Insufficient know-how for tackling new tasks slows the transformation process down.
• Warfare between different people, levels, and departments steals key energy for unnecessary “secondary battlefields”.
• The absence of a corresponding remuneration system—geared to the new requirements—can be misunderstood as insufficient commitment from management.
• The inability or unwillingness to change a part of the management and the staff constitutes another major obstacle.
Whether leaders are favourable of change or not depends on the degree of perceived personal risks. As future managers in the digital business space, it will be your job to convince fellow managers and employees of the benefits of change. This is no easy task!
Whether leaders are favourable of change or not depends on the degree of perceived personal risks.The typical initial attitude towards change looks like this:
*Source: Kreutzer et al. (2018)
Typically, especially at its beginning, a small promoter team confronts a large majority of people that have a negative attitude towards the change. These include sceptics, resistants and outbrakers who do not believe in the success of the process. Those who are resistant, and especially the outbrakers, are intentionally opposed to the changes. They procrastinate decisions and consistently boycott their implementation. If this potential for opposition will not be won for the cause in the course of the change process or leave the company, the process will fail.
However, it’s not all doom and gloom, the next chapter gives you some pointers on how you can deal with change management when transforming into more of a digital business.
Change Management
As we just mentioned, if those with a negative attitude procrastinate decisions and consistently boycott their implementation, the process will fail. The primary guiding principle is to turn affected persons into parties involved. To do this, you need to find or hire employees who can act as promoters because you will not be able to operate with only sceptics and resistors. Also consider the following:
• The CEO or the company’s management is responsible for starting the change process. It is important that their contributions to the overall process become visible and that the objectives, targets, and specific needs for action are formulated concisely.
• A dedicated mentor at the management level should support the entire change process.
• Continuous communication between employees with management is crucial.
• After kick-off meetings for the entire staff, departmental meetings on “change” need to be carried out continuously.
• To enhance the motivation for the tasks that often need to be taken on in addition to the daily business, it is of utmost importance to adequately appreciate the contributions of the individual employees as well as each team (a little feedback goes a long way).
• In the course of the digital transformation which goes hand in hand with reorganisation, the new or additional demands on employees as well as their responsibilities need to be clarified early and transparently.
• Individual performance reviews need to be aligned with new targets.
It’s important to realise that change can make staff uncomfortable since comfort zones will be abandoned. Compliance or lack of, from management and employees can make or break the digital transformation process and with that, digital business leadership.
Digital Transformation Strategies
After having looked at systematic change management and its challenges and tools to guide the process, let’s at systems and processes for digital transformation.
Digital transformation is a precondition to achieve digital business leadership, but is digital transformation?
Digital transformation is the conscious and ongoing digital evolution of a company, a business model, an idea, a process, or a method, which can be both strategic and tactical (Mazzone, 2014).
Some key takeaways from this definition:
• Digital transformation is all encompassing,incorporating business models, ideas etc.
• It never stops evolving and therefore requires an ongoing strategy
Digital transformation strategies seek to coordinate and prioritise the many independent threads of digital transformation.
Elements of Digital Transformation
Independent of the industry or company, digital transformation strategies have certain elements in common:
• Use of technologies
• Changes in value creation
• Structural changes
• Financial aspects
Use of technologies
This includes a company’s attitude towards new technologies as well as its ability to exploit these technologies. A company needs to decide whether it wants to:
- Become a market leader in terms of technology usage with the ability to create own technological standards.
- Resort to already established standards and sees technologies as means to fulfil business operations.
Being a technological market leader can lead to competitive advantages and create the opportunity of other companies becoming dependent on one’s technological standards, but it might be more risky and requires certain technological competencies (e.g. platforms, systems, human resources).
Changes in value creation
The use of new technologies often implies changes in value creation. Changes in value creation includes the impact of digital transformation strategies on companies’ value chains, i.e. how far the new digital activities deviate from the classical – often still analogue – core business and how they provide value for the firm.
Changes in value creation offers opportunities to expand and enrich the current products and services portfolio, but are often accompanied by a stronger need for different technological and product-related competences and higher risks owing to less experience in the new field.
Structural changes
With different technologies in use and different forms of value creation, structural changes are often needed to provide an adequate basis for the new operations. Structural changes are variations in a company’s organisational setup, especially concerning the placement of the new digital activities within the corporate structures. It is important to consider if it is mainly products, processes, or skills that are affected by these changes and to act accordingly.
Financial aspects
Financial aspects are both a driver and a bounding force for transformation. Use of technologies, changes in value creation and structural changes can only be transformed after considering financial aspects. These include:
• A company’s urgency to act owing a diminishing core business (i.e., knowing when to cut your losses).
• A company’s ability to finance a digital transformation endeavor.
Lower financial pressure on the core business may reduce the perceived urgency to act while companies already under financial pressure might lack external ways to finance a transformation.
Sample Solution
The post Businesses you need to adhere to and why. appeared first on acestar tutors.
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