Digital Transformation

Digital transformation is not just about the technology used – big data, cloud, Internet of Things (IoT), mobility, social networks. It is about how this technology is used to achieve the organization’s strategic objectives.
Both existing processes and human talent necessarily undergo a period of adaptation and change.

While companies needed to make progress on digital transformation before the pandemic, the arrival of Covid-19 has made it paramount. As the physical doors of homes and offices close, digital doors swing open (McKinsey Insights, May 2020). We have had to adapt to remote working from one day to the next. The supply chain went from having to arrive on time to also having to adapt to fluctuating demand. We were familiar with e-commerce, but the contact-free economy is new. To survive, organizations must harness all the technological tools that facilitate the change and make adjustments to optimize and reduce costs.

We must first define Digital Transformation:
“The process through which an organization changes the way it operates in four key Value Creation Model aspects: culture, organization, knowledge and technology.” (UC Innovation Center) Knowledge is how the company uses client and business data to measure its success and define strategy. As data is recognized as an asset, it will spur changes in the business model. Digital transformation is not just about the technology used – big data, cloud, Internet of Things (IoT), mobility, social networks. It is about how this technology is used to achieve the organization’s strategic objectives. The required change in organizational dynamics involves adapting existing processes as well as a cultural shift. The latter requires human talent that adapts and embraces the new dynamic.

There is talk of a “new normal” or a “next normal.” What is clear is that we will not return to the way things were. A portion of today’s remote work will continue as such and a portion of the demand for delivery – currently a very high percentage of total demand – will also endure. In general, the consumer goods sector has adopted Digital Transformation quickly. However, there are also significant opportunities in the B2B sector, regarding manufacturing, where social distancing is a challenge. Even prior to Covid-19, several industries had adopted IoT to improve supplier relations, manage inventory and optimize procurement and maintenance. All of these functions can be carried out remotely, which enables more flexible operations, reduces costs and enables greater social distancing.

How are things here at home? The following are among the highlights of the conclusions drawn from the 2020 Digital Transformation Index (ITD for Spanish acronym) by CORFO’s Digital Transformation Committee:

  1. Chilean companies have significantly improved their Cultural & Digital maturity; however, half of them remain at the “Digital Beginner” stage or below.
  2. The Cultural & Digital Transformation process adds value for companies; higher levels of digital maturity yield greater value.
  3. Culture either boosts or slows the Cultural & Digital Transformation process.
  4. Digital leadership is one of the most considerable deficiencies for companies in terms of making progress on their Cultural & Digital Transformation process.
  5. Digital maturity levels are disparate in the country’s industrial sectors. The communications sector leads the process, while construction shows less progress.

The so-called Industry 4.0 or the Fourth Industrial Revolution refers to this possibility of a series of analytical and digital tools that reduce operating costs while providing flexibility. Value creation is massive when digital transformation occurs. However, it must happen quickly and focus, not on the technology itself, but on outcomes, learning through experience and building an ecosystem of technology providers.

Thus, as noted in Harvard Business Review (05/06/2020), digital transformation is more about people than about technology. We believe that the talent required to undertake the digital transformation process (which, by the way, is ongoing) is eminently flexible, adaptable, and curious – emphasizing learning – collaborative and problem-solving. People with hungry minds, who connect their interests to current and changing demand and learn hard skills as needed will probably have the best results in this changing, uncertain world that is full of opportunity.