Andrea Latino currently serves as Digital Lead at the Nestlé Global Accelerator. Before this time, he used to be an independent Digital Transformation consultant and entrepreneur for almost a decade, serving more than 50+ multinationals across 11 industries. Previously, he also worked as a researcher at SDA Bocconi’s DEVO Lab, in partnership with MIT, at the Prime Minister’s Office of Italy and at the Italian Parliament. He was awarded with a Forbes Under 30 recognition in Marketing in 2020. In 2022, he was selected as one of the 50 non-executives to attend the WEF Annual Meeting in Davos.
*The author writes this article on a personal capacity, with no relation to his current employer.*
In today’s fast-paced and dynamic business landscape, organizations must evolve to thrive amidst increasing competition and rapidly shifting customer demands.
Digital Transformation has emerged as a priority of broader business strategies, reorienting companies towards the application and utilization of well-connected technologies at scale, as well as reshaping entire processes and structure to unlock both substantial productivity gains and growth opportunities.
This article delves into the three essential components that companies must be able to rely on for a successful digital transformation: an integrated technology stack, a sound business model, and a skilled, culturally aligned workforce.
Pillar I: An Integrated Technology Stack
The first pillar consists in an integrated and modern technology stack, which offers vast potential for generating new business opportunities and improve operational efficiency. To introduce the topic, however, it is first crucial to stress the difference between digitalization and the related concept of digitization, two terms which often get confused with each other.
Digitization refers to the process of converting non-digital objects into digital representations without significant improvement, like converting a series of paper documents to PDFs — this is often referred to as “dematerialization”; in contrast, digitalization entails leveraging an integrated tech stack to disrupt traditional business operations fundamentally, allowing for a complete redesign of the underlying process.
Case in point for both the processes: AXA Group, a French multinational insurance firm, has adopted an integrated technology stack to support its digital transformation on both the front-end, consumer facing part of the company and its back-office operations. The company employs a range of technologies, including AI and machine learning for claims processing and risk assessment, IoT devices for real-time monitoring and data collection, cloud computing for scalable infrastructure, and mobile applications for personalized customer engagement.
Choosing a Business-Driven Digital Transformation
Organizations and their management, however, should not fall into the trap of being seduced by a technology-first approach, as it can create more problems than it solves. Issues such as redundant and inconsistent data storage, overlapping functionality and fragmentation of solutions, as well as a lack of sustainability in scaling, are all just symptoms of a fundamental distance from business needs that could manifest during transformation efforts, especially when they are completely delegated to IT.
To avoid these problems, companies should focus on a “business-driven” digital transformation strategy rather than an a IT-driven one, where the definition of clear technological priorities is not merely delegated to the function; this most likely requires a new generation of hybrid management profiles, capable of speaking both the languages of business and technology, especially in traditional, non-tech industries. We’ll get there.
Pillar II: A Business and Operational Model that makes sense
The second pillar, a redesigned business and operation model, is crucial for companies to navigate the digital landscape successfully. Both should be scalable, customer-centric and data-driven, enabling organizations to quickly adapt to market fluctuations and remain competitive.
Take Siemens, for instance: the German-based multinational conglomerate has embraced digital transformation by investing in IIoT (Industrial Internet of Things) technologies, data analytics, and AI to create smart products and solutions across various industries, including energy, transportation, and healthcare, complementing its traditional hardware business. Siemens’ MindSphere — an open cloud-based IoT operating system that enables the collection, analysis, and utilization of data from connected devices — has strengthened the company’s competitive positioning, allowing it to remain at the forefront of its industries and resisting the competitive pressure coming from native software players.
Netflix offers another classical illustrative example of a successful business model transformation. By launching its online streaming video on demand service in 2007, the company supplemented its DVD rental service and ultimately saved itself from extinction. This bold move allowed Netflix to capitalize on the growing demand for streaming content, transforming the entertainment industry along the way. In contrast, its primary competitor, Blockbuster, failed to adapt and succumbed to the changing market at last.
Pillar III: Empowering People for a Digital Future
As anticipated, the third pillar emphasizes the importance of employing a skilled and culturally aligned workforce. It is often said that “it’s impossible to improve what is not measured,” a necessary starting point should be a company-wide people digital skills assessment, in order to be able to establish a clear picture of the population average level. Specific, highly critical functions should have in-depth assessment verticals to understand potential significant gaps in capabilities in order to orient re-skilling activities as well as restructuring and new hiring.
Employees must be willing to shift their mindsets as well and embrace change, while organizations should provide them with the necessary resources and opportunities to develop their digital skills. To facilitate this cultural shift, companies can implement regular training programs, workshops, and seminars to keep employees engaged and facilitate professional growth. They should also define accelerated career paths for the ones pioneering meaningful digital capabilities, especially the ones related to creating digital services and ecosystems.
In order to stay competitive, people are the most precious asset to invest in. That’s precisely why even LEGO, the Danish toy manufacturing company, embarked on the challenge of building a digital products team from scratch. The company focused on hiring digital talent, upskilling existing employees, and fostering a culture of innovation and collaboration. By doing so, they successfully created innovative digital offerings such as LEGO Life, a social network for children, and LEGO Boost, a robotics product that combines physical toys with digital technology.
The Subtle Menace of the “Innovation Theatre”
What if all the pillars are not in place?
The risk is to trigger a particular phenomenon defined as “innovation theatre,” where short-term initiatives – often led by middle management – fail to produce significant bottom-line impact while appearing effective to a distracted leadership.
An example comes from a large energy firm. The company aimed to leverage digital technologies to improve operational efficiency, enhance customer service, and explore new business models in the face of a challenging economic downturn. Complacent management and misaligned incentives, however, produced an unserious commitment to digital transformation: the lack of a clear mandate and strategy, as well of resources, incentivized a “constellation approach” that involved multiple disconnected projects and POCs in different areas, such as smart metering, predictive maintenance, and digital customer service, without building the necessary backbones and capabilities. These initiatives were often driven by the mere desire to appear innovative and satisfy publicly announced targets, rather than a commitment to genuine transformation.
As a result, the company’s efforts had limited impact on its operations and led to a substantial erosion of its market position; the digital transformation efforts needed then to be rebooted only years later — under new management and with substantial impact on the stock price.
To avoid this negative escalation, the company should have developed a comprehensive, centralized digital transformation strategy, with strong commitment and epistemological humility to understand the fundamentals of digital and ensure the necessary resources, support, and alignment throughout the organization, as Digital Transformation is, at its core, a top-down process.
This example shows that concrete leadership buy-in is crucial for driving change, as it signals the organization’s willingness to embracing digital transformation and encourages employees to adopt new ways of thinking and working — something that press releases can’t substitute for.
Summing it up
Bottom line, digital transformation is a commitment to the future.
Companies that embrace and prioritize the three pillars of digital transformation—an integrated technology stack, a sound business model, and the support of skilled and culturally aligned individuals—will be better equipped to navigate an unpredictable and increasingly competitive environment.