Analyzing Digital Transformation Canvas for Competitiveness

 

By Omodiaogbe Samuel

Last Updated: December 15, 2023

Introduction

Digital Transformation (DT) is the use of digital technology and data analytics to make data-driven decisions. That improves operational efficiency, custom-centricity, and the development of a winning business model. The objective is to transform an organization into a form in which it can achieve and maintain a competitive position in the digital age. Transformation initiatives require analysis of the market, customers, and technologies as well as internal processes and resources. The Digital Transformation Canvas is a strategic analysis tool that systematically guide you through the ten building blocks in order to make informed strategic decisions. DT begins with a strategy. Without a strategy, it’s nearly impossible to improve business processes, develop new capabilities or design innovative business model to keep pace with change. The ultimate advantage of a DT strategy is having a roadmap that keeps everyone on the same page by ensuring the teams is delivering on what matters most to the business and customers. Essentially, for a digital transformation to be successful, it has to be viewed from the lens of business-centric initiative, rather than a technology project.

 

                             There are 7 Action fields of Transformation.

The seven action fields give us a holistic approach to the scope of digital transformation. The action fields help us to analyze the general market, as well as the internal process of the organization. Leading digital change requires business leaders to have a vision of how to transform their company. In developing a competitive strategy, a company need to prioritize its strategic approach to digital transformation based on core competency, capabilities, and the desired goal it wants to achieve.  It’s difficult for a company to have competency in all 7 areas. But by prioritizing based on the company’s goals is the differentiation strategy. The 7 action fields of transformation are:

 

  • Customer Centricity: This is based on a shared understanding of DT as improving the experience of customers. Customer obsessive organizations place a strong focus on customer orientation, personalized offers, digital communication and sales channels. They pride themselves in being able to detect weak signals in the market, and therefore are able to determine which signals to pay attention to.
  • New Technologies: This means the recognition and understanding of how new technologies can create opportunities that directly or indirectly influence the definition of the market. The emphasis is on deployment of technologies to change the game. However, there is an awareness that the introduction of new technologies alone is not enough, but that employees need to be acquitted with the technologies to exploit them successfully and sustainably
  • Data & Information: These are organizations that believe that data and information should drive all decision-making. It’s a management principle that emphasize that the most important fuel for business is data, including being able to harness it and understand the deep analytics behind it.
  • Digital Business Development: This has to do with organizations providing a new or extended products and services through innovation, new business models and alliances. Such organizations emphasizes that orchestrating ecosystems leads to larger rewards.
  • Process Engineering: Here, the focus is on process standardization, and the process being made faster and more efficient or being digitized and automated. The emphasis is on process management, process (re)engineering, and workflow improvements, automation and digitization of processes.
  • Digital Leadership & Culture: Digital leadership is the strategic use of a company’s digital assets to achieve business goals. It’s a system of leading a cultural shift to the way the organization thinks about service delivery, supplier relations, and the customer experience. It emphasizes the adaptation of new leadership methods, the digital and mobile workplace, and a culture of digitalization
  • Digital Marketing: This refers marketing strategies that a business executes using the internet and other digital channels to reach its actual or potential customers. It’s a creation and dissemination of content through digital media channels, and the promotion of that content using a variety of strategies across paid, earned, and owned digital channels, including SEO, SEM, content syndication, social, and more.
                                             Goals of Digital Transformation

The goals of DT are to:

  • increase speed to market with new products and services
  • increase employee productivity
  • expands ability to acquire, engage and retain customers 
  • improve customer service, especially in providing more intuitive and engaging customer experiences
  • optimization of processes
  • agility
  • create new sources of competitive advantage
  • boosts revenue growth
  • create a new business model

 

                                    Digital Transformation Strategy

Successful transformation starts with a vision that articulates how to harness digital transformation to achieve strategic objectives of the organization. Implementing cutting-edge DT strategy, no matter how promising, without understanding how it will deliver a return on investment (ROI) or improve customer experience will not lead to transformation. Each organization must have its own vision of success. Here’s 4-step process to develop a comprehensive digital transformation strategy:

1 Assess the Current State: Start this process by stating your current business model. Remember, your company doesn’t exist in isolation—it is constantly shaped by its environment, including the markets you serve, competition, technology, and industry trends. Therefore, as you highlight your business models, analyze the internal and external landscape to determine the key challenges facing your company

2 Establish Business Objectives: In this step, you define the business objectives that your company will pursue. Here, you can use the Objectives and Key Result (OKR) framework for goal management. In the OKR framework, the Objectives are the qualitative description of what your company wants to achieve, and the Key Results are the quantitative measurements of your progress towards those goals. Choosing the right objectives and appropriate key results is not an easy task. The important thing to keep in mind is that you must go beyond broad statements to defining exactly how to measure success.

3 Identify Opportunities: Next, conduct a brainstorming session with your team to come up with ideas that will help your company achieve the objectives and key results (OKRs) identified in the previous step. Depending on your company’s aspirations to defend its core or expand into new areas, you can pursue five transformation strategies:

  • Enable More Efficient Operations: [DEFEND] How can you empower your employees to do a better job for customers and make your internal operations more efficient and customer-centric?
  • Improve Customer Experience: [DEFEND] When your customers’ do business with you, how can you make their experience easy, painless, and enjoyable?
  • Change Operating Model: [EXPAND] What can you change in your operating model (how a company delivers its value proposition to its customers) to make it more profitable?
  • Innovate with New Products and Services: [EXPAND] Can you help your existing customers improve the outcomes they seek by offering additional products and services?
  • Serve New Market Segments: [EXPAND] Can you serve new market segments with existing or new products and services?

4 Build a Digital Roadmap: In this step, your team will prioritize on the five DT strategies listed above to uncover the highest priority ideas and then build an execution roadmap. Armed with the strategic approach, you execute on the strategies that gives you the highest returns and competitiveness

 

                                 Components of the Digital Transformation Canvas

  • Business Driven Product/Service Description
  • Business Value Proposition
  • Key Stakeholders
  • Data Objects in Scope
  • Data Objects Current Available Format
  • Machine Readable Data Object Transformation Technologies
  • Partnerships
  • Business Value Drivers
  • Implementation Model
  • KPIs

Business Driven Product / Service Application Description

In order to conquer your competitors, it’s crucial to voraciously learn all you need to know about your products and their place in the market. Selling becomes much easier when you know all about what you’re selling. If you aren’t completely knowledgeable about the minutiae of your products and how they relate to others in your field, you won’t have the answers to all of your customers’ questions. The rule here is clarity. The clearer the service or product is, the easier is to explain, get buy-in from stakeholders

 

Business Value Proposition Section

If you want to stand out in the marketplace, you must have something notable that sets it apart. This box answers the question of how you are different from the existing alternatives. An effective value proposition can be derived by focusing on the benefits when the problems are solved

A Value Proposition should:

  • Be easy to understand in about five seconds.
  • Communicate the benefit a customer receives from using your products and/or services.
  • Explain how your offering is different from and better than competitors’

Therefore, you need to ask:

  • What is the product or service?
  • Who is the target customer/user segments?
  • What do they need? i.e., what is the job or need they want to get done.
  • How does this digital use case reduce the main pain points?
  • How does the initiative improve their current situation, make their life better? What is in there for them?
  • Why is this value proposition better than others?

Key Stakeholders

Digital transformation initiative is interdisciplinary. It requires different people from different departments across the organization. By understanding the key players, their role and their level of influence, the appropriate communication strategy can be put in place to bring them on board by presenting them the view which best represents their concerns

Typically, we have the following stakeholders in the decision-making.

  • Internal business stakeholders, such as brand or marketing teams, who have a specific business need or objective, which digital initiatives aim to address.
  • Digital Center of Excellence (DCoE), such as technical experts, digital planners or managers, who support business stakeholders in planning and executing digital initiatives.
  • External partners, such as agencies or consultancies, who bring high levels of specific expertise and knowledge to digital initiatives

Key Partnerships

The key thing is to determine the deficiencies of the company that requires external “know-how”. A partnership to support your transformation requires far more than technical acumen. The right partners will not only help you execute your transformation agenda — they’ll also help you shape the right agenda for your firm and prioritize them. Choosing the right partner is an essential step in the process and one that many organizations don’t devote adequate due diligence to. Therefore, you need to be strategic in entering into partnership. You need a partner that has the ideal combination of experience, knowledge, and skill to suit your organization’s specific needs

Data Objects in Scope

The core piece of any digital transformation initiative is to understand the data objects that require digitalization. This means those data objects that need to be transformed into a machine-readable format. When thinking in digital initiatives or value cases, the key question is: what data needs to be put in a machine-readable format? Is it chemical structures, biometrics indicators, payment details, customer interactions? Understanding the data objects in scope is the first fundamental step towards digital businesses.

Data Objects Current Available Format

Once data objects to transform into a machine-readable format have been identified, then the next logical step is to understand the way they are available today. The Data objects may be manual documents like handwriting, images, voice, databases, etc. It can also be anything that a sensor, device or technology can access or convert to a machine-readable format. Even if the data objects are in a machine-readable format already, the findability, accessibility, interoperability, and reusability of them need to be machine-readable as well.

 

Machine Readable Data Objects (DO) Transformation Technologies

This is the piece that brings the technical complexity in place, but also where creativity is at the core. This is really the scope of the digitalization work. Bear in mind that machine-readable format is anything machines can read and make sense of. This may be input from sensors, media transformation to communication protocols or knowledge representation. Once data is available in a machine-readable format, it can be used for the business value application. Without the technology necessary to create data objects into a machine-readable format, then the overall business value added application can be seriously compromised.

Business Value Drivers

In order to make transparent the benefits of any digital transformation value case, it should be clear what the value drivers should be. A business value driver can be to:

  • bring efficiencies (e.g., reduce/optimize costs)
  • increase in revenue
  • customer-centricity
  • manage risks, or
  • implement new business models

For example, if the purpose of the digital transformation program is to excel at customer service, then that may require investments in digital technologies which make customers life easier. The same thing goes to the other factors on the on the 7 Action Fields of Transformation.  Essentially, Digital Transformation steering bodies need to be clear about the purpose of the overall digital transformation initiative, so they steer their decisions accordingly.

Implementation Model

New business models can be the main business driver behind a Digital Transformation initiative. However, new business models need to be compatible with the overall Digital Transformation goal or strategy. For example. If the goal is to give the best customer experience, such clarity should reflect in all products/services offered. This is where setting the right strategy from the unset is very crucial. With the right strategy in place, what is required in implementation is the discipline of executing the strategy that was set, and if necessary, pivot, given the market signal. The overarching goal is competitiveness, and that should be the focus.

Key Performance Indicators

Just implementing the technology isn’t enough – the DT needs to be specifically tied to monitoring key performance indicators on customer insights, business process effectiveness, and other factors on the 7 action fields of transformation. Defining how to measure success brings clarity on the end goal and help to get internal sponsorship and executive buy-in. Metrics are extremely valuable in order to assess whether the initiative is going in the right direction, determine what need to be fixed or knowing if the DT initiative failed. Essentially, the more mature an organization becomes about measuring outcomes, the more accurate, predictable and profitable Digital Transformation value cases will be.

Case Study

                                           EasyLoan

EasyLoan is a startup Fintech Company established to provide solution to loan challenges of Small and Medium Enterprises (SMEs) in Nigeria. Commercial banks in Nigeria avoid offering smaller loan to SMEs primarily because of the low profits they can generate, and that is further exacerbated by high processing and recovery costs. In some situations where loans are offered, they come with steep interest rates, a lengthy application process, stringent collateral and guarantor requirements. Additionally, a traditional bank takes weeks or months for loan to be approved, and such loan could come with interest rate as high as 30%, coupled with onerous documentation requirements and hidden charges.  All these challenges make it difficult or practically impossible for SMEs and micro businesses to access loan in the country. It’s worthy to note that SMEs and micro businesses accounts for more than 60% of industries in the country. As a result, without access to loan, their progress is hampered. The only way out for them is to rely on equity from friends and family. Relying solely on organic growth means that they might not be able to scale to their desired level 

 

EasyLoan is Fintech company that is out to make SMEs and micro businesses to have access to loan in cost effective and efficient way. By offering loans online, we tend to save operational costs such as rentals, human resources, and administrative expenses.  And such saving would be transferred to the customers in form of lower interest rates than the commercial banks. Also, being a Fintech company, our operation will be data-driven. In Nigeria, where credit history and other traditional data sources are limited, we will deploy technology to pool and mine unconventional data to create a scoring and evaluation algorithms. Such predictive analytics will help us to create a paradigm shift in risk management. Apart from offering loans, we will equally provide saving services to the customers. Higher saving would enable them to have access to higher loan opportunities. The saving account will be interest bearing, a higher interest rate than what they could receive in the conventional commercial bank. EasyLoan primary goal is to provide its consumers an easy and hassle-free access to loan without paper documentation, collateral or guarantor. With App on their smartphones, they can have access to great services on the go.

 

At EasyLoan, we recognize that in the Fintech space that there are many other players, offering one services or another. There are some that target the same niche market as we do, i.e., SMEs and micro businesses. Therefore, we are not only competing with the traditional banks, but also FinTech in general, and those focusing on loan services to SMEs in particular. As a result, for us to be competitive in that space, we need to create a differentiation strategy. We need to provide the customers what no other player currently offers. To that effect, we have decided to leverage on our capabilities in Digital Transformation (DT). Digital transformation is the process of using digital technology to develop new business processes and consumer experiences to meet the changing market dynamics or to alter the existing ones. While Digital Transformation Canvas is a strategic analysis tool that systematically guide us through the ten building blocks in order to make informed competitive decisions. Why EasyLoan decided to use the Digital Transformation Canvas is that it will enable us to bring clarity and transparency to the scope and value of the initiative before really investing resources on the project. By working through the 10 building blocks of the model, we would be able to get a clarity of whether our strategy is robust enough to give us a competitive advantage or not. The canvas will offer the team the opportunity to brainstorm on the assumption of each of the block, and also to determine their strategic implications. Our digital transformation strategy is centered on using the model to drive our innovative business model, customer-centricity, and data-driven decision-making. To win in those fronts, we will leverage on our core competencies, as well as striking the right strategic partnerships to deploy digital transformation technologies to achieve our objectives

                                Analysis of Easyloan Digital Transformation Canvas

All we want to achieve at EasyLoan centers on our strategy of innovative business model, customer-centricity, and data-driven decision-making. On the first block (Business Driven Product/Service Description) the key features of the EasyLoan App are listed.  The features of the App is about the capabilities and robustness of our system. The value proposition block emphasizes our uniqueness and differentiation factors from the other players in the marketplace. The key stakeholder is about the holistic team that will make the program successful. On the data object in scope, we list the various data that are expected to be transformed into a machine-readable format. Block five enable us to highlight the present state of the data and where they currently reside. While on block six to focus is how we need to make meaning of the data. On the partnership block, we realize that we cannot do it alone, and therefore, we highlighted the strategic partnerships that would help us to achieve our objectives. On blocks 8,9, and 10, the focus is on the desired outcome on business value driver, implementation model, and the key performance indicators to measure our performance. All is about making sure that the right approach is adopted to achieve our strategic objectives

After conducting the analysis, it was very clear to us the right strategy to adopt. However, we equally realized that some of the factors listed might to not fit into our overall strategy, and therefore we might need to pivot and continue to iterate the model until we arrive at a digital transformation model that would stand us out in the marketplace. The analysis will equally help us in resource allocation. That mean it will help us in prioritization and effective resource allocation by understanding what requires immediate attention or what could be delayed. The overall goal of the analysis is to determine our competitiveness in the Fintech loan services space. As a result, the Canvas was designed to guide us in making strategic decisions. Equally, it will guide us in conducting further research in whatever area that is necessary to achieve our objectives

Digital transformation is a journey, not a destination

Organizations need to recognize that DT is a continuous process. You need to re-evaluate and re-invent the transformation journey depending on the goal you want to achieve. The strategy you adopt will determine where you want to play on the journey. It will determine whether you need to progressively build new capabilities to capture new value, or remain unadventurous.  Here are the 5 stages of digital transformation process: 

 

  • Laggards: Laggards are companies who have not invested in digital capabilities and are faced with increasing competition and reduced profitability.
  • Shotguns: Shotguns are companies who have made one-off, tactical digital investments in their businesses, often without a cohesive strategy.
  • Defenders: Defenders are companies who are working on making their existing business model better by focusing on gaining operational efficiencies, improving customer experience, or other factor on the action fields of transformation
  • Innovators: Innovators are companies who are using DT to grow their existing businesses by bringing new products and services to existing customers and/or reaching a previously un-served market segment.
  • Disruptors: Disruptors are the visionary organizations who use DT in new business models to fundamentally change the economics and structure of their industries.
Benefits of Digital Transformation

The following are some of the benefits of DT:

  • Improved efficiency and productivity
  • Increased transparency
  • Cost savings
  • Revenue growth
  • Better customer experience
  • Better employee engagement and culture
  • Better operating model
  • Improved competitive advantage
  • Improved decision making
  • Improved agility and flexibility
  • Data-driven customer insights
  • Increased analytical capacity
Challenges of Digital Transformation

The following are the most common reasons why digital transformation fails

  • lack of employee engagement
  • inadequate management support
  • poor or nonexistent cross-functional collaboration
  • lack of accountability
  • data privacy and security concerns
  • budget constraints
  • limited in-house skills and expertise
  • regulatory and legislative changes
  • immature digital culture
  • Lack of IT resources and management
  • Poor strategy and lack of leadership
  • Not having proper business models
  • Legacy IT Systems
  • Mismatch between technology and business alignment

                                          Summary

The Digital Transformation Canvas help teams to think through the implications of digitalization: what business processes to focus and for what reason; what data assets need to get digitalized and what technologies to use. It also brings the different players in the organization required to set up a diverse cross-organizational teams to work together for the common goal. Furthermore, it makes team to develop metrics to measure success or failure of the initiative. The Digital Transformation Canvas is not a holy grail either, it is not meant for that. But it can certainly help you to articulate clarity on the digital value cases and help the Digital Transformation steering team make better decisions. Regardless of the interpretation of Digital Transformation, the truth is that competitive advantage is won or lost in the boardroom. It is the leader’s role to ensure their industry knowledge is used to maintain competitive advantage and that is not overshadowed by the pursuit of technology. The company’s market position and ambition must be clearly articulated before technology is considered. Technology is the enabler, not the differentiator

 

Omodiaogbe Samuel, MSc. CMC, ChMC, FIMC

Omodiaogbe is a Strategic Management Consultant, and he the Principal Consultant/CEO at Vast Thinking Consults Ltd where he help organizations and business leaders to create superior value. Omodiaogbe holds BSc. and MSc. in Economics. Also, he is a Certified Management Consultant (CMC), a Chartered Management Consultant (ChMC), and a Fellow, Institute of Management Consultants, Nigeria. He is an Instructor on Coursera, where he teaches 25 courses in Strategic Management. Omodiaogbe is one of the world’s leading learners on Coursera and Edx with over 500 Certificates from top-ranked Universities, Business Schools, and Organizations.

Contact him:
Email; somodiaogbe@vastthinking.com.ng
Visit: www.vastthinking.com.ng

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