Not everything digital is transformation

Everyone who works in management has had a meme pop up in their WhatsApp groups at least once in the past few weeks. The meme looks like a multiple-choice questionnaire and asks: Who’s driving the recent digital transformation in your company? The answer is C, is circled in red, spelled out crystal clear. Not A (the CEO), or B (the CTO), but C - Covid-19 – that’s the main driver! The hundreds of people who got the message shared a bittersweet smile, and then forwarded it with a tap on their cell phone screens, thinking, “So true! I have to send this one to my colleague in IT!” .

As amusing as it is, the meme hides a basic conceptual error, one that poses quite a danger for the business world. But first things first.

Beyond a doubt, the current Covid-19 lockdown has accelerated the adoption of digital tools, solutions and work practices to an unimaginable pace. It’s to the point where we’re wondering if the internet has the capacity to support a world that has switched entirely – or almost entirely - from offline to online. From analog to digital, a transition that impacts not only institutions and organizations, but individuals and even children, who’ve been forced in just a few days’ time to turn the way they learn completely upside down. Or almost. And that ‘almost’ is what we’ll be reflecting on here.

Most schools and teachers have continued with lessons through online learning, providing materials in electronic format, such as voice or video recordings of face-to-face lessons, and homework (a lot or a little, that’s an ongoing debate, but it’s all relative). Basically a typical school day has morphed into one big pdf file, to send via email or to pin on a virtual wall. From analog to digital. The same goes for a day in the office, which for millions of people has moved online. We’re refitting our intimate spaces at home to serve as improbable co-working stations; we’re finding ourselves having to reorganize our workload online. But refitting and reorganizing is not transforming: it’s adapting; it’s converting. From analog to digital. And business processes are being adapted too: they’re ‘zipped’ or ‘pdf-ed’ but not redesigned. Far from it. Even our approach to work management isn’t fully embracing the smart working philosophy; at best we’re seeing a widespread, superficial proliferation of telework. And here is the most indisputable empirical evidence, no need for further comment: the software market for remote monitoring of work stations exploded in the month of March 2020. So even control adapts. From analog to digital.But what we need to stress about all these examples is that by and large the substance of what we do, both on an individual and organizational level, is staying the same. Essentially Covid-19 is undeniably driving is an unprecedented wave of “digitization” (it sounds like an ugly word, but we have to use it to differentiate between two different concepts). In purely IT terms, digitization simply means converting a datum from analog to digital to make it processable and transferable via ICT tools. When digitization happens in an organized, structured context we refer to “digitalization.” In other words, the focused adoption of digital tools and technologies with the aim of optimizing processes, enhancing customer experiences and supporting management decisions. Clearly the speed of the offline-to-online transition this emergency has forced on us certainly isn’t fostering premeditated digitalization in the strict sense of the word.

In fact, it’s this speed that has led us to lean more on mere conversion. Quick and dirty. As an example, just think about how Italy invented the concept of the “self-declaration” when we need to leave our homes: an (editable!) online form to fill out, print, sign and present - in paper form - to authorities manning lockdown checkpoints. In contrast, in the United Arab Emirates, the same process is completely digitalized, and authorization is issued via mobile tools, which people simply need to carry with them when they go out. Truth be told, in Italy we’ve seen one good example of digitalization during this crisis. It’s been years in the making, it’s arrived in time to help us contend with the health emergency, and it will outlive the crisis: the chance to receive - and more importantly to utilize - a medical prescription in electronic format.

But we still have quite a long way to go to arrive at true digital transformation. By this we’re referring to a particular form of digitalization, one that assimilates the premises and the finality and takes them to an extreme. But there are a few things we need to know. First of all, digital transformation isn’t a partial path, limited to a single process or functional area. Instead it impacts the company as a whole, with an end-to-end approach starting with customers and their needs. Second, the aim of digital transformation isn’t to simplify a single process or to make a single app available to an end user. Instead the ultimate goal is to enable a profound change in the way companies create value.

In the past five years of research run by the DEVO Lab at SDA Bocconi School of Management, what we’ve come to clearly understand is that this change only happens when there is a clear, explicit, formalized vision of what the company can become, along with a strategic plan that can turn this vision into a reality. So a vision and a plan are two conditions that are necessary, but even then, not enough to trigger a digital transformation. Companies also need to work on a sophisticated system to synch vision, plan, organization, IT structures and systems, and operational mechanisms. If these five dimensions are not aligned, digital transformation will simply not happen.

Once we understand this, we can say with total certainty that Covid-19 has not driven any digital transformation whatsoever. Digital transformation can’t be done out of desperation, or as a response to a planetary emergency. Yet we can still draw a number of useful managerial conclusions here:

1. The current situation has ripped off the Bandaid, so to speak, on incomplete digital transformations, that is, misalignments in the key dimensions listed above. An emblematic case is e-commerce, with sites that are being inundated during this lockdown, but that don’t have the capacity to deliver orders to customers. A sign that their IT infrastructures, or even more simply their operations, are not scalable. For many e-commerce retailers, the perfect storm is brewing as far as order fulfillment, as they discover that with back office processes that are still manual (or on the brink of digitalization, as the case may be), they can’t keep their promises. When working to realize digital transformation, companies need to think about processes from an end-to-end perspective, not in silos. (In other words, they can’t have a super responsive front office and a manual back office.)
2. The lockdown is shining a light on the obsolescence of certain business models, which will probably be shut out of the new economy - the new normal - unless they find a vision for transformation. A situation that starts to resemble a paradox if we think of the more innovative business models of the sharing economy. Let’s take car sharing, for example: Who among us would be willing to get into a car that some other person has just gotten out of?
3. We’d be in big trouble if we thought we were at the end of the path of digital transformation just because we’ve set up teleworking or a home delivery or e-commerce channel. The road is still a long one, and stopping is not an option. The real challenge is to open up virtuous paths for organizational learning, so as to balance the response to the emergency with small steps toward the future, post-emergency. Let’s use this time to build alternate visions of the world. There’s little to lose and everything to gain.

Like we’ve said, Covid-19 has not driven digital transformation, but we can hope that the epidemic has at least set it in motion, provided we do our part. This virus has hacked humanity, but with each hack there’s a chance to reboot a more resilient version.