IMD Center Research
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Digital Business Transformation

A Conceptual Framework

There is a great deal of hype these days about ‘digital transformation’ - the term is often used but rarely defined. And although it can be summarized simply as ‘organizational change through the use of digital technologies and business models to improve performance’ – Digital Business Transformation is far more than this – it generally implies a holistic reimagining of the entire enterprise to focus on the value delivered to customers.

Meanwhile, new digital competitors and start-ups focus on precisely that: the value delivered to the customer – be it cost valueexperience value or platform value, and increasingly in combination. In such circumstances, tweaking an existing value chain is unlikely to be enough. To win in the Digital Vortex, companies must be dynamic enough to understand the risks disruptors pose to their business and bold enough to be able to grasp the requirement for their own digital transformation.

A definition for digital business transformation

DBT Center research defines digital business transformation and outlines the journey that organizations must undertake to avoid disruption, realize the benefits of transformation, and extract the most value from digital technologies and business models.

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Digital Vortex

Failure to Transform

The importance of organizational change is well illustrated by Kodak’s fall from its position of market dominance, and its ultimate demise. It cannot be claimed that Kodak was not innovative. The world’s first digital camera was developed by the company in 1975 and it made major investments in digital capabilities throughout the 1980s and 1990s. Kodak failed primarily because it was not able to make the necessary adjustments to adapt to new markets and changing customer requirements. The company was encumbered by legacy infrastructure, people, and knowledge that became increasingly obsolete, and was not willing to make tough choices early enough to adapt to changing market demands. In other words, it failed to enact sufficient organizational change. Kodak’s Japanese competitor FujiFilm was faced with exactly the same challenges but managed to adapt and survive. The company accomplished this transformation by combining investments in digital technologies with radical organizational change. FujiFilm cut its workforce, sold underperforming assets, and shifted investment into new areas such as high-end imaging machines, coatings for LCD displays, and cosmetics. The company combined existing strengths with new digital capabilities to build a highly modified organization able to compete in new markets. Today, the company is worth more than it was at the heights of 2000.

There is little doubt then that digital tools and technologies are profoundly affecting the way business is being conducted today. They have already disrupted many industries and are threatening to disrupt others. The stakes are clearly high but there are actions that organizations can take to increase their rewards and decrease their risks.



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