Digital transformation is a hot topic today.
But for those of us who have been around the industry for some time, today’s digital transformation should read “Digital Transformation – Fourth Edition.”
Each prior edition has been associated with a particular digital technology breakthrough.
Each edition has resulted in substantial disruption to the prior status quo and significant cultural change.
From Automation To Social Analytics
The first edition in the 1960s was about automating manual tasks from the 1960s. The second edition in the 1980s centered on personal.
Of course, the big third edition was the internet in the 1990s. This fourth edition is all about social.
R Ray Wang, the author of Disrupting Digital Business: Create an Authentic Experience in the Peer-to-Peer Economy, defines digital transformation as “a methodology in which organizations transform and create new business models and culture with digital technologies.”
In this edition the new business model is the Platform, teamed with an emerging culture centred on Social; disrupting the Value Chain models and cultures centered on hierarchies and Business Process Compliance.
The Platform Business
Sangeet Paul Choudary elegantly described the Platform business model’s emergence from the value chain in his “Pipes to Platforms” analogy.
Platforms are two sided markets, with one side being the traditional customers and the other the suppliers.
The platform firm orchestrates the market by providing a digital platform, which attracts both buyers on one side and sellers on the other.
Unlike the value chain model, the firm need own no assets. The current platform poster children are Uber and Airbnb.
However Visa, Amazon and eBay were the real pioneers of the platform business model.
In fact, eBay was founded on the principles of informal social communities. Former CEO Meg Whitman was quoted as describing eBay as "a commerce site that built a community around it."
In essence, that is an alternative definition for the platform business model that it helped to pioneer.
Transforming from Pipes to Platforms
While the stellar platform business examples were all able to disrupt traditional markets as pure play new entrants, digital transformation today is largely about traditional firms looking to transform from pipes to platforms and from process compliance to a collaborative social culture.
Not all traditional businesses will see a complete transformation as needed to defend or enhance their market positioning.
Apple is a good example of a pipe/platform hybrid, with its iOS operating system performing as a platform for applications. But the devices themselves being provided through a traditional pipe model.
All, however, will want to be able to monitor their transformation status in order to balance risk and reward. So how is this best done?
Transformation in Measurement Methods
The journey from pipes to platforms requires a transformation in measurement methods.
Pipe businesses measure their performance through tracking the progression of a product or service through pre-determined stages and eventually to the customer.
Enterprise resource management and traditional business intelligence systems are used to monitor progress, along with the resources consumed.
Customers are segmented by marketing departments and passed on to Sales for direct customer interactions.
In contrast, platform businesses are about facilitated, direct relationships between suppliers and customers.
The emergence of the platform business has been heralded as "Digital Disruption."
Today this transformation in measurement is happening substantially only on the customer side.
Social media monitoring of potential customer bases is maturing rapidly.
Sophisticated analytics are now available to uncover hidden buyer influence networks through analyzing data feeds from social networking platforms like Twitter, Facebook, Instagram, LinkedIn and the like.
Marketing departments have become ‘digital’, looking to create brands that can sell themselves through the customer-side influence networks.
The Value of Enterprise Social Networking
On the supplier side — for example, inside traditional "pipe" firms, progress is more challenging.
Enterprise Social Networking (ESN) platforms like Yammer, Jive and Slack are making inroads into the traditional organisational hierarchies, established to support pipe style businesses.
In our research on enterprise communication channels, we found email, instant messaging and work management channels largely reinforced the existing hierarchy. ESNs are the exception.
So progress toward a more social supply side has been limited.
Addressing Organizational Hierarchy
Social Network Analytics that can expose the supplier side influence networks that transcend the organizational hierarchy are only just starting to emerge.
This infographic provides a unique comparative view of Yammer adoption across 16 organisations.
Ultimately a marketplace replete with platform businesses would see social analytics working not only between suppliers and customers, but also between suppliers themselves and between customers themselves.
Today, pure platform businesses like Airbnb and Uber, as well as hybrid firms like Apple, use community forums to facilitate both networks of buyers and sellers.
Such forums are a rich source of data for feeding their social analytics needs. Connections identified through forums can be transformed into social network graphs and analytics to identify key influencers and change agents as illustrated here.
It is largely through social analytics that platform firms are able to manage the delicate balance between supply side and customer side networks and ensure only positive network effects are experienced.
Social Analytics and Digital Transformation
As mentioned earlier, there is no shortage of both free and paid social analytics tools for monitoring supplier-customer and customer-customer interactions.
This recent analysis from the G2 Crowd provides a nice summary of current tools. There are few industries that have yet to be touched by the "social media wand," so if you are not monitoring your customer’s social networks then you are likely already behind the game.
The next stage of the digital transformation is on the Enterprise (Supplier) side.
In this case if you are yet to install social tools or platforms for use inside your organisation, then you are also likely already behind the game.
Social analytics applied across the enterprise however is only starting to happen now.
The final stage of the transformation is when supplier and customer networks are interacting directly, with your platform firm collecting and using social analytics for all three networking dimensions of supplier-supplier; supplier-customer and customer-customer.
At this stage we would only see the most advanced platform firms currently at this level of sophistication.
The above digital transformation maturity scale is shown for you convenience.
So how are you placed on your transformation journey?