Unisys' Eric Hutto Describes the Strategic Gap Between Digital Transformation and Digital Optimization Affecting Most Organizations
"If an organization is not generating new revenue that is based on new technologies and digital processes that it has put in place, then the organization is not on a path to true transformation" -- Eric Hutto, Unisys
"Most organizations are really focused on optimization when they think they're working on transformation,"
The difference between digital transformation and digital optimization is no mere matter of syntax.
"If an organization is not generating new revenue that is based on new technologies and digital processes -- revenue that could not have been collected before the initiative -- then the organization is not on a path to true transformation,"
While there are positive impacts associated with digitally optimizing existing revenue streams, the absence of a true digital transformation strategy can leave enterprises at risk of being disrupted or otherwise put in business jeopardy.
"To me, the biggest concern or risk is that you're simply kicking the survival of your existing business model down the road," Hutto says. "Ultimately, if you can't create the new source of digital revenue -- which will be more profitable and more efficient -- you'll be more susceptible to being disrupted, or worse... displaced altogether."
Legacy Leadership and Structures Hamper Digital Transformation
The temptation to simply optimize existing operations with new digital tools and processes is great. Hutto points out that leadership -- and even investors -- have a bias maintaining and improving strategies that have performed well in the past, and which are well understood. The problem is that few industries are operating in environments in which status-quo management is not a sustainable proposition over the long-term.
"I believe that the failure of some of these companies is what actually triggers real transformation initiative. That is when organizations bring in the next generation of leadership that affords them the ability to make the difficult cultural shifts that are necessary for re-envisioning the business model," Hutto says.
Even the process of strategic planning -- to develop new business models -- is different in a digital transformation context.
"We have to re-envision the business -- not as a set of products or services offered by the company -- but in the context of the organization's position and role within a value ecosystem in which customers assemble the attributes they need or desire," he says.
This requires organizations to move away from the inward-focused metrics enterprises have traditionally used to measure performance, and toward and outward-focused paradigm that sets as its ultimate focus the measurement of improved customer experiences.
"Often, digitally native organizations -- the ones that are out to disrupt established non-digital players -- don't really own anything. They are typically in the business of aggregating and orchestrating components to create an experience that is valued by their customers. Now, if that experience is superior to that of others, it drives adoption and usage, which drives revenues," he says.
Although some of the traditional metrics may not necessarily change, the way organizations go about measuring performance and determining customer satisfaction likely will change in the context of digital transformation. This is unlikely to take place for those who simply optimize operations with new digital tools.
To listen to the full podcast interview with Eric Hutto visit: