Winners take all in this digital transformation race

 |   Microsoft NZ News Centre

Every organisation needs to accelerate their digital transformation journey to effectively compete and stay relevant to customers. This requires changes in goals, metrics, organisational structures and in the technology platform that enables this transformation. While such a viewpoint may have been controversial five years ago, it is certainly not the case today as digital transformation is a key item on the agenda for C-suites, boardrooms, and governments.

Microsoft New Zealand’s CTO Russell Craig

Race to transform

Microsoft recently partnered with IDC to assess the digital transformation landscape across Asia Pacific, involving 1,560 business and IT leaders from 15 economies, including New Zealand.  The study Unlocking the Economic Impact of Digital Transformation in Asia Pacific predicted a dramatic acceleration in the pace of digital transformation across Asia Pacific.

Digital transformation is estimated to add an additional US$7 billion to New Zealand’s GDP by 2021 and increase the annual growth rate by 0.7%.

To participate in this growth, organisations must grapple with the speed of digital transformation. Imagine that you are operating a fast-fashion clothing store in New Zealand. By 2021, half of your business will be derived from online or digital channels.

Organisations are seeing significant and tangible benefits from their digital transformation efforts. The study shows that the top five digital transformation benefits that organizations experienced include increased profit margins, productivity, customer advocacy, loyalty and retention, cost reduction, and revenue from new products and services. Even more interesting is that these benefits are set to grow in New Zealand by more than 20% in three years.

Winners take it all

When I speak with industry leaders, I don’t get a uniform sense of urgency about their digital transformation journeys. Some leaders prefer others to be the trailblazers, and then to learn from these digital transformation pioneers. But is digital transformation a race where the winner takes all?

The study shows that the pace of transformation makes a difference, much like how an efficient pace is key in raising your chances of winning a long-distance marathon. The organisations participating in the study were classified as ‘Leaders’ and ‘Followers’ based on a few factors: the maturity of their digital transformation strategies; proportion of their digital income; and level of benefits achieved from digital transformation initiatives. With these filters applied, only 7% of organisations in this study can be classified as leaders.

More importantly, the study has shown that leaders reaped the highest digital transformation improvements – to the tune of more than double the benefits from digital transformation compared to the followers – and the effect is expected to be more pronounced by 2020.

We are already seeing digital leaders in action in New Zealand. For the past seven years, Auckland Transport has been on a digital transformation journey with Microsoft. With the vision of a digital city, it has been focusing on reducing traffic, easing commutes, and helping people navigate by car, bike, foot, but, ferry and train. Empowered by Microsoft cloud, Auckland Transport has been able to monitor, track and analyse commuters’ activities, leading to reduced wait and travel time for public transport, identifying and resolving traffic-causing events in the city, and an improved engagement with the public.

Learnings from winners

Organisations can learn from digital transformation leaders to help them succeed in their own digital revolutions. The study makes a number of recommendations for organisations.

It is important to create a digital culture, this is at the heart of every successful organisational digital transformation. In an increasingly digital world, a digital culture cannot thrive if an organisation operates in silos with disconnected or under-connected business functions. Importantly, digital transformation will not be optimised if organisations do not collaborate with external customers and partners. The study shows that leaders benefit most from a full digital transformation strategy in an ecosystem of customers, partners and employees working together. Data must be embraced as part of every piece of work done in an organisation. Companies that emphasize big data analytics will build strong foundations for emerging technologies like Artificial Intelligence (AI) and Internet of Things (IoT) to accelerate their digital transformation efforts.

Building an information ecosystem ensures that, in a digital world, organisations can bring together all the internal and external sourced data together. The data can then be analysed and used to contribute to better decision making and better outcomes. Data capitalisation is key to success in the digital economy. To convert this data into capital assets and monetise them, there needs to be data sharing and collaboration not just within the organisation, but also externally with customers and partners in a trusted manner.

Training and reskilling workforce will become essential for organisations, so that employees are equipped with future-ready skill sets to adapt to a new digital economy. Skills will include complex problem-solving, critical thinking and creativity. At the same time, organisations need to put in processes to not only retain and attract key digital talent, but be open to creating a flexible work-source model that lets them tap into skills-based marketplaces.

In this high-stakes digital transformation race, leaders reap the greatest rewards, and will command stronger positions in the exciting digitally-fuelled world we are heading towards. History has also shown that during these industrial paradigm shifts, old business models often become extinct, taking out entire organisations and even industries at the same time.

If there was only one question that you should ask yourself as a business leader, it should be this: “Is your organisation in a position to be a digital transformation leader today?”


Please find below the full IDC/Microsoft slide deck presented at the New Zealand round table on Digital Transformation

Digital Transformation New Zealand presentation