a colorful approach to digital transformation

What is your favorite color?

We all like to read and talk about  digital technology and digital transformation, right? We use this one word "digital transformation", but we often mean quite different things in a conversation. Why's that? We live on different planets - mentally. Our perception of the same thing is guided by different point of views, different background, different knowledge. In digital transformation, there are 3  different planets. When you visit all 3 of them, you will see the power of change behind digital transformation. It can be very disruptive, but it must not be. So let's go and visit the blue, yellow and red planet.

Living on the blue planet

Most people live on the blue planet. Living on the blue planet, you are familiar with digital technology, social media, IoT, industry 4.0, cloud and mobile IT technology and much more. In business, the use of digital technology is not new. The internet, e-commerce, smartphones and social media have been around for some time. But still, there is a fundamental change going on on this planet. It is the combination of different kinds of technology and the speed of adoption of digital technology that is driving the change.  Production is adopting IoT and industry 4.0. Service companies are offering it's services 7x24 hours  in a completely digital way, e.g. e-Banking. Marketing is moving to digital marketing at full speed.  Retail stores move to digital check out by replacing cashiers. Payment and many other processes are getting completely digital. Even very traditional companies like your electricity company is adopting new digital technology by putting smart meters into your home and replacing old meters.

What's the result of digital transformation on the blue planet? As the focus is on automation and paperless processes, the key benefits are cost reduction, increased efficiency and a tremendous increase in speed. People on the blue planet are smart. They are experts in using digital technology to make things better, cheaper, faster. They love to talk about the latest technology and they are typically early adopters of new digital technology. One of the results is, that thousand and ten thousands of jobs will disappear on this planet.

Living on the yellow planet

People on the yellow planet are different. They are familiar with digital technology but normally not experts. When looking at digital technology, they think about how to create new products and services based on digital technology. They are the design and marketing type of people. They are very familiar with modern methods such as design thinking or human centered design. In business, the  result is new digital products and digital services. Let's go back to the example above with your home with new smart meters installed. On the yellow planet, people would use smart metering and associated technology as a starting point to create products and services for a smart home. Dozens of devices in the house are connected to the internet. This allows for all kinds of smarthome services delivered from anywhere in the world.  An example for a company in this field would be "digitalstrom", as their business is based on digital products and digital services for a smart home. On this planet, thousands of new jobs are created.

Living on the red planet

Now, let's visit the red planet. The people on the red planet are more the philosopher type of characters. They think about how they can fundamentally change their business. They might even start up with completely new business models. They design new business models based on new opportunities offered by new digital technologies or by combining existing digital technologies in ways never seen before. Yes, we are all talking and writing about them. They are Uber, airbnb, Tripadvisor, new Fintech companies. In the example of smart metering and smart home, the people on the red planet would use all this digital technology to start up with new companies. They understand the  fundamental changes in the energy market. One idea is to virtually build  power plants and selling and delivering electricity without actually owning one single power plant. Here, we are on the level of virtual power plants and smart grids. This business model is based on combining digital technology and new commercial models in the market place. An example: a company completely based on this new business model is virtual global systems (www.vglsy.com). The company was nominated for the Newcomer Award of Swiss-ICT some weeks ago. The company was founded 2 years ago and has put up a significant capability to deliver electricity and generating revenue without it's own production capability.

What does this all mean for your business?

Why is it important to have all 3 planets in mind, when you drive down the road of digital transformation?  When you completely focus on the blue digital transformation, you will be successful by reducing cost and inreasing efficiency. As your  competitors will do the same, it will help you to survive, to keep going. But not more. But you might not see an increase in revenue or profit or value of your company. It is a prerequisite to stay in business. Not more.
When you invest into what I call yellow digital transformation, you have a good chance to increase your revenue and to see the value of your company (and the price of your shares) go up. Besides technology, you invest in new people and new competencies of your employees. You adopt new ways of creating new products. Or in one sentence: your success is based on adopting digital technology and transforming your organization to become agile. For yellow people it is clear, that digital transformation means agile transformation.

Why might blue and yellow not be enough? In many industries, you will be well off, if your digital transformation is blue and starting to become yellow. In some industries disruption will hit very hard. To survive, companies need to hire people living on the red planet. The banking industry might be one of these industries. Fintech can be yellow or red. Red fintech means total disruption. To achieve a successful digital transformation, digital is definitely not enough. Agile is a must. But I think, that you need even more than agile.

A personal question: Which color do you like best? I mean, on which planet do you feel most comfortable?