Lessons for Digital Transformation

As companies advance in their digital journey, they are learning how to gain an edge to compete in today’s market and achieve sustainability goals.

Courtesy of  Bain & Company

By Manny Maceda and Michael Egan

Before the pandemic, a digital transformation was already at the top of the agenda for many CEOs. To meet the demands of an evolving market and consumer trends, companies across industries understood that a digital transformation—or the process of adopting new technologies and working models and focusing on customer centricity—was the key to staying competitive. In fact, one in three small and medium-sized merchants in Southeast Asia believe that they would not have survived Covid-19 without selling on digital platforms, according to the recent Google, Temasek, Bain & Company e-Conomy SEA 2021 report. And yet, in a Bain survey, only 4% of executives said they had achieved all of their digital goals, and 30% reported achieving less than half. When the pandemic hit, the organizations that were progressing with their digital transformation were better prepared to meet the overnight challenges and demands of a market (and world) turned upside down.

Covid-19 has turbocharged digital adoption and has sent a clear message to all organizations that, prepared or not, a digital transformation has never been more important or urgent. Southeast Asia is now home to 350 million digital consumers, with 60 million added since the pandemic started. Digital consumption is now an ingrained way of life, and companies that want to thrive must meet the rising expectations of consumers, especially since 90% of these new digital consumers will continue to rely and spend more on digital services.

The expedited onboarding of digital has taught businesses five main things about the future of their digital transformation:

•                     There is no digital transformation without a tech transformation. A modern and flexible technology infrastructure cannot be an afterthought. It’s a key enabler for building the adaptability and resiliency required to capture the competitive advantage of digital at scale and speed.

•                     Changing people and ways of working is harder than changing technology. Addressing talent and culture gaps early on in the process can save time and avoid roadblocks later. By building internal capabilities, finding the best technology partners, and maintaining the agile working processes adopted during the pandemic, companies can succeed in closing the culture gap.

•                     Sponsors are key to success. The endorsement of a board, executive team, or top role models leads to organizational buy-in, a key element to successfully implementing the transformation at scale.

•                     Innovation requires freedom and risk-taking. Place responsibility to innovate in a separate structure in the organization rather than at its core to continue innovating and taking risks.

•                     Incremental scaling wins over a “big bang.” Instead of adopting digital across the organization overnight, experiment in one or a few business areas to gauge early results before scaling.

And while there are many ways to go about a digital transformation, patterns have begun to emerge. They include a focus on digital foundations before scaling, creating roles to rationalize a fragmented digital landscape and prioritize digitization efforts, gradually incorporating digital from the front to back end, and launching new, cutting-edge tech infrastructure from scratch.

But digital transformations are critical to more than just working models and tech adoption. Companies are now being called on to address environmental crises with sustainable solutions. Digital tools will play a key role in accelerating the transition to a sustainable economy. We all see and believe that the world is now going through a massive ESG transformation. It will impact all industries and all countries. Digital will be a critical enabler to this macrotrend.

For example, digital tools will permit organizations to measure, track, and manage sustainability goals across the value chain, better collaborate within and outside of the company, and innovate by rapidly testing sustainable products and services. Digital tools will optimize resource utilization to make processes more efficient and automated, help companies use analytics to predict and mitigate risks, and increase workforce productivity by providing greater access to training.

Digital applications will boost energy efficiency and increase product safety, enable supply chain traceability and visibility, and introduce new hybrid ways of working. Integrating digital into your company’s core strategy allows for a full-scale transformation, enabling future growth capabilities and delivering on the environmental, social, and governance (ESG) agenda.

But a full-blown digital transformation to achieve sustainability goals doesn’t come without its challenges, including employee motivation, investment trade-offs, and a lack of data to see the payoff.

Even with its challenges, organizations are already using digital to solve sustainability issues. Olam is undergoing a digital-first transformation, leveraging technology to disrupt the agribusiness and increase customer intimacy. For example, its new mobile app and handheld devices provide a way to improve crop traceability among small-hold farmers while also delivering to those farmers critical information that can improve crop yields.

As more companies see successful digital transformations at organizations like Olam, they’ll realize that not only does digital have significant business payoffs, it’s how we’ll create a more sustainable and equitable world.

Manny Maceda is a Worldwide Managing Partner at Bain & Company based in San Francisco. Michael Egan is an Expert Partner at Bain & Company based in Bangkok.