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How Digital Transformation changes value creation (Part I)

In today’s world, it’s hard to find anyone who hasn’t already heard about digital transformation and how companies must reinvent themselves to survive. However, in response to this overwhelming message, while there are startups that exclusively operate in the metaverse or which are born with business models and processes rooted in the digital realm, most existing companies still need to undergo this transformation.

 

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Nevertheless, the prevalence of this message is not matched by a commensurate call to action. This discrepancy can be attributed primarily to two responses: first, some believe their traditional industries are immune to the digital shift, and second, others who are willing to embrace the change often find themselves paralyzed by uncertainty, not knowing the next steps to take.

The ubiquity of the transformation

Throughout history, transformative technologies have played a pivotal role in shaping human progress. From our prehistoric ancestors who ingeniously created tools to craft new ones, we have been deeply engaged in a process of continuous improvement. This journey has led to significant advancements, including the culmination of the steam engine and the industrial revolution, which brought about revolutionary changes across various industries. These innovations primarily enhanced our physical capabilities, making us stronger, faster, and more accurate. They enabled increased worker productivity, the construction of larger buildings or significantly faster travel.

In contrast, digital transformation represents a departure from this incremental innovation. It has brought about a radical shift by transcending the constraints imposed by the physical world. Unlike their industry-specific predecessors, digital tools possess a transversal nature, impacting all aspects of society: they empower us to transcend the limitations typically imposed by analog methods.

Understanding the starting point

Companies thrive because of their inherent capability to create value for their customers, a feat accomplished through a complex interplay of processes and the use of resources. They then capture a portion of this created value to offset their operational costs and to generate profit.

Digital transformation may revolutionize how companies create value in two fundamental ways: by reshaping how value is generated or by redefining their core value proposition.

In the case of new companies, they have the advantage of defining their value proposition and crafting the means to create it while fully integrating the digital era as a fundamental tool from the outset. This proactive approach enables them to embrace the potential of digital technologies seamlessly and operate in a digitally native manner.

However, for established companies, transformation needs a different approach. They must first undergo an internal transformation before aiming to reshape their market impact or fight newcomers. This journey involves two additional steps: understanding the starting point and instilling an organizational culture that welcomes change.

Redefining the value proposition is a foundational element, requiring a revision of strategic plans and the formulation of an overarching vision that will serve as a guiding beacon for future decisions.

Equally essential is comprehending how value is currently being created. Only with clear and unified visibility into their processes (for instance, through Business Process Modeling) and how the organization is set to serve the client, can they pave the way for optimization in the digital era.

With the right diagnostic, it is possible to apply the overarching benefits of digital transformation to each case.

Know more, on part II.

By Hugo Dias & Pedro Lima

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