Optimization vs. Transformation
A new Gartner Report, Digital Business Ambition: Transform or Optimize? can help you weigh the pros and cons of optimizing your existing digital business model, or transform it into something new altogether. Choosing the right path starts with understanding your goals:
- Transform your business if you are: A company that wants to disrupt your industry or you must adapt to an industry disruption.
- You want: To pursue new revenue streams, product or services, and business models.
- Optimize your business if you are: A company whose industries aren’t being disrupted in the near term.
- You want: To significantly improve existing business models through better productivity, greater revenue generation through existing streams, and better customer experience.
Both carry risks. And while many change-averse businesses favor optimization over transformation, that may not be the best strategy for the long term.
“If the enterprise goes for transformation but the market or organization is not ready, the results are below expectations. Money is made, but just not enough to satisfy the growth expectations of the investment. If the enterprise focuses on optimization while the market and competitors are transforming, it may never be able to catch up.”
– Gartner Report, Digital Business Ambition: Transform or Optimize?
Three ways to determine your company’s digital ambition
In order to make the choice between transformation and optimization, here are three things business leaders like you should do:
- Research the two options. Know what each choice means for your organization.
- Review the timing of transformation in your industry and others like it. Is your industry inclined to rapid or slow-growing evolution?
- Consider your competitive stance. In short, if your industry is about to tip, transformation is the best approach.
“Digital transformation creates a new paradigm that makes the old business model obsolete. Consequently, an optimization strategy leaves the enterprise in a weaker competitive position. In other words, optimization works only for so long; then it becomes a liability.”
– Gartner Report, Digital Business Ambition: Transform or Optimize?
Depending on the nature of your industry and the impact of technology, the pace of transformation varies. The music industry has changed dramatically over and over again. Consider how rapidly physical product stores were replaced by digital product download stores only to be replaced by digital streaming services. Other industries have been long stagnant. The hotel industry looked the same for decades until Airbnb changed the game. So optimizing may work for a while, but disruption is eventually inevitable in even the most stable industries.
Support your chosen strategy
Once you’ve made a decision, make a plan and set a budget that support that choice. This is particularly important for organizations that want to transform. Too many rely on a small innovation team and budget to tackle the seismic shifts that a digital transformation represents.
Business leaders who are serious about gleaning the most reward for their transformation efforts must expect to start new business units, add or alter manufacturing capacity, add new products, and/or make mergers and acquisitions. The rewards of transformation can be great, but only if a fully-informed decision is made intentionally from the outset and then given the proper resources to support its success.
Talk to us about digital transformation in your business with Office 365.
This article was originally published by Microsoft.