Why Should Your Organization
Consider Digital Transformation?

Judging by the latest tech trends, digital transformation will remain one of the top priorities for enterprises in 2020. If you are one of the laggards in the digital transformation race, we have bad news for you — probably you will be disrupted by your forward-looking competitors. In this episode, we will try to clear things up and explain what digital transformation means for business and why you should care at all.

Podcast transcript

Hello, and welcome to this episode of the Eastern Peak Podcast. My name is Atzmon Ghilai and I’m VP projects for Eastern Peak. Today we are going to be getting practical with digital transformation.

Judging by the latest tech trends, digital transformation will remain one of the top priorities (and one of the main challenges) for enterprises in 2020.

But, what is actually “digital transformation”? Let’s take a short example: A limousine company came to us a while ago with the request to go digital. The company used to work with emails for getting ride orders from customers, used excel sheets in order to create the work plan for their drivers for the next day, etc. When they came to us they had in mind a work process that is equal to their current work process, just with a computer application that will replace the emails and the excel sheets - but actually the processes will remain the same, that is not digital transformation. That is just transforming legacy processes from one media to another. We explained to them that this will not take their business to the next generation, to the 21st century. They will still be in the same place with perhaps some more efficient processes.

Instead, we discussed automatic dispatching of rides to drivers. As the system can do the work in a much better and optimized way than a human dispatcher. We started discussing automatic prediction of drivers being late to a ride. Today they know it only after the fact - when the customer is already angry because his ride did not arrive on time. With the solution we proposed to them, the system alerts about potential delay 45-60 minutes before the fact. This gives the personnel enough time for a correction plan - either send another driver, switch between drivers, or even call the customer ahead of time and be proactive about the issue.

Almost any organization is producing and keeping an enormous amount of data. Very few organizations use this data to yield strategic decisions and drive their business forward.

In this lecture I will try to explain what are the benefits for digital transformation, and how to do it right. I will also bring some more examples from our experience, working with real customers in many different business areas and different business sizes.

So, why should digital transformation be your strategic goal for 2020?

Digital Transformation process is not easy. It is time consuming and has a substantial cost. So before going into that journey we must be sure that the effort will eventually be beneficial and we will realize a positive and significant ROI from this effort.

What are the main reasons and potential benefits for Digital Transformation?

It seems that the ultimate goal of most businesses is to preserve and improve their business competitiveness. This will ensure that they will increase their market share and will perform better than their competitors in the same area. They will get more customers, more business, and will be able to offer better pricing without losing profitability.

It reminds me of one of the most interesting case studies we were engaged - the Gett taxi application project.

When we started working on this project, the taxi business was dominated by large, legacy taxi stations, employing hundreds of cabs. These companies were accepting calls from customers and sent taxis to them. The power was in the hands of the station. Independent drivers could not even think about working on their own. Small taxi stations could hardly compete and pricing schemes were very rigid.

When we developed the first version of the Gett taxi application, it was much more than another mobile app. It was a complete change in the ecosystem of taxi services. Using such applications, the driver now gets “ride proposals” directly from the system. The first driver to pick the ride is the winner. The taxi station does not play that major role as before. Small, independent taxi stations or even drivers can compete head to head with the bigger stations. That is a complete paradigm shift that shook the industry. Legacy taxi stations that did not adopt quickly enough to this paradigm change — stayed behind and lost their competitive advantage. New contenders emerged. We all know Uber, but there are many other young companies that made their way very quickly to the main stage.

What are the main factors in improving your competitive edge?

These are the main 5 factors in my mind: reduced operational costs, better flexibility in doing business, better resource utilization, better customer satisfaction and higher customer engagement

I would like to go over these factors using an example of a very interesting digital transformation project we did for the restaurant industry.

The main idea was to create a restaurant application where the guests can scan a QR code on the table with their phone and retrieve the restaurant menu. Then they can make the orders directly from their phone. Their orders are then sent to the kitchen immediately.

At first sight you may think “what’s the big deal” just replaced the paper menu with an on-line menu”. But analyzing it a bit further you can discover many advantages both for the restaurants and for the guests.

Reduced operational costs

So, first I would like to discuss reduced operational costs. Reducing operational costs is crucial for every business. In many industries the highest operational cost is manpower. Some of these manual processes can be automated. We tend to think about automating mundane tasks, highly structured and repetitive tasks. That is right, but only part of the whole picture. In many cases an automatic system can do a better job than a human being. For example, calculating the optimal route from point A to point B on the road can be done by a computer system much better and much faster than a human driver. Using dynamic programming techniques, an automatic system can scan hundreds of thousands of alternative road segments in seconds and pick up the best one. A human being cannot do it. Automatic systems can analyze the stock market 24X7 and draw conclusions in seconds. They do not get tired and need no breaks. Using deep learning techniques, automatic systems can learn from millions of examples. A human being will need lifetime to go over a fraction of these examples.

However, there are many things that are still done better by people. and sometimes there is no substitute for the “human touch” when dealing with our customers.

In our restaurant application: people can now order using their phone. They do not need a waiter to mediate. They can also pay on their phone and do not need the check. This leads to a reduction in the number of waiters the restaurants need to employ. Labor costs in a typical restaurant are 30% of its total operational costs. So reducing labor cost is a major contributor to overall cost reduction.

Flexibility in doing business

We live in an era which is changing very rapidly. If in the past companies could work in the same way for decades, now they must change and react very fast. Going back to our restaurant example: how often can a restaurant change its menu? Because the menu is printed, it makes it difficult to change the menu frequently. Once the menu is online, the menu can change every day or every week.

How many times did it happen to you that you came to a restaurant, chose a dish and was told that it is not in stock? Now the store manager can take off a dish temporarily from the menu if it is not in stock, thus avoiding the guest frustration.

The store manager sees that there are 10 pieces of salmon fish that if not consumed today will have to be thrown away. He can reduce the price for that dish in real time, to improve the chance of being chosen by customers today. Beneficial for the restaurant and follows the trend of waste reduction.

Better resource utilization

Every business is using many resources. Optimizing the usage of these resources is crucial both for keeping costs low and to produce excellent products or services.
For restaurants, one of the most important resources is its tables. Many restaurants have a peak time between 12:00 to 14:00 when business eaters are dining. Using the application, guests can order lunch before leaving their offices. When they get to the restaurant the food is ready. Their time around the table is minimal — just for eating - no need to order and pay. Thus more guests can be served by the restaurant in this 2 hour window at lunch time — thus increasing revenue.

Better customer satisfaction

Happy customers are returning customers. They will spend more money with your company and they will tell their friends or colleagues to purchase at your company as well.
When customers look at the digital menu they can get an estimate when the dish will be ready - based on statistical model we developed that predicts dish preparation time. It is based on past experience and on the current load on the kitchen. Once ordered the guest can get a “countdown” that measure the amount of time until the dish is ready.

At the end of the meal, the customer gets an immediate survey about his satisfaction - overall satisfaction and review of each dish he had. all this information is aggregated in real time and sent to the manager on duty. He or she can see immediately that a certain dish, which was always getting high ranks is getting lower ranks now - this is invaluable information that until now they could not get. Restaurant staff have no clue today if a guest is happy or not. If he liked the dish or not. Now they can be proactive about that - Maybe the meat quality was not good? Maybe it is a new cook who did not know how to prepare this specific dish? The next time the same customer visits the restaurant we can tell him what he ordered in the past and what he liked or did not like. So at least he does not make the same mistake twice...

When do you need a digital transformation business partner?

Many organizations perform the digital transformation process in-house, using their own resources. However, many times it is a very good approach to use third party partners to assist you with the digital transformation process. In my experience, the main reason is that Insiders cannot see their own issues. In many cases, when an organization needs some radical change, it is very difficult for insiders to think out of the box, to change processes and habits that have long become part of its DNA.

From my own experience, I see how an external consultant can be effective in such cases. We ask questions, bring our own experience from other companies, give a different point of view. In many cases this starts a disruptive process that breaks old conceptions and opens the way for new and fresh ideas. These ideas are not necessarily coming from the consultant - but he is the one that starts the thought process.

Sometimes I feel myself as the “psychologist” of the organization. I listen to all people, I put a mirror in front of them, and I let them see things they cannot see themselves. After all, you know your business better than anyone else. But sometimes you need an external push to start a radical change.

The process of Digital Transformation needs to be driven and backed by top management in the organization. They must buy into it and understand the importance and potential. They need to allocate the budget and give the required management attention. Without it the process has little chances to succeed.

How do we work?

Our approach to Digital Transformation is a very methodological one. It is divided into 3 main parts:

Focused business diagnostics

In this phase we learn and document the existing state of the organization, its main processes, main stakeholders, departments, hierarchy, organization culture, interrelations with external organizations and customers. At this point we create a list of issues that limit the organization’s ability to fully exploit its business goals and its growth potential. Needless to say that this phase needs close collaboration from you and from main stakeholders in the organization.

Second phase is solution design

In this phase we create, together with you, a blueprint of how the organization should look like in the next 3-5 years. We detail the strategic initiatives that could help you get there. We perform a competitive analysis, where we compare your organization to other organizations in the same sphere. We perform an assessment analysis of market trends, risks and opportunities in your business area.

Agile plan for digital transformation

At this phase we conduct a gap analysis based on your current and target blueprints and identify the initiatives that are strategically important for your organization. We analyze the optimal ways to bridge these gaps, the systems, tools and processes that should be developed. We recommend which order you should follow to maximize your ROI and be able to see first results quickly. We assess your risks and how to mitigate them.

At the end of this phase you get a detailed plan that you can start implementing gradually, either by using your own resources or with the help of external resources. But at that point your chances of success are substantially higher.

Conclusion

I would like to summarize what we have discussed today. So, digital transformation is about a paradigm shift from using data in a tactical way to a strategic way. The data becomes the main tool that drives the organization to the next decade.

Digital Transformation process is difficult and time consuming, but doing it right will yield a substantial ROI to the organization.

The main goal that can be achieved by Digital Transformation is to increase your competitive edge in your market.

Digital Transformation strategy can benefit the organization in the following ways: reduce operations costs, Increase flexibility in doing business, Improve resource utilization, Improve customer satisfaction, Increase customer engagement.

Digital Transformation partners can help the organization in thinking out of the box and getting rid of old habits and paradigms.

Digital Transformation process is divided into 3 main phases: Focused business diagnostics - analyzing the current status of the organization; Solution design - developing the desired status of the organization; Agile plan for digital transformation - developing the way to get from the current situation to the desired one.

So there you have it — a clear understanding of what is digital transformation and its benefits

If you're hungry for more, please subscribe to our Podcast. Also check out the most excellent series of articles entitled Digital Transformation, which you can find at Easternpeak.com