In biology, the cascade effect refers to how the extinction of a species, organism and/or plants leads to the extinction of other species, organisms and plants in the ecosystem.
In business we know that the ‘death’ of a business or the closing of a factory can have a devastating effect on other organizations (e.g. suppliers of parts) and on other ‘entities’ in the ecosystem: people and their families.
While normally we steer away from messages of disruptions and alert, there is something poised to happen that will disrupt all industries serving companies that go through digital transformation efforts: it’s the cascade effect of digital transformation immaturity. Before explaining the why let’s explain the what and how.
Digital transformation immaturity and the danger for B2B service and solution providers
Each organization operates in an ecosystem of suppliers, customers, partners and, increasingly, of interconnected process, data streams and, at the core of digital transformation maturity, emerging ecosystems of value based upon information and services which enable new business models and create a-typical partnerships.
Digital business transformation is a strategic journey whereby each step and aspect leads to benefits but also enables the next step and injects required capabilities and whereby each intermediate goal in the end also aims to achieve the next goals and vision, which is shaped by challenges, opportunities and a hyper-informed understanding of how the organization’s ecosystem will evolve and how the organization can shape new ecosystems or join new ones with innovation at the core.
The digital transformation goals of organizations impact the challenges and required changes and skillsets of their ecosystem partners such as suppliers and anyone in the full value and supply chain.
Now what is that disruptive cascade effect of digital transformation immaturity? As is typical with cascades it’s a staged impact:
- To begin, most organizations are far far away from realizing real ‘mature’ transformations, let alone tap into new revenue sources or transform their business at the core. They are in the very early stages of digital transformation maturity.
- As a consequence their suppliers who adapt their services and business to meet changing demands de facto often focus on these challenges as they exist today. In other words: they have a predominantly reactive approach towards these evolving needs which are falling down the rocks in relatively easy and slow ways.
- These changing typically revolve around the often internal-facing steps in the first stages of the digital transformation journey and digital transformation maturity stages where most organizations focus on: reducing costs, automating, optimizing, (ad hoc) improvements of customer-facing operations, streamlining processes and so forth.
- An additional challenge is that obviously these goals aren’t going to go away, even if the rationale behind them (might) change(s). In other words: while suppliers of companies in transformation need to reduce their own cost base and offer more advanced ways of automating, optimizing and improving services, at the same time they need to understand the future goals of their customers as the latter move through their journeys of change, growth and innovation towards digital transformation maturity, whereby you have more of an avalanche of expectations to meet in order to remain in the game as a supplier. You see the risk.
To support digital transformation maturity of your customers, you need to act differently
The past few weeks we’ve been working on a project which made us look at digital transformation paths in specific segments of the business process outsourcing (BPO) market.
The companies in this market face their own industry-specific challenges and disruptions. At the same time they need to meet changing customer demand (as the customer has its own challenges and opportunities).
What we found is that only a very small portion of this market of business process outsourcers (and suppliers) has a plan to prepare for the next steps of their customers: the really high value BPOs as Accenture would call them.
As such this isn’t new but it’s a warning sign that goes for all suppliers of companies in transformation: create your own journey, roadmap, vision, plan and actions for the accelerating changing qualities and capabilities your current and future customers seek and dare to rethink your business model, revisit your approach and reengineer your processes.
The impact of digital transformation on suppliers is like a cascade. Only adapting to the changes as they fall down today means missing opportunities. As the floods start to accelerate, more waterfalls are added and expectations change faster, you risk drowning in the lake of irrelevance.
Knowing where your customers will be in 3 years and laying the foundations to not just meet current expectations but also be future-proof is simply a must when mapping your own path of transformation and even survival.
Moreover, remember that most of the more traditional expectations and lower digital transformation maturity capability expectations will remain. You need your own digital transformation strategy and journey that is unique to your business, market, customers and evolutions today so you can guide your customers on their path to tomorrow.
So, what’s holding you back?
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