Over the last two decades, big technology companies like Facebook, Amazon, Apple, Netflix, & Google (also known as FAANG) and members of the Fortune 500 have undergone varying degrees of digital transformation. It's constantly on the forefront of the news and in the minds of business executives. Digital transformation is not limited to the largest companies, with many small and mid-sized businesses (SMBs) embarking on their own technological journey over the last five years. But how have companies digitally transformed in the past, and what does it mean to be a truly digitally transformed company?
How have companies digitally transformed in the past?
The textbook definition of digital transformation is the process in which an organization adopts digital technologies to transform their services or business. Although FAANG companies are digital transformation leaders, many of these pioneers did not start fully optimized and digitally enabled. In fact, digital transformation as a business priority as we know it did not begin until the early to mid-2000’s. For example, Netflix is today’s gold standard in movie and TV streaming service. However, people often forget that before they digitally transformed, Netflix was a DVD mail rental service. Some of you may even remember receiving their little square red cardboard envelope in the mail.
Before becoming the premier digital marketplace for everyone’s impulse purchasing habits and leading cloud service provider, Amazon started as an online book retailer. In 2002, Amazon was struggling to keep up with their core operations sustainably. Nothing seemed to go right before Jeff Bezos sent out his infamous company wide email to his 150 odd employees. The email stated:
- All teams will henceforth expose their data and functionality through service interfaces.
- Teams must communicate with each other through these interfaces.
- There will be no other form of interprocess communication allowed: no direct linking, no direct reads of another team’s data store, no shared-memory model, no back-doors whatsoever. The only communication allowed is via service interface calls over the network.
- It doesn’t matter what technology they use. HTTP, Corba, Pubsub, custom protocols — doesn’t matter. I (meaning Bezos) doesn’t care.
- All service interfaces, without exception, must be designed from the ground up to be externalizable. That is to say, the team must plan and design to be able to expose the interface to developers in the outside world. No exceptions.
- Anyone who doesn’t do this will be fired.
- Thank you; have a nice day!
This email may appear harsh and unduly restrictive. However, similar emails and edicts are in effect at nearly all FAANG companies and other industry pioneers — Refocus AI included. And for good reason.
Breaking down the email, the first three commands regard data hygiene and data recording standards. Undocumented data, processes, and insights can have a significant negative impact on opportunities and efficiencies if lost or forgotten. In some industries, lost data can cause costly E&O lawsuits. Strong data and process recording standards are also a prerequisite to enable more advanced technologies like automation of redundant tasks, mapping trends for analytics, and training AI and machine learning algorithms to Identify opportunities or infer future events/behaviors.
The second half of the email talks about the software requirements and architecture standards of systems developed and put into practice. “Externalizable” sounds like a twelve letter word for cyber vulnerability or a loss to a company's competitive edge, but in a world of open source software, systems without this ability will severely limit and potentially exclude companies from reaping the benefits of emerging technologies. In fact, this concept of externalizable software led to development of the application program interface (API) which powers the modern internet and the programs that run on it.
How much value do these practices actually provide to a business? Look no further to Microsoft. Microsoft is the poster child for being on the wrong side of history on this subject and has openly admitted to it. For Microsoft, their slow digital transformation has cost them their industry leading status in tech, slowly bleeding business over the last two decades, over a decade of painful restructuring, and tens of billions of dollars to fix their mistake.
Digital transformation - What does it all mean?
The thing most people misunderstand about the journey of digital transformation is that it ends. Employing good data hygiene (documentation) standards, storing all data accessibly in the cloud, and purchasing/ developing some RPA, analytics, and AI services to streamline processes and find additional revenue are just steps on the journey to digital transformation. Framed another way, these steps are just means to an end. And in an ever evolving digital world, as the end is constantly moving, so must we.
True digital transformation is a practice of never ending experimentation that drives continuous growth and efficiency across the organization. The experimentation requires the breakdown of data silos between systems and business units. Ultimately, to find insights and synergies that will change the core operating model throughout the organization. Experimentation through the application of existing data and alternative sources/types of data to emerging technologies eventually lead to the discovery of novel use cases that drive sustainable growth.