The essence, path, stages and challenges of digital transformation, explained clearly in one article

01The essence of enterprise digital transformation

Digitalization can connect the real world and virtual digital world where humans live, and seek new business models from it. Digital transformation is based on the emergence and development of new digital technologies. It can help companies combine their original traditional businesses with digital technologies to solve practical problems in the development process of the company. It also helps companies innovate quickly to cope with uncertainty, and ultimately achieve corporate performance growth. and the transformational requirements of sustainable development.

Enterprise digital transformation is not about digitization for the sake of digitization, but for business growth. Enterprise digitalization is not limited to the IT field, but also includes customer service, operations, sales, marketing, finance, senior management, supply chain, personnel, logistics, customer relations, ecology, legal affairs and other types of corporate affairs. It is an enterprise's unremitting efforts for business growth. Pursue.

The development of the field of enterprise digitalization presents two types of characteristics:

• With the development of enterprise information technology, enterprise informatization gradually covers all departments within the enterprise, except for the internal information flow and funds within the enterprise. There are differences in the development levels of flow and logistics. The levels here mainly include information integration of a single business unit (such as a separate R&D management system), cross-unit information integration (such as an ERP system), and integration of the entire value chain cycle (such as an integrated production, supply, marketing and service system). The digitalization of enterprises The goal of domain development is to solve the seamless information connection and linkage of all units in the enterprise's internal value chain.
• In the past, the development of enterprise information technology was more concentrated within the enterprise. However, with changes in customer needs and internal and external environments, internal informatization alone can no longer meet the needs of enterprise transformation. The driving factors for enterprise growth have shifted from information integration within the enterprise to information integration in the industrial chain, and from single enterprise resources to industrial chain resource integration.

Enterprise digital transformation requires coordinated corporate strategies, rather than tactics that pursue immediate benefits. Its essence is to reconstruct enterprise resources, cut into enterprise business flows through data technology, and form a closed loop of intelligent application of enterprise data, making the entire production and operation process of the enterprise measurable, traceable, predictable, assessable, and optimizable.

The reconstructed enterprise resources bring new value chain digital tools to enterprises, which can help enterprises carry out digital transformation.

• Overall collaboration: business middle platform, data middle platform, AIoT middle platform, and organizational middle platform.
• R&D design: trend prediction, design crowdfunding, simulation testing, new product trial marketing.
• Manufacturing: Internet of Things status awareness, real-time data analysis, optimal algorithms, digital intervention and execution.
• Product services: product life cycle design, customer journey services, remote diagnosis, intelligent agile operation and maintenance.
• Organizational management: unified management and control of the group and regions, decentralization of regional authority, closed-loop independent business units, and middle-office structure.

02 The path and stages of enterprise digital transformation

When an enterprise understands the essence of digital transformation, clarifies the goals of digital transformation, and formulates a top-level design at the enterprise strategic level, based on The "digital maturity" assessment of Alibaba's intelligent business theory can help companies judge their own capabilities, strengths and weaknesses, and make optimal choices at the technical and practical level. Enterprises should formulate a path for digital transformation based on their own actual conditions.

The path to digital transformation for enterprises suggested by Alibaba is as follows (shown in Figure 1).

(1) Cloudization of IT infrastructure (appropriate application of hybrid cloud)

• Build based on The hybrid cloud of the existing IT architecture enables the Internet, business applications, and internal systems to be migrated to the cloud, improving IT resource utilization, operation and maintenance efficiency, and user experience.
• Adopt reasonable security policies for applications to ensure information security.

(2) Technology Internetization

• Adopt enterprise-level Internet technology to build the enterprise's business center, comprehensively break the information island, precipitate shared business modules, and release enterprise IT Agile capabilities to promote business innovation and development.

(3) Application of data and intelligence

• Build the enterprise's data center and form a business-based data system through the extraction and connection of business data. Provide data services to help business development.
• Through machine learning, artificial intelligence, big data and other means, we will deeply explore the value of data, solve problems that could not be solved by human resources in the past, and expand the boundaries of cognition.

The enterprise level is also actively exploring new models of digital transformation. Individual enterprises have consciously strengthened their transformation capabilities?:

• Improve digital transformation capabilities and technically use IT infrastructure cloudification to accelerate the migration of core equipment and business systems to the cloud.
• Promote the transformation of traditional organizational structures, build a platform organization (similar to Alibaba Middle Office), and build an adapted organizational management system.
• Strengthen the introduction and training of digital talents, introduce digital transformation leaders, cultivate digital transformation professionals, shape corporate innovative culture, develop short-term and fast business organization transfer mechanisms, establish and improve corporate innovation management, and all-staff governance and intrapreneurship mechanisms.

03 Challenges faced by enterprise digital transformation

In the process of promoting digital transformation, traditional enterprises need to face up to the current status of the enterprise, including the internal concepts of the enterprise and the degree of innovation of the business team , the technical level of the IT technical team, the internal organizational structure of the enterprise, the action plans of competitors, etc. Therefore, it is particularly important whether the enterprise can define the problems to be solved by the enterprise's digital transformation. Appropriate rhythm, agile and fast execution can ensure the normal transformation process. Advance.

Although digital transformation faces many challenges, some companies have also shown great resilience in dealing with external uncertainties.

• Alibaba Group used its digital capabilities to quickly implement the health code project in a short period of time in 2020, becoming a typical application of digital capabilities to assist urban governance and playing a very important role in controlling the epidemic. This is inseparable from Alibaba has a good foundation of digital capabilities.
• Alibaba Cloud DingTalk mobilized its digital capabilities to quickly empower enterprises and families in 2020, enabling online offices, online meetings, online education, etc. based on DingTalk. With the cooperation of Alibaba Cloud DingTalk, it supported the nationwide The online office and online education scenarios of hundreds of millions of users have once again demonstrated the ability to cope with uncertainty through digital capabilities.

Of course, enterprises face many challenges in digital transformation. Enterprises need to face up to the current situation, define problems, transform paths, and implement small steps. We have summarized some technical and non-technical challenges faced by enterprises in digital transformation. The technical challenges are as follows?

• #The transformation of traditional IT architecture to cloud, is it reconstruction or increment?

The cloudification of traditional IT architecture faces a series of technical transformation problems. Is it necessary to reconstruct the traditional IT system or to effectively supplement the traditional IT system by going away from IOE and embracing SaaS applications? Enterprises aiming for reconstruction should focus on new business models, comprehensively build a corporate strategic transformation roadmap, and implement them in batches and phases; while enterprises aiming for incremental growth should focus on solving the current practical problems of the enterprise and use the advantages of cloud migration. The opportunity to quickly adapt to the new business formats brought about by transformation has given rise to a new partial cloud IT architecture.

• With digital transformation tools, can the transformation be successful?

The results of a large number of digital tool delivery projects of traditional enterprises prove that digital tools cannot cure all diseases. Superstitious tools may repeat the problem of large-scale ERP software in many traditional enterprises that is difficult to implement. Same mistake. Successful transformation requires ensuring that digital technologies and tools are applied in the correct reshaping and improvement of businesses and products, so as to promote the implementation of the entire transformation from point to point.

• How to ensure security in an open cloud architecture?

Cloud computing has become the foundation and foundation of digital transformation. The enterprise-level Internet architecture deployed on the cloud can support the changing business needs of enterprise digital ecosystems and global data governance. The IT architecture deployed on the cloud provides the source of continuous growth for enterprises and becomes an important weapon for enterprises to drive business innovation.

Security issues have become a major factor restricting enterprises from migrating to the cloud. Whether the policy is reasonable and secure, public cloud or hybrid cloud deployment, hierarchical permission management and auditing are currently major technical challenges for enterprises to migrate to the cloud.

• Leadership that mobilizes the masses to solve problems is crucial. Without leadership, there will be no digital transformation?

In the process of restructuring enterprise resources, reconstructing business models is particularly critical for enterprises. Because leadership that can drive the overall resources of an enterprise is the decisive factor in digital transformation. Establishing a cross-department transformation team and establishing a resource adaptation mechanism for the purpose of transformation are basic measures to ensure digital transformation. Some companies confuse such digital transformation projects with corporate informatization projects, and it is inappropriate for the CIO of the information and process department to lead the advancement of corporate digital transformation. It is generally recommended that senior leaders or CEOs with leadership within the enterprise work together to ensure full integration and interaction of business functions, IT functions and digital functions at the organizational level.

Based on our experience, in the transition to new retail for many traditional enterprises, there are considerable challenges in resource coordination between e-commerce, traditional offline, new retail and other business departments, as well as overall resource coordination at the company level. difficulty. This once again illustrates the important role of organizational and human factors in the digital transformation process, thus the need for “digital leadership”.

• Are agile organizations with large, medium and small front offices the organizational guarantee for digital transformation?

Based on Alibaba’s practical experience of “large middle office, small front office” and accumulated common technical capabilities, an agile organization is formed to respond to rapid changes in business. A suitable choice in a highly uncertain business environment. Traditional enterprises focus on processes and specifications. In the digital form, business chains are greatly shortened because flat and agile small business units can adjust at any time as the market changes.

• Is the data-centered decision-making process an effective starting point for digital transformation?

Although enterprises have relatively complete internal IT systems and even ERP systems, the problems of data fragmentation in the internal value chain, limited data insight scenarios, and lack of intelligent decision-making scenarios are still very serious. . In the process of data flowing upstream and downstream, they often face cost risks such as data inconsistency and manual efficiency bottlenecks. Data-centered decision-making processes can help enterprises improve data analysis efficiency and solve bottlenecks.

This article is excerpted from "Digital Transformation on the Cloud" and is published with the authorization of the publisher. (ISBN: 9787111704836) Please retain the source of the article when reprinting.

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