The Digital Transformation of Business Functions
As organizations become digital enterprises, various business functions – and the professionals who work in them – will be digitally transformed as well. External applications of social and digital technologies like marketing and sales are just the tip of the iceberg. Internal applications and implications will be far more extensive and significant, and virtually all functions and jobs will have a digital dimension to them. This essay offers food for thought and examples along these lines.
No one would argue with the notion that social and digital technologies are having a significant – and sometimes dramatic – impact on societies and economies. And though most people may not yet refer to this as the Digital Age or Era, they would likely concede that we are indeed transitioning away from a world driven primarily by industrial and mechanical technology to one driven by digital.
Organizations are not evolving quite as rapidly as technology. Most are still in the relatively early stages of transitioning from industrially-driven to digitally-driven strategies and operational models. In their journeys to become digital enterprises, they have generally made good progress with digitization, some progress in the area of digital engagement, and relatively little in terms of true digital transformation.
But that situation is changing daily. Strong leaders recognize that sound business principles, strategies and tactics must reflect emerging technologies and their implications, and organizations of all types and sizes are pursuing initiatives to respond effectively to the opportunities and challenges evolving digital technologies present.
As the barriers to digital transformation fall away and organizations start to create foundations and game plans for becoming digital enterprises (see this article and this article for details), various business functions – and the professionals who work in them – will be digitally transformed as well. External applications of social and digital technologies like marketing and sales – which have dominated most discussions and initiatives to date – are in many respects just the tip of the iceberg. As the Digital Era progresses, the internal applications and implications will be far more extensive and significant, and virtually all functions and jobs will have a digital dimension to them. Here is some food for thought and examples along these lines…
Marketing and Sales (plus Branding, Public Relations, and Customer Service)
We’ll start with the obvious applications and implications – those related to external communications. Most of us are familiar with these impacts from our personal lives and consumer interactions. Not only do we have direct experience with many of them, we also have indirect knowledge from the media stories we hear and read, as well as the ways technology has crept into popular culture and entertainment. It’s virtually impossible to go through an hour, let alone a day, without some reminder of how activities like marketing and branding in particular have been transformed by new communication technologies. The impacts include:
- New channels for listening, talking and engaging
- The increasing use of mobile devices, particularly by consumers
- Opportunities and challenges integrating old and new media channels
- Enhanced marketing analytics due to the increasing volume of digital data
- Marketing and branding challenges when campaigns fail; PR challenges when crises erupt
- Shifts in the balance of power with consumers and loss of control over conversations
Accounting and Finance
We don’t typically think of social and digital technologies as being relevant to areas like accounting, but they are. One of the biggest applications is the enhancement of business intelligence through the use of social technologies and data analytics. In a chain of retail stores, for example, a socially enabled business intelligence system fueled by accounting data can allow store managers to view current sales and shrinkage stats and use that data to address ongoing challenges and share best practices.
One of the biggest potential impacts in the finance area is digital currencies, like bitcoin, which create both opportunities and challenges. Finance professionals must also think about the opportunities and challenges of leveraging social technologies as they interact with and advise clients, as well as how they can use things like big data, analytics, and algorithms to inform their decision making. And of course, because it’s a regulated profession and industry, they must understand and comply with a new host of regulations from entities like FINRA and the SEC about what they can and cannot do.
Finally, if you’re familiar with the concept of behavioral accounting or behavioral finance, then the importance of understanding the impact of social and digital technologies on the actions of investors and others is pretty evident. On the finance side, an example would be the impact of Twitter chatter on trading activity and share prices, or how the increasing use of social media by activist investors can impact organizations. An accounting example would be how auditors have to change their audit programs to accommodate new communication channels, methods, and activities.
Business Law and Ethics
There are a host of applications and implications in the area of law and ethics as well. Many federal and state laws are in dire need of upgrades to reflect new social and digital technologies. These laws address digital technology in general (e.g., the Stored Communications Act), as well as specific commercial interests (e.g., intellectual property laws) and employment issues (e.g., whistleblower and anti-discrimination laws). Because the laws themselves aren’t current, precedents are now being set through decisions in specific court cases and via administrative actions, which makes staying current with legal realties even more complex for attorneys and professionals in related fields like HR and risk management.
In regulated industries like pharmaceuticals and health care there are new and evolving rules that both individual professionals and organizations must comply with.
Technological changes are also impacting the administration of legal cases, including the inclusion of social media in investigations, questions about the kinds of digital communications that are admissible, requirements related to e-discovery, and the use of software to analyze “reams” of digital documents.
And of course as we have increasingly been reminded, there are many social and ethical issues that new technologies create, such as privacy rights and expectations, that are becoming legal issues as well.
Operations and production management are also impacted by a variety of opportunities and challenges. Although the value of its impact may be debated, the transformative potential of the Internet of Things (IoT) for improving the efficiency and effectiveness of various machine-based processes is well established. In addition, data analytics and business intelligence systems create many opportunities to enhance operations, both internally and externally, and technologies like increasingly intelligent robotics and 3D printing can add significant value to both research and development and production initiatives. Mobile devices can help in both areas as well, but they also create potential safety issues.
Cloud computing (especially software as a service solutions) has created one of the biggest changes in how the IT departments in most organizations function, as well as what the professionals in those departments focus on. And of course addressing the opportunities and challenges of the Internet of Things will require capable IT leadership, strategy and planning. Additional changes and challenges are created by things like bring your own device, or BYOD, policies. And let’s not forget all the cybersecurity issues organizations now have to contend with, even if their products and services are not consumer oriented.
Human Capital Management
The human capital management implications include both the HR function and general people management issues. The HR function itself is being impacted by changes in administrative processes due to increasing digitization of information and activities and more self-help features. New technologies are also creating changes in how organizations approach talent acquisition and talent management, potentially impacting every aspect of the employer-employee relationship throughout the employee life cycle (see this article for more).
In addition, the changes in all other functional areas mean organizations need to consider new job requirements for a wide variety of positions, and address related issues with respect to organizational structure, compensation, performance management, etc.
Another significant area of change has to do with managing Digital Era people-related risks and legal issues, including social media engagement, safety issues from digital distractions, contractual relationships, protection of intellectual property and trade secrets, privacy and confidentiality, and labor relations (see this article for more).
As business functions are digitally transformed and new technologies become more fully integrated into everyone’s jobs, it is increasingly important for all workers to have high degrees of digital literacy. It’s also important for the academic institutions that prepare professionals in all these areas to become digitally transformed as well, by more explicitly incorporating Digital Era realities into their curricula, pedagogical approaches, and research agendas. I return to that topic here and here.