Since at least the 1980s, firms have engaged in digital transformations by coordinating, automating, and outsourcing productive activity. Client server architectures replaced mainframes, remaking supply chains and fostering decentralization. Enterprise Resource Planning (ERP) and Customer Relationship Management (CRM) systems automated back office and front office processes. Shifts to cloud and SaaS have changed software evolution and the economics of renting versus owning. Machine learning and artificial intelligence uncover patterns that drive new products and services. During the Covid-19 pandemic, virtual interactions replaced physical interactions out of sheer necessity.
Digital Transformation Changes How Companies Create Value
The new rules of the digital economy are turning the traditional firm inside out.
December 17, 2021
Summary.
Digital transformation is about changing where value is created, and how your business model is structured. More and more, value creation comes from outside the firm not inside, and from external partners rather than internal employees. The authors call this new production model an “inverted firm,” a change in organizational structure that affects not only the technology but also the managerial governance that attends it. Executives must understand and undertake partner relationship management, partner data management, partner product management, platform governance, and platform strategy. They must learn how to motivate people they don’t know to share ideas they don’t have.