Everything you need to know about Digital Transformation
What is Digital Transformation?
It can be hard to write a blanket definition that applies to all because digital transformation look's different for every company. However, we'd generally describe digital transformation as integrating digital technology into all business areas resulting in significant changes to how businesses function and deliver value to customers.
More than that, it's a cultural change that requires organisations to continually challenge the norms, frequently experiment, and be okay with failure. Sometimes, this means walking away from comfortable, long-standing business processes that companies were built upon in favour of new practices that are still being defined.
Digital transformation should begin with a clear opportunity, a problem statement, or an aspirational goal. For example, the "why" of your organisation's digital transformation might be around increasing productivity, more efficient operating models, improving customer experience, elevating profitability, or reducing friction. Or, as an aspirational statement, it might be to become the absolute best to do business with by utilising digital technologies that weren't available previously.
Think about what digital transformation will mean to your company and how you will describe it. The word Digital means many things to many people. Say 'digital' to one person, and they describe it as going paperless; another might think of artificial intelligence and data analytics; another might picture flexible teams, and yet another might think of open-plan offices. So when you discuss digital transformation, unpack what it means to your business.
When we think about digital transformation, we talk about automating operations, people, and new business models. Encased inside these topics are software, data, machine learning, big data, analytics, and technologies – these are enablers, not drivers.
In the centre of it, all are leadership and culture.
You could have all these things – the products and services, data, the customer view, and really slick technologies – but it will fail if leadership and culture aren't at the heart. Understanding what digital means to your company is essential.
As a leader, you need to be fully aware of this reality when raising conversations around digital transformation.
Why does Digital Transformation matter?
A business may choose to take on digital transformation for many reasons. But the most likely reason is that they have to: It's a matter of sink or swim. During the pandemic, an organisation's ability to adapt quickly to rapidly changing customer expectations, supply chain disruptions, and time to market pressures has become crucial. And spending priorities reflect this reality.
According to the Worldwide Digital Transformation Spending Guide, spending on the digital transformation (DX) of business practices, products, and organisations continues at a solid pace despite the challenges presented by the pandemic. In fact, IDC projects that global spending on DX technologies and services will grow 10.4 per cent in 2020. That compares to 17.9 per cent growth in 2019 "but remains one of the few bright spots in a year characterised by dramatic reductions in overall technology spending," IDC notes.
At a recent MIT Sloan CIO Symposium series event, IT leaders agreed that consumer behaviour had swiftly shifted in many ways since the start of the pandemic. Sandy Pentland, a professor at the MIT Media Lab, described how optimised, automated systems in areas like supply chain management broke down when faced with rapid shifts in both demand and supply.
Data shows that the biggest shifts were around food. Both home cooking and online grocery shopping — a category that has generally been resistant to being moved online — will probably stay more popular with consumers than in the past. Cashless transactions are also gaining steam. On the B2B side, data shows remote selling is working.
For CIOs, this means experimenting is no longer optional.
Mark Anderson, senior director of solution architecture, Equinix, described the last two years as "a forced test of many things we had thought about but not tried." For example, he noted, "Many supply chains are not well understood and underpinned with paper. We've started looking at technologies like blockchain and IoT."
Dion Hinchcliffe, VP and principal analyst at Constellation Research, states:
"The top IT executives in today's rapidly evolving organisations must match the pace of change, fall behind, or lead the pack. That's the existential issue at stake in today's digitally-infused times, where bold action must be actively supported by out-of-the-box experimentation and pathfinding. This must be done while managing the inexorable daily drumbeat of operational issues, service delivery, and the distracting vagaries of the unpredictable, such as a major cyberattack or information breach."
Improving the customer experience has become a central goal – and therefore becomes a crucial part of digital transformation.
Hinchcliffe calls seamless customer experience "the most important discriminating factor for how a business will perform."
What does a digital transformation framework look like?
Although digital transformation will vary extensively based on the organisation's specific challenges and demands, there are a few constants and common themes that all business and technology leaders should consider as they embark on digital transformation.
For instance, these digital transformation elements are often cited:
Culture and leadership
Culture and leadership
Digital technology integration
What role does culture play in digital transformation?
In recent years, IT's role has dramatically shifted. CEOs now want their CIOs to help generate revenue for the organisation. According to the 2018 Harvey Nash/KPMG CIO Survey, many CIO's top operational priorities is "improving business process."
Rather than focusing on saving money, IT has become the main driver of business innovation. However, embracing this shift requires everyone to rethink the role and impact of IT in their day-to-day work lives.
If you look at most startups, they don't start with giant software packages as the base of their company. If you're trying to create innovation inside a large enterprise, you shouldn't start with that either. Gone are the days of IT running the mainframe, servers, data centre, network, or operations. An outsourced partner can look after these for you.
While IT will ultimately play an important role in driving your digital transformation strategy, it falls to everyone to implement and adapt to the massive changes. For this reason, digital transformation is a people issue.
If your organisation isn't supportive and fully onboard with the transformation efforts, you won't succeed. You need to have motivated leaders to help the organisation understand why you're doing what you're doing.
Three groups of employees tend to slow transformation momentum: Old-timers, by-the-book players, and lone wolves.
It's important for companies must engage these three groups or face perilous stalls. How to do that? Work our which employees fit into the different segments.
Many organisations have rolled out the digital journey in a uniform manner, with the same blanket messages and techniques deployed throughout. From a change management perspective, this is lazy – and a misuse of investment that might be spent more strategically targeting smaller groups. Instead, companies should consider both digital experience and behavioural preferences of different sub-populations within their organisation. They should craft messaging, programs, and environments to hit the right starting point and realistic endpoint for different groups.