Digital Transformation is Not Just About Technology
To the casual reader, that headline might seem to be completely at odds with the concept of digital transformation. Yes, technology is involved, it’s integral to the process and it is a critical part of business optimization strategies in the connected society, but here is why this ubiquitous buzzword is more than a tech-based solution.
The process of overhauling business systems to compete in a rapidly evolving marketplace is only a part-explanation of digital transformation (DX). We have always had tools and techniques to speed up business processes.
The real difference with digital transformation is that it gives organizations the opportunity to reimagine their business from the point of view of their customers. And it is this shift that represents a seismic change, especially for established businesses in more traditional sectors.
There is a consensus among the tech sector that we’re at an inflection point with digital transformation. Basically, there is an understanding that: most enterprises have started to evolve or transform but are at different stages of digital maturity.
The caveat is that the pace of digitalization is speeding up and the gap is widening between the digitally advanced and those less so. For that reason alone, companies need to take digital transformation seriously not just as an IT initiative, but as a priority for survival.
Seizing the Digital Opportunity
In many ways, the timing could not be better for executing meaningful, lasting changes to enterprise architecture. The pandemic will likely be cited as a catalyst by future historians, but digital first has often been digital only for some time.
As Gartner noted in its 2021 CIO Agenda Report, “During the COVID-19 lockdown, many CIOs helped save their enterprises. They now have the attention of the CEO in a way they hadn’t before. The enterprise’s path to the future runs through IT, and boards and CEOs know it.”
Doubling down on this assessment, a recent commissioned report from ZDNet said that there is consistent evidence to show that digital transformation helps organizations become more resilient, navigate change and perform better financially.
CIOs know this and should seize this golden opportunity for improvement. After all, CIOs have a crucial role to play in shaping digital transformation. However, there is no doubt that they cannot do it alone. To put it into plain English, digital transformation is a team effort.
Taking that into account, let’s take a closer look at the reasons why digital transformations succeed … and, importantly, why they sometimes fail.
When Things Go Wrong
This may seem counter-intuitive, but it can be prudent to start with the challenges as opposed to the success stories.
For example, various industry studies have reported worryingly high levels of dissatisfaction with digital transformation projects, showcasing numerous examples of digital transformation challenges. Although we prefer not to generalize – as reports tend to differ in how they measure success – but digital transformations are not seen as successful for around 15 to 30 percent of organizations. These companies often cite overstretched IT teams, a widening skills gap, lack of senior support, unclear or shifting strategies. And you will note that these are not technology issues.
Unsurprisingly, enterprises do encounter technology problems during the required transformation. Choosing the right tools isn’t easy, for instance, but knowing what to prioritize is arguably even harder.
In addition, there’s a tendency among IT leaders to weigh up investing in quick wins against the longer-term, much bigger need to modernize monolithic legacy systems. A recent Harvard Business Review article said as much, noting that the more we favor quick wins over structural overhaul, the more we build up technical debt and store up problems for later.
The pace of innovation can work against IT leaders too.
When they deliver quickly on a project, they are heroes who can seemingly predict the future. The reality is that the pace of digitalization has picked up and sometimes these tech-savvy leaders get it wrong. As a knock-on effect, the stigma around making mistakes can be a strong deterrent for future projects.
When digital transformations are deemed failures, it is often a failure of management or mindset as much as a technology that has not lived up to expectations.
DX is a Process, Not a Project
On the other hand, what characteristics do successful digital transformations share?
Although the term digital transformation is increasingly used to talk about individual projects or an attitude towards change, successful enterprises find it more helpful to look at it as either a process, an evolution, or a journey towards digital maturity. As such, it requires a strategic vision and long-term commitment to achieving those goals.
The process also requires stamina. Digital transformation is not the job of one or two passionate individuals, it really needs to be a mutual drive for digital maturity that is shared across the organization.
Way back in 2017, there was a need to evolve the traditional pharmaceutical benefits management (PBM) market. Apexon worked hand in hand with a leading healthcare company on its digital transformation engagements during this time, resulting in important service improvements, such as quicker onboarding and radically more efficient systems, combined with strategic competitive advantages such as becoming the market disruptor – the customer has been named one of the world’s most innovative companies by Fast Company as a result.
Everyone wants a quick win, obviously, but there is no doubt that enterprises need strategy and the stamina to realize the longer-term benefits of digital transformation.
Mind(set) Over Matter
In today’s connected society, digital transformation touches every area: IT, business development, sales, marketing, support, product development. That cross-department functionality means that it must have security and compliance baked in, while the skills required to sustain it means that digital transformation is also an HR priority.
Achieving scale can be a challenge, which is why there is an argument to be made that digital transformation should start small…but have a big vision. On the flip side, scaling the vision is hard because it also requires organizations to scale up their passion for change, their people’s curiosity, their willingness to make mistakes, to collaborate and, in the long run, to learn together.
When digital transformation efforts stall, it is easy to point a finger at a variety of reasons to do with team culture, motivation and mindset. To get it moving again, there are a several tactical approaches that can help – linking DX with KPIs or creating DX ambassadors, for example.
But the underlying questions to ask are who is the digital transformation helping and what is their stake in it?
The answer is often related to three distinct areas – workforce, innovation and existing business model. So, let’s take a few moments to take a quick dive into why companies should have them on their radar.
The Workforce of the Future
A joint article by The European Sting and the World Economic Forum said that by 2025, there will be 149 million new digital jobs in areas like software development, cybersecurity, data analysis, ML, AI and more.
It is hardly breaking news to say that there is already a skills shortage in the tech industry. In areas like data science and AI, it’s particularly acute.
This lack of available talent was made worse by the pandemic which, according to Coursera’s Industry Skills 2021 report, saw two years of digital transformation occur in just two months. Hiring in these skills is already difficult – upskilling the existing workforce must be a significant part of the solution.
Furthermore, the knock-on impact of widespread digitalization is that digital is now part of everyone’s job. Enterprises that undertake thorough skills and talent management planning with digital upskilling in mind are more likely to be able to sustain digital transformation.
Decentralizing Digital Innovation
Not only is the workforce becoming more digitally savvy, but advances such no code and low code software platforms (LCNC) are enabling even those with no prior coding or tech background to create sophisticated, customized digital solutions to their business challenges. It is not hyperbole to say that the implications of this are huge.
LCNC platforms will become the dominant method of building software, democratizing who, how and when software is created.
If an enterprise is stuck in the mindset that digital transformation is something that the tech people do, it’s time to shift the perception of DX to something that everyone can do. For example, Gartner figures show that already 41 percent of low code applications built are done so by people outside IT.
Business Model Transformation
Digitalization banishes many constraints under which traditional business models operated.
Let’s take e-commerce as an easily relatable example. We are no longer limited to buying products from stores located near to where we live. We can find almost anything online and it’s very often more convenient to shop this way.
If distance is no longer a barrier, retailers need to take logistics as seriously as the goods they are selling because from a customer’s point of view, it’s all part of the same experience. That increases the pressure on supply chains … which then must digitally transform to keep pace with their customers.
As a result, the elimination of physical barriers digital creates other challenges for enterprises. Often, that means developing new capabilities (like expedited delivery or data-driven logistics), either growing them in house or by partnering strategically.
All about the Customer
Being able to better focus on the customer is the most valuable by-product of digital transformation.
That is why, ultimately, the process is about business transformation, not just technology.
Digitally engineering a business so that it can thrive in the connected economy is a bespoke initiative. Doing it right requires serious ambition, laser sharp strategy and staying power to reap the long-term benefits. Luckily, advances in automation, cloud, AI and the LCNC market are making the individual components required for digital transformation easier than ever before.
Enterprises that succeed at sustained digital transformation have certain characteristics in common. They have a collaborative mindset, for example, in which business transformation becomes a common, shared goal. Team culture plays an important part too, since individuals need to feel empowered to take responsibility, make decisions and even make mistakes along the way.
It should not be surprising that successful transformation involves leadership right from the top, supported strongly by management throughout the organization. As the word “transformation” implies, structural changes to the way the business runs inevitably impact employees.
For that reason alone, how a business approaches its hiring and skills acquisition is a key indicator of its capability to transform into a digital business. And while DX is a good indicator of where a company is on its digital journey, there is a need to ensure that the right boxes are ticked at the right time. Strategy, structure and speed are all part of the digital transformation challenge, the companies that understand that the puzzle is more than just technology will be the ones that come out on top.
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