Not all organisations are yet clear on what Digital Transformation means; many projects have not delivered the desired results. A digital foundation is needed to build a customised path to IT modernisation and cloud adoption on a solid foundation. Here's what to do and what to avoid for a transformation that truly brings value and competitiveness
Digital Transformation has been the talk of the town for years, and many companies are now aware that they need to take this path and modernise their IT and processes. At the same time, it is still difficult to understand what Digital Transformation actually means and how it can be applied in a fruitful way to their own needs.
What is Digital Transformation really about?
Digital transformation is understood as the digital transformation of private and public companies, i.e. the application of digital tools and technologies to the performance of normal work. This does not mean introducing technologies into the same work process: digital transformation implies a redesign of processes, and must be accompanied by a change management process, to overcome people's normal resistance to change. Digital transformation therefore means redesigning processes, introducing automation (RPA Robotic Process Transformation), but also developing new products and services enabled by digitalisation, with a growing trend towards Subscription Economy, with subscription services. This can be led by the CIO or an intermediate figure between IT and business, such as the Digital Officer and the Marketing Technologist.
Smart working is an example of the digital transformation taking place in the world today. The crux is that digital is pervasive: we know that technology helps us to innovate and grow business and competitiveness, but it also introduces the complexity of navigating a sea of IT solutions and devising efficient strategies without losing focus on the objective.
How to do digital transformation in the enterprise today
A Cio.com article states: without an assessment of the IT initiatives to be adopted, a clear definition of the objectives, a calculation of the business impact and the right management skills, understanding what exactly digital transformation is not easy. Implemented projects show that the 'boil-the-ocean' approach (the search for the impossible) doesn't work, while planned and goal-oriented initiatives have even greater positive spin-offs than expected. This is especially true when fundamental processes are changed, in a step-by-step process from separate and inflexible processes to a condition of permanent and pervasive agility.
What it takes to make digital transformation: advanced technologies, leadership and training
Only 30 per cent of organisations (globally and across all industries) undergoing digital transformation are satisfied with their results, McKinsey found in a study. And just 16 per cent reported that they had actually improved their performance and were prepared to handle new changes. Based on the responses of the companies surveyed, McKinsey has prepared a list of 21 best practices that make Digital Transformation projects more likely to succeed. These best practices fall into a few key categories: leadership, IT modernisation, change in the way employees work thanks to digital tools, transparent and widespread communication to all departments to share and support new strategies.
A distinctive feature of all successful digital transformation projects is the use of a large number of hi-tech solutions: cloud-based services, mobile internet technologies, traditional web technologies, big data and related architectures (such as data lakes), Internet of Things, design thinking, artificial intelligence tools, robotics (e.g. Robotics Process Automation or RPA), advanced neural machine learning techniques (such as deep learning), augmented reality technologies and additive manufacturing (including 3D printing). McKinsey's survey shows that Digital Transformation winners benefit most from the use of the most sophisticated technologies, such as AI, IoT and machine learning. In addition to technologies, they also benefit from other elements, such as digitally savvy managers and upskilling of employees. But increasing technological 'capabilities' is the foundation.
The foundations for creating a digital transformation 4.0
It's no coincidence that we also talk about the 'Digital Foundation': the digital foundations that underpin a successful IT modernisation. The Digital Foundation is built through a customised implementation that puts data security at the heart and enables rapid business change and improvement with a concrete, measurable result and a holistic view that includes culture and people. Analyses conducted by DXC experts have shown that there are seven key attributes shared by most modern IT parks:
Adaptability: organisations that have modernised their technology stack can change quickly and innovate seamlessly: elements involving rigidity disappear, in favour of new often cloud-based ones. IT assets follow on-demand logic, according to actual consumption, so items linked to traditional IT assets disappear.
Speed: The right platforms and tools, new skills and operating models, automation and lean processes enable organisations to accelerate the speed at which they run their processes.
Data centricity: IT modernisation leaves behind the logic of silos and brings to light information that was previously confined to non-communicating systems: knowledge of the organisation becomes deeper and it is easier to activate new business processes.
In-depth analysis: organisations need to have a real-time, in-depth overview of their activities and operations. With the support of data mining, machine learning and predictive analytics, it is possible to proactively seize opportunities as they arise, reduce costs and innovate. Over time, an organisation can also learn from its data, using that knowledge to optimise business decisions and offer new products and services.
Collaboration and scalability: Developers need a platform to rapidly integrate and scale business services to create real business value from information.
Comprehensive security: Mission-critical data is too important not to be adequately protected. Instead, security must be part of every step of IT modernisation. All data is encrypted for security and privacy.
Economic feasibility: IT modernisation must deliver a quick and clear ROI and position the business for continuous optimisation.
Analyses have also identified a number of obstacles that often stand in the way of digital transformation, such as the non-scalability of many solutions, the lack of a unified platform, the excessive complexity of systems that do not allow integration with mission-critical applications, the lack of adequate talent or skills, insufficient budgets, and an overabundance of solutions and applications that make it difficult to decide what the next stage of the digital journey will be.
In this scenario, the cloud has become one of the foundations on which digital transformation rests. However, "there is no such thing as a one-size-fits-all cloud" and what works for one company will not necessarily work for another; each company will need to consider its mix of public cloud, private cloud and on premise data centre, preparing for the coexistence of different environments and the management of hybrid and multi-cloud architectures, integrating technologies such as intelligent automation, analytics and AI. After all, 'data is the value, technology is the enabler'. A multidisciplinary approach also serves to trigger cultural change, enable IT architectures to make data more accessible, improve software throughput and speed up the work of developers.
The goal remains to improve the customer experience, offer innovative products and services and improve efficiency and productivity to meet market demand and stay one step ahead of the competition.
The role of the CIO in the company
The role of the Chief Innovation Officer is an integral part of the Digital Foundation. The CIO has to build a complete and comprehensive business plan and build a strategy for IT modernisation and cloud adoption, remembering to highlight the main needs to be met, such as: improving strategy and achievement of business priorities; reducing operating costs and freeing up more resources for innovation; simplifying IT in favour of agile, fast and flexible operations that aim to create value. Once the business plan has been approved and the budget allocated, the CIO can take his strategy a step further, for example by developing or hiring new digital talent, aiming for widespread cultural change and seeking the cooperation of third-party players in the ecosystem.
How business leaders matter
But because Digital Transformation is multifaceted by nature, it doesn't always require a digital super-expert to lead the IT turnaround. An article in the Harvard Business Review notes that digital transformation is not about radically rethinking business, but about understanding how to use digital tools to better serve your customers. To achieve this, leadership and organisational change are as important as technology. Hiring an external digital guru for your transformation strategy turned out to be a flop in most of the cases (50) studied by HBR. The digital guru is probably the right person to create a digital business from scratch, but within a company that already has its own business and its own legacy in terms not only of technology but also of task organisation and shared values, the digital guru usually fails because he or she cannot accurately interpret the nature of the company he or she is dealing with, its teams, its customers, its culture. In contrast, internal leaders who don't have much digital experience but are put in charge of digital initiatives have an 80 per cent success rate, because they know how their company works, they understand what organisational changes are needed and they have relationships with both other leaders and individual teams. They also understand that there are elements of the technologies they know little about and so they hire digital talent to strengthen the teams' work towards Digital Transformation.
Learning from mistakes
If, as McKinsey found, 70% of Digital Transformation initiatives fail, it is possible to learn from the mistakes of companies whose projects did not work. Forbes has collected some examples (and at this link has also included the most significant statistics on Digital Transformation).
The key lesson to be learnt from projects that went wrong is, once again, not to look for the moon. You can't change everything immediately: you need a strategic focus on defined areas, quality counts more than quantity (this is especially true for large multinationals).
Another mistake is not taking into account what the competition is doing and not assessing where we are in relation to our competitors. Sometimes we already have a strong competitive advantage with our processes and products and changing just because 'you have to change' does not work. Transformation needs to be implemented where we are weakest, taking into account internal strategies and external factors.
Finally, Digital Transformation initiatives proceed in stages but must eventually be integrated throughout the organisation: they cannot remain confined to one department or a few operations.
How to navigate the Digital Transformation: a five-point guide
We, at Xplore Digital, we decided to share a short five-point guide to navigating the magnum sea of Digital Transformation. The starting point for this journey is to understand how the value chain is changing in your industry, who your customer is and what you are offering them. Secondly, anchor the Digital Transformation to precise performance indicators (KPIs). The problem with digital is that it’s all pervasive and that can be a huge opportunity, but also a problem. It’s very easy to get lost with the digital transformation initiatives. It is necessary, therefore, to anchor the initiatives and define some business KPIs; you need numbers to base the digital journey on and to keep focused on the objectives. Thirdly, harness data - analytics are everything in the digital age. You can identify each customer and can customise the offering for each customer. That’s the great possibility with digital and that is really made possible through data. Fourth: study and manage all the impacts on the organisation (processes, people, skills, management roles....). Finally, once again, digital transformation is not exactly a big bang that changes everything overnight. Better to focus on specific use cases in line with your organisation's objectives where you can more easily achieve rapid success and then extend your transformation projects to the rest of the organisation….
Four tips to succeed in digital transformation
According to Greg Satell, author of the book "Cascades: How to Create a Movement that Drives Transformational Change" (McGraw-Hill, 2019), a few tactics can provide top managers with a guarantee of success for digital transformation projects in their organisation. First, there is a need to focus on people before technology.
Indeed, the first step towards successful Digital Transformation is not the technology itself, but understanding how technology can provide new tools to improve people's work, productivity and creativity. We need to ask ourselves where we want to shift value, what new skills are needed, how technology can help improve the customer experience.
The second element is to set clear business objectives and focus on those rather than the specific functionality of the technology.
The third is to identify the single change that can serve as a springboard for a digital transformation that gradually involves the whole organisation. This will be an initiative that, although within a total vision, is limited to certain areas or objectives but is capable of triggering new, more complex projects.
Finally, Digital Transformation is a journey, not a destination: this requires a new culture oriented towards flexibility, dynamism and adaptation. The journey towards change never ends, there is no arrival point. There is only change, again and again.
We are here to help !
As said, Digital Transformation involves a profound transformation of activities, processes, skills, business and organisational models using the opportunities of digital technologies. Xplore Digital works to help companies in their digitalisation journey and follows the three P's of Digital Transformation:
People: before an organisation can transform, its employees must transform. Roles must be clear, competencies covered.
Products: what is really important today is the customer experience. Digital transformation has an impact on products and the experience surrounding them.
Processes: digital transformation does not happen all at once. The process that drives the transformation must be balanced as well as the strategies themselves.
At Xplore Digital we help clients find the right path to the creation of Digital Value. To better understand our mission, check our website.