What we know and don’t know about digital transformation
Trends

What we know and don’t know about digital transformation

“Digital transformation” is one of the buzz phrases of our time and you hear it wherever business and technology conference delegates gather. It started to gain momentum in early 2014 and since then it has embarked on a graceful ascent, as Google Trends shows here:

But even today you could ask five people to define digital transformation and receive six significantly varying responses. That’s because it has become an umbrella term and because companies of all sorts want to attach themselves to it.

I’ve been speaking to experts about digital transformation for a few years now, from IT vendors and boutique digital agencies to CIOs and CTOs, public-sector organisations and business leaders. Here’s my best attempt at suggesting what we can say with confidence about digital transformation and what remains up in the air.

 

We know digital transformation is real and ubiquitous

Nobody seriously doubts this stuff is real and this is more than just another silver bullet marketing thing. IT buyers might be weary of being told about the Next Big Thing but it’s indubitable that transformation is important. What we’re talking about here is representing an organisation so it offers a consistent and coherent set of ways to interact with the brand, from mobile to desktop to physical, selling, marketing and communicating. And it’s important to get it right.

Maria Hernandez, head of country digitisation at Cisco UK and Ireland, calls it “akin to a vortex”, adding that “Anyone that fails to adapt risks being displaced [and] everything that can be digitised is being digitised. Not just IT itself, but every process and every service within every organisation. Today’s digital innovation has the potential to reshape markets faster than any transition in history.”

 “It has turned from disruptive technologies that could drive new opportunities, new business, or new customer experiences into a core asset that should be embedded into each and every enterprise asset, such as connected products, processes, and operational tasks,” says Jean-Michel Franco, product marketing director at data integration firm Talend.

“See the luxury industry as an example: although most consumers prefer shopping in-store vs other channels and most of the sales actually happen in store. Eighty-one per cent of shoppers want to interact with their phones in-store, while 41 per cent of luxury shoppers research products and services online and buy them offline, once they buying decision is done.”

As for ubiquity…

“I don’t know if any major sector of the economy is not seeing major transformation today,” says David Rosen digital transformation technologist and strategist at Tibco.

“Digital leaders have already – and the pace will accelerate – reshuffled the shareholder value in a number of key industries. Tesla, shipping fewer than 80,000 vehicles in 2016, has already surpassed Ford and General Motors as the most valuable automaker in America. Uber, still a private company, has an implied value more than double that of Hertz, Avis and likely all the taxi companies in the world combined.”

Others see fresh angles, perhaps including a rise in the importance of location data and services.

Shaz Qamar, marketing campaign manager at Esri UK, says:

“Organisations need to make actionable sense of the raft of data and information being produced to fuel growth, address unpredictability and evolve solutions. Location technology is a key enabler as it lets users analyse huge data sets and share real-time insights based on the location element within the data, ultimately enabling businesses to be more innovative, driving efficiencies and delivering better customer service.”

 

You probably need to act now (or, better, yesterday)

It’s a chestnut of digital transformation debate to say that the winners will be those who move quickly, but it’s probably true nonetheless.

“How many companies can provide a personalised customer experience in their web or mobile apps?” asks Talend’s Franco. “How many companies are currently ready to deliver on the promises of voice-recognition technologies, or real-time analytics? The leaders are those that are able to move fast and embrace a trial-and-error approach.”      

“The key”, Tibco’s Rosen suggests, is “how to avoid being swallowed by the native entrants who are not encumbered by the ways of their pasts. Bottom line, the difference between leaders and laggards determines survival versus failure. A recent McKinsey study put the spread of profitability in the financial services industry at 80 percentage points. No incumbent laggard can ever hope to survive under that performance gap.”

 

‘Transformation is a techie thing’ is a myth (and there are others)

“One of the biggest myths about digital transformation is that it’s only about the technology,” says Cisco’s Hernandez. “Digital technologies are undoubtedly re-inventing what is possible in the workplace and it is clear business leaders and employees alike understand the potential benefits digital technology can bring. But unless organisations foster the right culture in the workplace when engaging with employees, it’s possible for digital roll-outs to go off-track. Our recent research with the Institute of Cultural Capital found that employees are craving clear digital leadership to drive the organisation forward and the boardroom must ensure digital delivers on its promise to help drive productivity and organisational effectiveness. To achieve this, training for employees is vitally important to ensure they have confidence to use new digital technologies and gain value from them. Whether it’s through dedicated training or face-to-face interaction, companies must talk to employees about how to use new digital technology and explain how it will impact their roles.”

Claudia Crummenerl, head of executive leadership and change at Capgemini Consulting, says, “Firms are still burying their heads in the sand, thinking digital transformation isn’t yet relevant. There’s also a tendency to think a digital transformation equals technology, but this is not the case. No matter what technology you bring in, for true digital transformation the operational model and culture also need to change. It’s not just digitalisation, but how you leverage technology to find new business opportunities and new ways of working.”

Says Mark Williment, head of technology at digital consultancy Keytree, “The biggest myth about digital transformation is that it is something new. It is a continuation of using computer technology to improve business practices and efficiency that started with the first use of computers within the business community in the 1950s.”

Another myth is that “digital transformation means you have to completely change the way you run the business,” says Esri’s Qamar. “That’s not the case. You need to use technology to improve the way you work, improve customer service and empower a more agile, informed and productive workforce.”

Jon Cook, enterprise sales director for Citrix UK and Ireland, disagrees:

“Undertaking a digital transformation for an entire organisation requires consultation, engagement and increased communications. In this respect, digital transformation often results in the creation of an entirely new working culture.”

 

Digital transformation isn’t that great a phrase – but we’re probably stuck with it

“I actually think that we’re overusing ‘digital transformation’,” says Tibco’s Rosen. “All industries are using it so much that I fear it is being diluted and losing much of its meaning.”

He suggests that complementary trends include “connected intelligence” where insights from historic and real-time data are blended; ‘Big Storage” and “Big Computing” where blockchain and other advances have enabled enormous capacity and “customer-centricity, journeys and context” where changes occur through the lens of the customer experience.

Says Talend’s Franco:

“What is missing in the term is the notion of speed and the need for continuous innovation. If you look at precedents, transformation such as business process re-engineering or CRM required a massive effort with a top-down approach and on a global basis. With digital transformation, companies need to reinvent themselves and move faster than their competition. Engaging in a digital transformation, might be not enough for a company when it fails to engage it at the proper pace.”

Keytree’s Williment says: “No, it’s not a great phrase. It is not all about digital channels, it is about consistency of experience across digital and physical, combining and maximising the strengths of both. ‘Omni-channel’ is stronger.”

Antony Bourne, VP, global industry solutions at business applications firm IFS, despairs:

“The biggest issue with it is the fact that everyone has their own opinion about what it is. There are so many different solutions that the term itself is too all-encompassing. Some people think digital transformation means going to the cloud, some think it’s IoT or 3D printing – but it’s all part of that big digital transformation jigsaw and there’s no way of telling whether you’ve done it or not. If you Google it, you get tens of millions of hits – analysts have one view, Wikipedia has its own, and there’s no set definition.”

 

Large companies are transforming at rates that run the gamut from one to 10

A McKinsey survey suggested that the US is operating at under a fifth of its digital potential and Europe less than an eighth.

Capgemini’s Crummenerl says: “How far firms are in their digital transformation journey depends on the industry. For example, the tech industry was the first to do it as they had the business need. [But] we have not yet seen a firm that has fully transformed into a digital organisation.”

Tibco’s Rosen says that large companies tend to fall into “the 2s, the 4s and the 8s”, ranging from “falling behind” to “doing their best to keep up” to “genuinely transforming”.

IFS’s Bourne:

“Nobody has got a 10, the best out there is probably about a 6 or a 7 – and most are around 4-5. People are only just discovering what they can do with it as the market continues to mature. Most of what’s being done in digital transformation is just proof-of-concept or trials – it’s not necessarily mainstream yet. What I always say is do lots of small projects, because it does come down to trust. You need to do a project for at least five to seven weeks because you need to convince yourself before you can convince your board. There’s a realisation that needs to take place that not everything’s going to work.”

Citrix’s Cook scores his local market a “five”.

“Our recent study into the state of digital transformation across UK businesses, undertaken by YouGov and interviewing executives across the UK, revealed that 35 per cent of medium to large UK businesses have a single digital delivery plan for the whole organisation. Yet, over one third of businesses are struggling to adopt technology fully into the business strategy. This modest take-up indicates that, even if the potential of digital is acknowledged, most are struggling to know how to harness it.”

But there are pockets of best-practice emerging. Esri’s Qamar uses the Manchester Transformation Programme, the redevelopment of Manchester’s Terminal 2 airport using geospatial know-how as “reaching 9 on the transformation scale” because it includes “a self-service GIS facility for staff who will be able to create views and access data whenever needed ... The customer experience will be transformed with faster, more convenient journeys and reduced likelihood of delay. Passengers will benefit from increased peace of mind, through better knowledge of what, where, when and how.”

 

Digital transformation mistakes are (mostly) non-technical

“Interestingly, it’s not a willingness to spend on technology,” that leads to transformation failure, Tibco’s Rosen says. “Leaders and laggards spend about the same as a percentage of revenue on IT. Mistakes fall into the following buckets: allowing behavioural change to regress back to the ways of old, lack of willingness to make mistakes (even mistakes that hit the market and customers) and not building a capacity to test and learn and very quickly adapt to those signals.”

For Keytree’s Williment, making IT front and centre is an error:

“IT being led by the IS function is a mistake. The IS function is vital to enable and showing the art of the possible, but the drive for digital transformation should be better customer experience, so the process should be driven by those parts of the business closest to the customer.”

Cisco’s Hernandez says:

“The biggest mistake organisations make when digitising their business is believing they can ‘bolt on’ digital technologies to their business structure, model or process. Organisations need to prepare themselves for digital transformation which means having a digital-ready network which sits at the core for their business. [It can’t be] manual, hardware-centric and static, it must be automated, software-driven and have the ability to dynamically respond to the needs of the business, at digital speed.”

 

There are some tell-tale signs of likely success (and failure)

What are the signs of a successful digital transformation exercise? Tibco’s Rosen lists three: understanding the “pain, pleasure and metrics” at each stage of the customer journey; a strong analytic capacity; and a “willingness to disrupt historic value chains when the economics simply no longer make sense”.

Talend’s Franco:

“When companies can express the benefits of their digital transformation into outcomes that resonate directly to their customers, they are reaching competitive advantages. Examples with Talend customers are Siemens that uses Big Data to helps railway companies to make rail transportation a failure-free, energy-saving activity, or Air France KLM which wants to differentiate with data for recovering lost items in a better way that the competition.”

Keytree’s Williment:

“[A positive sign is] that it is driven by an innovative and engaged business leader who sees how it can provide a better experience for the organisation’s customers.” 

For IFS’s Bourne a bad sign is, “They think it’s either on or off – ‘I have done it or I haven’t’. It’s not just a case of efficiency or quality but the ease of adoption. In order to change the way in which we work, certain aspects of jobs will have to change. If that change is too great, there will be an internal barrier to adoption which will become the greatest obstacle for many organisations’ digital transformation. Organisations must therefore look at how they can use an element of the digital transformation that will differentiate their business in the market and use that to get their people to think differently. If people change the way they’re thinking instead of just doing what they have been doing in the past that is a good indicator that a particular project will work.”

Another mistake is provided by Citrix’s Cook: lack of employee engagement.

“It is little use in investing in advanced digital tools if employees aren’t utilising them to their full potential. Business leaders should consult with individuals at all levels of the organisation in order to boost digital literacy across the company. Too often, flagship programmes are rolled out without the right level of engagement with employees in the development phases – which can lead to missed opportunities and even abandoned projects which can hit the bottom line hard. By taking a proactive stance, investing in thorough training programmes, mentoring, coaching and support networks upon tech implantation, organisations will boost employee engagement and encourage workers to think about how technology could transform their service area and roles in the future.”

 

It’s wrong to think about transformation as one-off project

Transformation needs to be viewed as an ongoing, never-ending phenomenon where goals have to be refreshed along the way. For once that dreadful marketing cliché of “the journey” is apt. There is no end, just a series of iterative improvements and moments of recalibration dependent on the latest technologies, their adoption levels, market risks and opportunities, laws on data privacy, the state of markets and so on.

“Digital transformation is not a one-shot initiative,” says Talend’s Franco. “Enterprises need to reinvent themselves on a continuous basis. Think about a company like Amazon that initially disrupted the retail industry with a one-click customer experience. Then they turned physical assets like books into a digital asset and for that they became a device provider with the Kindle. Because this ongoing digital transformation was requiring huge IT investments, they decided to share their IT platform and turned that into an innovative business with AWS. Finally, with Alexa, they found a way to listen to their customer in the true sense of the word, competing with the high-tech leader with voice-recognition technology.”

Says IFS’s Bourne:

“If someone says they’ve achieved the digital transformation, it’s inherently meaningless. The biggest myth out there at the moment is that the digital transformation is something that can be ‘achieved’ - you can’t do it overnight, and you can’t say ‘I’ll have achieved the digital transformation by ‘this date.’ It’s a journey, and you’ll never get to the end. Digital transformation is the answer to the question: ‘how can I continue to improve the various parts of my business?’”

However there is not an end state of digital transformation, it’s an ongoing process. We are only seeing the beginning of this transformation. It will not stop with the first implementations as new drivers such as Artificial Intelligence or machine learning or increased robotics are again reshaping the way we work. Businesses need to be ready to embrace all these new technologies as they come up and digital changes in the near future.

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Martin Veitch

Martin Veitch is Editorial Consultant for IDG Connect

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