Best Practices in Digital Transformation

In the simplest terms, any digital transformation (DX) is about bringing digital technology into all walks of an organization. The decision involves both choosing an appropriate technology as well as not using one! Michael Porter's "The essence of strategy is choosing what not to do.”?is very relevant. The organizations should consider what should be avoided, echoing Porter's wisdom. Embracing every new technological advancement without discrimination is a flawed approach, indicating a misguided fixation on technology itself for the sake of new technology. I came across many companies which want to ride the new wave of technology for fear of being left out. A technology is only as appropriate as it can make a difference to its business. One report says, 37% of the software costs are squandered. So, the fixation and the mentality of "Technology first at whatever cost" should go. Do not confuse this with that pocket of the organization that is responsible for experimentation, failing fast, identification and evaluation.

?The 3 core principles of DX

1. Marry business strategy with digital transformation: If you view digital transformation as solely an IT strategy, you will limits its potential impact. The effects of such a transformation should be felt in at least one aspect of the organization - people, process, structure, frameworks, tools etc. leading to an outcome that addresses one or more of efficiency, effectiveness, innovation. Eventually, the goal of all DX is to enhance the top/bottom line and provide competitive advantage.
2. ?The Two-Sided Coin of Business Success: Think of digital transformation and business strategy as two sides of the same coin. On one side, a successful transformational technology initiative enables the overarching business strategy by optimizing processes, streamlining operations, and delivering exceptional experiences to customers.?On the other side, integrating business strategy within the DX initiative provides a clear vision for the project, guiding strategic investments and improving the odds of success.?When both sides are aligned, organizations can maintain a business-first mentality while capitalizing on the benefits of digital transformation. However, organizations that lead their DX initiatives with a technology-first mentality miss out on the larger opportunities it presents for growth, competitiveness, and market relevance.?
3. ?No Technology mistakes: Michael Porter’s advice is especially relevant when selecting technologies for transformation initiatives. Take the case of moving to cloud. Someone reads a great brochure that says shifting to cloud saves more than 30% of costs. Unless you do a proof of concept, you may not be in a position to understand how much savings, if any, will be realized. In other words, cloud migration is a technology initiative that should be tied to IT asset simplification leading to reduced TCO (Total Cost of Ownership).

• Prioritizing technology without a clear understanding of strategic objectives can lead to costly mistakes. Rather than chasing the latest trends, assess the technology solution’s impact on your pain points, competitive advantage, and operational efficiency. By making conscious choices about which technologies to adopt and which to avoid, you ensure purposeful investments that contribute meaningfully to your overall business strategy.??
• Involve your CTOs into business decisions and empower them. In general, there are two types of CTOs. The first ones are great at reducing cost of IT landscape and maintain status quo ruthlessly squeezing every penny. The second ones scream business at every second, enable and constantly assess if their IT can unlock more business opportunities like creating new markets, creating new products rapidly, reduce the cycle, increase throughput etc. Elevate those CTOs and involve them with questions like "What is the new model you bring to the table" instead of "How can you support this blue print of decisions which we made already?"

Best Practices for Aligning Strategy and Technology?

?Tips for developing a clear business strategy:??

1. Define your objectives: Start by clearly defining your business objectives. What do you want to achieve through digital transformation? Whether it's improving operational efficiency, expanding into new markets, or enhancing customer experiences, your strategy should outline these goals.?
2. ?Understand your target market: Gain a deep understanding of your target market and their evolving needs. This knowledge will help you identify the technology solutions that meet your customers' expectations and preferences.?
3. ?Identify your value proposition: Determine what sets your business apart from competitors. Your value proposition should guide your technology choices, ensuring they contribute to your unique selling points.?
4. ?Plan for growth: Consider your long-term growth plans and how technology can support them. Anticipate future market trends and evaluate technologies that can help you stay ahead of the curve.?

?4 Steps to ensure the right technology selection:??

1. Assess your existing infrastructure: Evaluate your current technology infrastructure and identify any gaps or areas that require improvement. This assessment will help you understand which technologies are necessary for bridging those gaps and enhancing your operations.?
2. ?Prioritize based on strategic fit: Make each potential technology investment part of your business strategy. Assess how well a technology enhances your objectives, addresses pain points, and enhances your competitive advantage. Focus on technologies that have the most significant impact on your strategic goals.?
3. ?Conduct thorough research: Research various technology options and vendors in the market. Look for case studies, customer reviews, and industry reports to gain insights into how well a technology solution maximizes your strategic performance.?
4. ?Engage stakeholders: Involve key stakeholders, including department heads and IT professionals, in the decision-making process. Their perspectives and expertise will ensure that technology choices are evaluated from multiple angles and align with the overall business strategy.?

?To sum up:

• Avoid the technology first mindset
• Every DX initiative should meet its own CBA (Cost Benefit Analysis)
• State the outcome of a portfolio of DX initiatives clearly. They can be quantified in the form of customer experience, NPS (Net Promoter Score), efficiency, throughput, straight-thru processing etc.
• Every major DX has the potential impact people/process and involves lot of changes. Organization change management should be the bedrock.