Digital transformation & COVID-19 are pushing positive improvements

Digital transformation is a technique that organisations use to meet holistic, long-term business goals, not just to fix immediate problems. It is the introduction of digital technologies into all aspects of an organisation, radically changing how you act and deliver value to consumers. It is also a cultural change that requires organisations to challenge the status quo on an ongoing basis, to experiment and to be comfortable with failure. 

It is crucial for all businesses, from the small to the enterprise, to be digitally transformed. As the world becomes more and more digital, this need is loud and clear from what it may seem every keynote, panel discussion, article, or study associated with how businesses can remain competitive and relevant. However, for many business leaders, it seems that the meaning of digital transformation is not clear. Is it just an attractive way of saying moving to the cloud? What are the precise stages we need to take? Do we need to design fresh jobs to help us make a framework for digital transformation, or hire a consulting service? What parts of our business strategy need to be modified? Is it really worth it? 

A note: Some leaders feel the term itself “digital transformation” has become unhelpful as it has come to be so widely used. Although you might not love the term, the business mandates behind it - to reconsider old operating models, to increase experimentation, to become more agile in your ability to reply to customers and competitors- are here to stay. 

This article is aimed to answer some of the mutual questions concerning digital transformation and give clarity, precisely to CIOs and IT leaders, including lessons learned from your colleagues and digital transformation specialists. Since technology plays a vital role in an organisation's capability to change with the market and constantly increase value to customers, CIOs play a key part in digital transformation. 

It is also important to note that organisations today are in different places on the road to digital transformation. If you are feeling like you are going nowhere in your digital transformation work, you are not alone. One of the most difficult inquiries in digital transformation is how to get over the beginning snags from vision to execution. It builds anxiety: Many CIOs and organisations think they fall behind their peers on transformation when that actually is not the situation. 

Organisations that are doing well on their way to digital transformation still face difficult ongoing obstacles, such as budgeting, talent tussles, and culture change. Let's look at some advice for organisations at different stages on that road to change. 

What is digital transformation?

While the definition of digital transformation looks different for every company, it can be hard to find one that relates to all. Nevertheless, generally, we define this term as the incorporation of digital technology into all areas of a business resulting in fundamental changes to how businesses function and in which ways they deliver value to customers. Not to mention, it's a cultural change that requires organisations to constantly challenge the status quo, experiment often, and get comfortable with not succeeding. Subsequently, this could mean sometimes walking away from long-standing business processes that companies were built upon in favour of somewhat new practices that are still being defined. 

With numerous and even an excess of articles and various definitions of digital transformation, it is easy to understand why there is some misunderstanding concerning the topic. For example, author Greg Verdino concentrates on what businesses that go through digital transformation might expect to attain. He says, “Digital transformation closes the gap between what digital customers already expect and what analogue businesses actually deliver.” 

A definition from The Agile Elephant highlights all the ways businesses may need to modify their standing practices: “[Digital transformation] involves a change in leadership, different thinking, the encouragement of innovation and new business models, incorporating digitisation of assets and increased use of technology to improve the experience of your organisation’s employees, customers, suppliers, partners and stakeholders.” 

In addition, the Wikipedia definition, while vague, touches on how the consequences of digital transformation spread beyond businesses to society as a whole. It states that “Digital transformation is the changes associated with the application of digital technology in all aspects of human society.” 

When it comes to leaders, they think about what digital transformation will mean – in practice - to your company and how you will articulate it. “Digital is a loaded word that means many things to many people,” says Jim Swanson, Senior Vice President/CIO and Head of Digital Transformation at Bayer Crop Science (and previously CIO, Monsanto.) When you discuss digital transformation, unpack what it means, he suggests.  

At Monsanto, Swanson spoke about digital transformation in terms of customer-centricity. “We talk about automating operations, about people, and about new business models,” he says. “Wrapped inside those topics are data analytics, technologies, and software – all of which are enablers, not drivers.” 

“In the centre of it all is leadership and culture,” Swanson says. “You could have all those things – the customer view, the products and services, data, and really cool technologies – but if leadership and culture aren’t at the heart, it fails. Understanding what digital means to your company – whether you’re a financial, agricultural, pharmaceutical, or retail institution – is essential.” 

Melissa Swift, who leads Korn Ferry’s Digital Advisory for North America and Global Accounts, agrees with Swanson's take that the word "digital" has a problem because it means a lot of things to a lot of people.

 "Say 'digital' to one person and they think of going paperless; another might think of data analytics and artificial intelligence; another might picture Agile teams, and yet another might think of open-plan offices," she notes.

“Digital” is a hot mess of a word. And this causes a lot of grief in organisations."

"Imagine ordering a hamburger over and over, and getting everything from a hot dog to a chicken sandwich to a Caesar salad…" she says.

It is essential that leaders are completely aware of this reality as they structure conversations around digital transformation. For guidance from Swift on how to speak about this topic without getting mocked, read the related article,  Why people love to hate digital transformation.

Why does digital transformation matter?

A business might start with digital transformation for a number of reasons. However, by far, the most apparent cause is that they have to as it is a matter of survival for many. 

Howard King, in a contributed article for The Guardian, explains it this way: “Businesses don't transform by choice because it is expensive and risky. Businesses go through transformation when they have failed to evolve.” 

John Marcante, CIO of Vanguard, also points this out: “Just look at the S&P 500. In 1958, U.S. corporations remained on that index for an average of 61 years, according to the American Enterprise Foundation. By 2011, it was 18 years. Today, companies are being replaced on the S&P approximately every two weeks. Technology has driven this shift, and companies that want to succeed must understand how to merge technology with strategy.” 

When it comes to enterprise leaders, they are prioritizing accordingly as they have understood what is needed. The (IDC) Worldwide Semiannual Digital Transformation Spending Guide predicts that worldwide expenses on technologies and services that support digital transformation will grow steadily, reaching $1.97 trillion in 2022. Which in turn is a five-year compound annual growth rate of 16.7 per cent between the year 2017 and 2022.  

“IDC predicts that, by 2020, 30 per cent of G2000 companies will have allocated capital budget equal to at least 10 per cent of revenue to fuel their digital strategies," said Shawn Fitzgerald, research director, Worldwide Digital Transformation Strategies. “This shift toward capital funding is an important one as business executives come to recognize digital transformation as a long-term investment. This commitment to funding DX will continue to drive spending well into the next decade." 

As of 2018, cutting-edge analytics was the number-one digital investment with enterprises preparing to raise associated deployments by 75 per cent during the next 12 to 18 months, according to research from The Hackett Group. This consists of a certain focus on data visualization tools and machine learning.

There is no doubt that organisations are at different places in the digital transformation voyage, but speed has become a business imperative for all. This falls on IT leaders who face pressure to show that digital initiatives continue to translate to better agility and speed for all of the organisation.

As Dion Hinchcliffe, VP and principal analyst at Constellation Research, writes: “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. The CIO this year must be both a supremely masterful priority juggler and an effective digital leader from the front.” 

Enhancing consumer experience has become a key goal and accordingly a vital 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?

Based on an organisation's particular challenges and demands, digital transformation will vary widely. Nonetheless, there are a number of constants and mutual themes that are found in existing case studies and published frameworks. In turn, all business and technology leaders should consider these themes as they enter the realm of digital transformation. 

For instance, these digital transformation elements are often cited as: 

• Customer experience 
• Operational agility 
• Culture and leadership 
• Workforce enablement 
• Digital technology integration 

Although each guide has its own recommendations and varying steps or considerations, CIOs should search for those significant shared themes when evolving their own digital transformation strategy. 

A few examples of digital transformation frameworks consist of:

MIT Sloan: The Nine Elements of Digital Transformation

Cognizant: A Framework for Digital Business Transformation

Altimeter: Six Stages of Digital Transformation

Ionology: A Step-By-Step Guide to Digital Transformation

What role does culture play in digital transformation? 

Recently, IT's role has basically changed. More and more, CEOs are wanting their CIOs to help make revenue for the organisation. According to the 2018 Harvey Nash/KPMG CIO Survey of more than 4,600 CIOs, the CIO's number one operational priority is “improving business process." However, among CIOs at 'digital leaders' – companies known as top performers – the CIO's highest operational priority is “developing innovative new products.” 

Instead of focusing on cost savings, IT has turned out to be the main driver of business innovation. To accept this change, everyone in the company is required to rethink the role and effect of IT in their everyday experience.

Bryson Koehler, CTO, Equifax, says, “There is a very different mindset at work when you take IT out of an operating mode of, 'Let’s run a bunch of packaged solutions that we’ve bought and stood up to 'Let’s build and create new capabilities that didn’t exist before.' If you look at the vast majority of startups, they’re not starting with giant, shrink-wrapped software packages as the base of their company. If you’re trying to create innovation inside of a large enterprise then you shouldn’t start with that either. You’re not here to run the mainframe anymore. You’re not here to run the servers. You’re not here to run the data centre, or the network, or operations. That is table stakes. That’s what you can outsource.” 

Even though IT will play a crucial role in driving the digital transformation strategy, the work of executing and adjusting to the huge changes that go along with digital transformation falls upon everyone. Because of this, digital transformation is a people issue. 

It is now more than ever that IT leaders find themselves working in cross-functional teams. Often workgroups, job titles, and longtime business processes are reshaped because of digital transformation initiatives. Not to mention that IT leaders will feel the pushback when people worry that their value and even their jobs are at risk. Therefore, leadership “soft skills”, which are in fact rather difficult, are in great demand. 

Mattel EVP and CTO Sven Gerjets say that leading transformation begins with empathy. “When your empathy is genuine, you begin to build trust,” he says. “If you don’t have an organisation that is supportive and fully onboard with the transformation efforts, it’s impossible to succeed. You need to have leaders that know what “good” looks like and who are motivated to help the organisation understand why you’re doing what you’re doing.”  

“This will become apparent when you hear things like, 'Hey, we’re working with your team and it feels different,' or, ‘We can’t believe that IT delivered this project early and it met my business needs.'” 

Korn Ferry's Swift, the leader of Digital Advisory for North America and Global Accounts, has found in her consulting work that three groups of employees have a tendency to slow transformation momentum: Old-timers, by-the-book players, and lone wolves. 

“Companies must not ignore but engage these three groups – or face perilous stalls,” she writes. How to do that? Her first proposal: “Think about your population in a segmented fashion, and work to meet different segments where they are.”

“Many organisations,” she writes, “have rolled out the digital journey in a highly uniform manner, with the same messages and techniques deployed throughout. “Re-skilling for everyone! New teams! Welcome to the new world!” From a change management perspective, this is pure folly – and a misuse of investment dollars that might be spent more strategically targeting smaller groups.

Companies should consider both digital experience and behavioural preferences of different sub-populations within their organisation, and they should craft messaging, programs, and even environments to hit the right starting point and realistic endpoint for different groups.” 

What drives digital transformation?

Technology, of course, is an essential component of digital transformation. Yet, most of the times, it is more about getting rid of old processes and legacy technology than it is about accepting new tech. The Federal IT Dashboard shows that in fiscal year 2017, more than 70 per cent of IT spend government-wide was put towards operating and sustaining legacy systems.  

In the healthcare industry, regardless of the widespread use of smartphones and other mobile devices among healthcare workers, “close to 80 per cent (79.8 per cent) of clinicians continue to use hospital-provided pagers and 49 per cent of those clinicians report they receive patient care-related messages most commonly by pager.” 

Such examples distance all industries and the popularity of legacy technology hampers CIOs' ability to successfully start on a digital transformation strategy. Research from Forrester proposes, on average, CIOs spend an average of 72 per cent of their budgets on remaining IT concerns, while only 28 per cent goes to new projects and improvement. If businesses want to advance with the fast pace of digital change today, they have to work to elevate productivity with technology wherever possible. For many, that means embracing agile principles across the business. Moreover, automation technologies help many IT organisations improve speed and decrease technical debt. 

What are the key trends in digital transformation in 2020?

As Enterprisers’ Stephanie Overby lately reported, “Ongoing digital transformation across industries became a given in 2019. At the same time, digital transformation fatigue also became very real.” It's a good time to ask yourself if your team is getting tired or less engaged.” 

2020 will be a year of some reckoning for digital initiatives. Organisations that still underestimate the need for culture change do so at their own expense. 

“2020 will still see the rapid scaling of digital initiatives across industries,” says Steve Hall, partner and president of global technology research and advisory firm ISG. “In many areas, CIOs and organisations have prepped their organisations for change but haven’t made the full leap to transforming their culture to fully embrace the change.” Business and IT leaders should be aware of these eight key digital transformation trends in 2020: 

1. The quick adoption of digital operating models, including integrated cross-functional teams. 
2. A shakeout as those who have invested in big data governance and analytics surpass their rivals. 
3. Better use of AI and machine learning. 
4. Persistent merger and acquisition activity in the IT outsourcing industry. 
5. Consultancies creating new digital partnerships. 
6. Growing public cloud adoption. 
7. Updated digital transformation success metrics. 
8. Additional attention to the long-term value of digital initiatives. 

For more detail and advice on each of these items, read the related article, 8 digital transformation trends for 2020.

How can I measure ROI on digital transformation?

To verify the success of digital transformation efforts, leaders need to calculate the return on investment. Of course, that’s easier said than done with projects that cross-functional and business boundaries, alter how a company goes to market, and often essentially reform interactions with customers and employees. 

A project such as giving a mobile application a makeover may have a short-term payoff but other projects are going after longer-term business value. 

Furthermore, as we recently reported, “Digital transformation efforts are ongoing and evolving, which can render traditional business value calculations and financial governance approaches less effective.” 

Still, calculating success is key to ongoing investment. “Just implementing the technology isn’t enough – the technology needs to be specifically tied to monitoring key performance indicators on customer insights and business process effectiveness,” says Brian Caplan, director with management consultancy Pace Harmon. 

First, ask if you’re taking enough risks.

“When determining how well digital transformation investments are performing, it’s best to take a portfolio view and not a project level view,” says Cecilia Edwards, partner with digital transformation consultancy and research firm Everest Group. Just as a mutual fund manager or venture capital firm would look at total performance to decide how well things are going, digital transformation leaders must take a full view of digital change efforts. 

This is particularly important so that the underperformance of one particular project doesn’t reflect negatively on the overarching efforts of IT. It also builds tolerance for the necessary risks that must be undertaken to achieve real digital transformation.

Next, consider best practices regarding digital transformation metrics:

• Set initial metrics in advance
• Develop micro-metrics for agile experiments: The goal is to learn and adjust.
• Incorporate business outcomes: Look at strategic impact (e.g., revenue growth, lifetime customer value, time to market), operational impact (e.g., productivity improvements, scale, operational efficiencies), and cost impact.

Want more detail on ROI best practices? Read our related article: Digital transformation ROI: How to check a project's payoff. 

How can I get started on digital transformation?

If all of this makes you feel like you’re lagging behind, don’t worry. One of the biggest misunderstandings CIOs have about digital transformation is that all of their rivals are way ahead of them. That's because “there’s much admiration of (and popular press around) the fastest transformers, but a little critique of how hard transformation is or how long it may take for a typical Global 2,000 company,” says Tim Yeaton, CMO of Red Hat.  

Where can I learn more?

Digital transformation is an enormous responsibility, particularly for larger, established companies. When done right, it will create a business that is more associated with customer demands and resilient in the fast-moving digital future. 

For more insights on digital transformation, see these resources:

• Teaching an elephant to dance (Ebook on digital transformation)
• The automated enterprise (Ebook on managing IT with automation)
• How leading CIOs drive revenue: Harvard Business Review Analytic Services report

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Digital transformation: 5 ways COVID-19 are pushing positive improvements

The COVID-19 crisis is rapidly reshaping the "what" and "how" of digital transformation agendas - for the better. Examine how companies are changing in the face of major change.

Just a few days after the United States began its lockdown, I received the same meme in my inbox and social media feeds more than a dozen times. It showed a survey question: Who led the digital 

Who led the digital transformation of your company? 

A) CEO

B) CTO

C) COVID-19 

"The answer choice 'C' was circled in red: COVID-19."

There’s a Russian saying, “In every joke, there’s a little joke” – meaning jokes are mostly made of the truth. This meme is certainly suitable, as we’ve seen the COVID crisis quickly re-shape both the “what” and the “how” of companies’ digital transformation agendas. 

5 ways digital transformation plans are changing now

Here are five ways in which companies are experiencing transformation:

1. Employee experience jumps to the front of the queue

Nowadays, with a large part of the workforce now faraway, employee experience of digital technology has escalated from "nice to have" to "the only way work gets done." Whilst employee experience has become a vital theme in the HR community, in IT circles this concept has been getting mixed reactions as it is sometimes being labeled as “spoiled employees expecting best-in-class consumer-grade tech on shoestring budgets.” 

Accordingly, it's getting the problem-solving attention it likely long deserved. 

  2. "Hiring" your customers and employees for tech support

Today, virtually every job is more tech-enabled than it was a few months ago due to either remote work, changing customer needs, government limitations, or a host of other factors. This is creating tech support needs at a first-time scale. 

Organisations have been pushed to widen their support reach, using everything from FAQs to chatbots to realtime partnership with tech support personnel to let customers and employees be more empowered partners in fixing the problems they face. These techniques aren’t new, but the amount and speed at which they’re being used are. This is marking what could be a positive re-set in the direction of a coaching model of tech support.  

3. Escalation of automation for cost and safety reasons

CIOs who’ve long supported automation are all of a sudden finding strong backing from CFOs and CHROs alike. The growth of automation isn’t new – in many manufacturing centres, industrial robots now make up approximately 1 per cent of the factory “workforce,” and robotic process automation is already a several-billion-dollar market. However, automation – in its many forms – has moved from the innovation agenda to the resilience agenda because of new pressures on both the cost of human workers and the need to have fewer humans in many workspaces. 

4. Radical housecleaning: Identification of gaps, redundancies, and conflicts

In recent months, organisations have successfully conducted a large-scale audit of the current state of their digital transformation thanks to the steep rising in the utilization of the technology they have available. Missing capabilities came to the front right away – but more often, redundant or conflicting systems were recognized as people actually used them! 

Some of these problems will drive systems reasoning (“Why are we paying for five different video conferencing systems?”), but others will come about it on a policy level (“Okay, we have five different platforms for video conferencing, let’s agree that this division will use System X.”) 

5. "The perfect is the enemy of the good"

Nothing calms an individual’s, or an organisation’s, inner perfectionist like a total disaster. Replying to intense disturbance, many organisations have gone through a healthy re-negotiation of their relationship to digital technology – prioritizing “hey, it works!” over “after years of slaving over this initiative, we’ve assembled the very best bells and whistles.” The “working software” lionized in the Agile Manifesto is getting a true moment in the sun. 

To-do: A positive impact inventory

If your organisation is starting on some of these modifications, or if you’d like it to, a great approach to either begin or hasten efforts is to do a “positive impact inventory.” 

MORE ON DIGITAL TRANSFORMATION

• Digital transformation: What CIOs are accelerating during the pandemic
• 3 types of IT leaders emerge from the pandemic
• A silver lining to the current crisis: Rethinking work

At the ground level through your organisation, find the better ways of working you see developing. Take part with the teams you see giving positive changes, such as less perfectionism, quicker automation, enhanced focus on employee experience, etc... 

Develop their lessons and generate a platform allowing them to share their stories on a wider basis. 

Learning from each other is our most important tool for transforming our transformations as our working processes and workforces are radically reshaped.