Digital Transformation Demystified Part 1

If you ask a corporate head about the digital transformation, you will have an interesting experience. They know companies need it. They know companies who have it are more competitive than those who don’t. They know it has to do with ‘The Cloud’, ‘Big Data’, ‘AI’, etc. After that, you may get a lot of different responses, especially if they try to get specific. There are legitimate reasons that this happens. I have worked in digital transformation my entire career and believe I can help demystify the difficult parts. 3 months ago, I made the following post

1.What is the digital transformation?

It is abstracting your business value streams into a software-defined model

2. Why is the digital transformation so critical?

It enables company processes with the adaptive response flexibility that is built into software development. This makes traditionally static companies insanely agile. (It has very little to do with 'new technology' and very much to do with 'new change model')

3. How does this make every company a technology company?

Business agility becomes a function of the agility of the software organization

You are welcome in advance for simplifying a bazillion b.s. articles into three questions

I would like to explain what these questions mean. I’m going to focus a lot on the less tangible side of the digital revolution. Let me know if it helps.

1.    What is the digital transformation?

It is abstracting your business value streams into a software defined model.

You can break up digital transformations into an innumerable amount of stages. I find four to be most appropriate in general circumstances. Each of these stages slowly progress by their ability to transform tasks, knowledge, and decisions into a software solution.

Stage 1: lift and shift

I have an account with a financial company that services my requests by displaying a list of fields to complete. It then it takes all those values and pastes them into a pdf of the document I would normally fill out by hand. I then e-sign, approve, and send that e-document into them. That is stage 1 digital transformation in a nutshell.

Stage 1 is a lift and shift. It is turning everything from a physical medium into an electronic medium. This can render some immediate efficiencies such as saving costs in office supplies, movement in and between offices, record keeping and more. If you stop at this level though, you didn’t get your money’s worth. The only value you are harvesting at this point is the fact that you can store and send electrons easier than hard materials.

Stage 2: integrate within work flows

Stage 2 begins to leverage the easy transmission and de-duplication of data to create electronic work flows. Data is passed down the line of steps, and people can receive notifications, processing, status updates, etc. in an automated manner.

SharePoint tried to capitalize on this early in their existence. An online shopping cart is a fantastic yet simple example of this kind of thing. You navigate through the search items->select items->review->purchase->confirmation all using the same data flow. Your information can even be stored for faster access next time.

The efficiencies at this level start to get exciting. Automatic actions, reduced data entry, transparency, and simplicity can take a lot of hassle out of the work. This is still stone age by today’s maturity standards though. We are just getting started.

Stage 3: Integrate between work flows

As a work flow becomes streamlined and digitized, its connections to other work flows become more apparent. The third stage is combining these workflows into a seamless system. The connections between different processes become more apparent and more synchronized.

The shining example of this is SAP. They took the world by storm by connecting the vast enterprise resources necessary to make a company function. A simpler example is the pizza I ordered from Grub Hub last week (shout-out to Elasticsearch, you are amazing!). Grub Hub has connected the shopping experience with the procurement and near-on-demand fulfillment of the desired items! Wow! This is one of the secrets behind the success of the Domino's Pizza app as well.

A notable phenomenon makes real appearance at stage 3: data becomes its own discipline. Normally the data is a slave to the process. Here, multiple processes revolve around a unified set of data. Granted, there are databases, and data disciplines at stage 2 and even stage 1 (And yes, stage 0 as well. Shout out to Speedy Tuk Tuk and my social-preneur friends in developing countries), but at stage 3, the data itself requires comprehensive definition and management. Data Analytics can enter the scene here, as insights are uncovered that would normally be hard to spot across processes. Data managers and Data owners become more important as data is shared across functions. The roots of big data started with the stage 3 data disciplines and vice versa.

Another fascinating trend is the influence that stage 3 had on the strategy of digital transformation service providers. Tech companies had greater motivation to vertically and horizontally integrate technical functions into a single suite. As workflows combined, it was a natural step to also combine the software for those workflows under a single roof. We can see this in every area, but the one I am most familiar with is the CCaaS space, where the company I work for, Nice inContact, slowly combined standard telecom functions with workforce optimization and cutting-edge analytics to become the dominant player in their space. They did so well, they went through a merger acquisition with a company that had the same idea. We now run the CXone suite which is a comprehensive all-in-one platform for call centers. If you told me six years ago that our telecom ACD wasn't going to be as exciting as having a seamless offering of other features, I would not have understood you. Now I see better how the ability to tie the processes together is even more important than perfecting one single process.

As tech companies built out comprehensive suites, the ability for them to become the trusted advisors and consultants also grew. The knowledge of developing and optimizing workflows was pooled and centralized in these companies. At this point the digital transformation became more about simply ‘getting to the cloud’ or ‘modernizing’. The software itself (jumping to a question 2 topic) was now not just an optimizing tool, but a best practices package from a provider that had helped dozens of other companies with similar needs. Companies weren’t buying the software anymore. They were buying the expertise built into the software.

Stage 4: Value-Stream work flows

Unfortunately, Stage 3 is where the tangible starts giving way to the intangible. After all, what could be better than a unified seamless workflow? Well, just as the fourth dimension is time, the fourth stage is taking your unified seamless workflow and building in adaptation over time at reduced cost.

The tech companies have been at stage 4 for a long time. The crazy transformation that is happening now is for companies that do not consider themselves tech companies, but who are now learning the same secrets that the tech companies found out. If you were to walk into a tech company, they would describe their stage 4 transformation with words like ‘Agile, DevOps, Scrum, continuous delivery’. If I could describe in one word, I would describe it as 'Value Ecosystem' (fine, two words, but one compound noun).

Software allows you to play. It allows you to build a process, wipe it out in a day, and bring it back up again the next day. It has a certain agnosticism to the hardware. It is a theoretical construct mapped to a mathematically defined electronic medium. When process change becomes so easy to modify, the questions don't revolve around the logistics of changing it, but the reasons for which you would want to change it. You can start asking the deep questions like ‘what are we really trying to accomplish here?’, ‘where is the value in this process?’ ‘What else influences this set of activities?’ When paper is being passed across desks, it is harder to see what is happening and harder to change it quickly. When that paper turns into a software defined process, you become unbounded and can focus on the abstract purposes of the process, not the concrete functions of the process. The value from end to end becomes the focus, as the processes become subservient to the overall flow, not the other way around.

Value Stream mapping is not a point-in-time activity. It is a constant process of re-evaluation and discovery. As such, companies at stage 4 see the digital transformation as an ongoing process of building their capability to match their customers needs. It is a dynamic response to external market and internal corporate changes.

When advisors say that culture is key, this is what they are referring to. Stage 4 is a a transformation of the culture itself. Culture eats strategy for breakfast, as Drucker put it. When a digital transformation fails, it almost always has to do in some part with a failure to grasp stage 4.

Because this is currently the leading stage, and because of its abstract nature, it is hard for me to find easy-to-relate-to examples to demonstrate theses principles. I can point to macro examples of Amazon and Google. I can also point to a micro example from a Microsoft presentation on feature flags. Microsoft allows you to turn on features when you want them, or hold off according to your preference. This gives them time to test, measure, and adjust while delivering a fantastic customer experience. I would be interested in hearing about other examples you may know.

Conclusion

Hopefully you can see the possibilities of what the digital transformation is doing for companies regardless of industry. We will be discussing this more in parts 2 and 3. For now, the most important thing to realize is that our society has been through a process of slowly lifting the way we do work into a conceptual realm that allows us incredible control over shaping the value the company produces both internally and externally. This is a difficult concept to grasp because we think in terms of the tangible or the intangible. Nevertheless, this is the core of the Digital Transformation, and critical to companies in every industry.