Digital Transformation: a holistic approach

With digitization comes a new business environment where information, now available and accessible in large amounts, calls back into question well established business rules, dynamics and expectations. As such, digitization has been synonymous of disruption for many companies, with quite a few experiencing a slow and frustrating journey. Sometimes I wonder if the real source of sorrow is lack of clarity of what digital transformation is all about. In my view, there are two key ingredients: a vision of the digital business value proposition (the what), and the digital capabilities required to achieve it (the how).

Defining digital ambitions (“the what”)

The definition of digital business value proposition that I like the most comes from a book I read a few years ago, “Leading Digital” (G. Westerman, D. Bonnet, A. McAffee – Harvard Business Review Press, 2014). According to the authors, digital business transformation manifests itself in three forms. The first is the creation of new business models, characterized by digital products and services that did not exist before. The second is a dramatic improvement of customer experience, making it contextual, personalized and overall more fulfilling.  Finally, digitization enables to streamline operations, using information and technology to automate, accelerate and improve processes across the extended enterprise. While the majority of businesses are likely to pursue at least two, if not all areas of opportunity, it is crucial to align those goals with enterprise plans and prioritize efforts and resources accordingly. The more ambitious the digital vision, the bigger the effort to change foundational capabilities – especially if they have been developed over a long period of time and in line with a traditional way of doing business.

Transforming enterprise digital capabilities  (the “how”)

“Going digital” requires an evolution of capabilities across many dimensions. Similarly to an iceberg, the change within the company is deeper, pervasive and more demanding than the business changes visible by the external world:

• Culture: information and data are at the core of the digital enterprise and as such must be elevated to other cultural enterprise artifacts. A digital culture promotes and encourages information sharing, fact-based decision making; and as often happens with cultural changes, leadership must lead by example.
• Talent: attracting new digital talent is as important to succeed as much as developing and retaining experienced workers. And in the digital world, experience counts little if it is not matched by learning agility.
• Data and Analytics: information is the glue of the Digital Enterprise, which must move from reporting on the past to analyzing predictive/prescriptive insights. That requires both the capability to access a diverse set of increasingly large and diverse data at scale, as well as the adoption of a common language of reference data and key performance indicators.
• Cybersecurity: in the digital economy data and information are source of growth and competitive advantage, but they also exponentially increase enterprise risk levels. As such it is essential not only to invest in cybersecurity resources and tools, but also to elevate the topic at executive and board level.
• Workplace: a visible artifact and a key enabler of digital transformation is the adoption of a collaborative, engaging and virtually connected digital workplace. It requires the implementation of cloud technology paired with the adoption of collaborative ways of working.
• Enterprise IT: while digitization affects every single function in the enterprise, the degree of change in the IT department is the most significant. Simplification of services thanks to automation, faster delivery of solutions through Agile and DevOps approaches – and above all, a renewed and closer interaction with business units and functions.  
• Architecture and cloud: the data and system strategy must evolve from an ERP-centric approach to a more open architecture, providing seamless interaction of internal and external (cloud-based) platforms.  Data and process integration is a critical capability, with key data elements information and transactions exposed by APIs.  

Each of the foundational areas above must be subject of assessment of current status vs. the desired target state – the latter in line with the requirements of the desired business value proposition.   

Seeing the Forest… and the Trees

Ultimately, broad perspective is a prerequisite for an effective, timely and successful digital transformation strategy. An easy way of sidetracking the journey is to focus on enablers first, without having defined the value proposition; likewise, defining an ambitious vision without addressing the level of change in capabilities is equally prone to failure. Setting the scope of a digital transformation strategy across both the visible as well as the submerged portion of the “digital iceberg” is paramount.