How to embark on a journey of Digital Transformation?

What is Digital Transformation?

Digital Transformation is the trend whereby every industry and product is using digital technologies to provide better outcomes and experiences for their customers. It is not only accumulation of IT & cloud technologies but lays emphasis on the experience and culture provided to all stakeholders. From smarter cars that aim to become autonomous via software updates, to connected communities that share information instantly via social media, to the creation of entirely new industries, e.g. around industrial IoT all forms part of Digital transformation. Machine learning is also doing a huge impact. Robotic processing automation (RPA), edge computing, virtual reality and augmented reality, blockchain is also changing how we do our business currently, Internet of Things all form a part of digital transformation.

Why should one consider Digital Transformation?

In order to meet the needs of the modern customer, employees, organizations need to deliver exceptional customer experiences with their products and services. More often than not, these will require organizations to build new muscles around making data-driven decision, and the use of software to make products and services smarter. This is the reason behind the need for Digital Transformation.

Moreover, Digital Transformation is not optional. The increasing use of data analytics, the preponderance of smarter products that use software and sensors and the analytics required to sustain the cycle are being used by market leaders and disruptors. It is simply a choice to disrupt the status quo or be disrupted by the adopters of digital technologies.

Benefits of Digital Transformation !!

The ultimate goal of digital transformation is for an organization to be able to deliver a differentiated product or service to the market – whether through a capability that nobody else offers, or the speed with which one can offer it. In doing so, an organization becomes the trusted, go-to option for its target customers.

Another important benefit of the increased speed and agility that digital transformation affords is that an organization can be nimble in the face of market conditions and opportunities. Gaining first-to-market advantage is undeniably important, but even more so in an age when consumers are used to getting what they want instantly and technology habits dictate stickiness with one vendor versus another

In order to digitally transform, organizations need to develop three competencies

·      They must embrace software-centricity across their products and processes

·      They must switch to greater use of sensors/ IT technology and instrumentation across the business

·      They need to be able to derive insights from all the data available to the business

The below picture shows the picture of a car dealer of future.

How to start thinking about Digital Transformation ?

Our ecosystem that comprises of partners and the markets are rapidly changing. The customers of today need to feel important, digitized, experience and new UI and are rapidly getting impatient. To address the same we need to focus on Digital Transformation. We need to drive and display innovation, time to market and professionalism at every stage.

Main areas of focus before starting

Key questions that we answer on an organizational level

“To master the digital transformation, a company must take a comprehensive approach to algorithm-based forward-looking steering,” says Stephan Unger, Daimler Mobility’s Chief Financial Officer (CFO). “This includes not only advanced analytical methods, new technologies, and the right expertise, but also an engaging approach to change management.”

Itinerary decisions of which path to take:

Every company has many legacy systems, which can be put to use. The way we handle our legacy system contributes to the success of the digital business transformation. There is a cost attributed to that legacy system so that you can be able to accommodate your future business. When we talk about legacy systems, we basically lay emphasis on three main areas. 

1. ·      Application Modernization
2. ·      Technology Upgrade
3. ·      Deployment to Modernization

A solid strategy for transferring services and processes needs to be in place. The question is how to approach the transfer is a strategic decision and must be given due importance and has a impact on success of the digital transformation. In practice there are three most implementation strategies that has to be seen for each process across functions. Organization need to weigh the pros and cons of each route.

Route 1 : As is non-standardized process are directly taken up for digital transformation process after a careful analysis of the various factors

Route 2: All non-standardized process are first taken in view with customer centricity and then taken up for digital transformation

Route 3 All process are worked in silos enabling them with similar IT and made homogeneous and then taken up for digital transformation.

While there is no right or wrong in each of the three routes some survey shows that route 2 is preferred route for many processes. Although, standardized processes will reduce overall transition time but these requires initial efforts in terms of costs. Yet route 2 allows organizations to centralize activities while technology and improvements are tackled later from a central perspective, which saves time and resource. Consequently, a dedicated team is able to automate and digitize at a faster pace. Below table shows a illustration how this can be analyzed for different divisions.

While deciding the routes of each function or process there are few things that are to be kept in mind. If we tackle one, let's say for example you only upgrade technology, you then consider how you faster you can solve your client by purpose of his delivery, or business modeling, or application modeling, you will be impacted in your future business transformation. In this stage we need to take up each process and evaluate.

1.    Is it a budget killer? Is it really going to help me in transformation?
2.    What kind of Cloud should I have?
3.    Do I have talent issues?
4.    Do I have security risks?
5.    What about data management and privacy?

There are two strategies that can be taken up for any process as given below:

TWO-SPEED Strategy: They two speed IT is you focus on the customer facing channels, you revamp them, and then slowly you have now true data they call core systems. So, back end systems, you maintain them, you run them, and then you revamp your whole digital channels, or basically customer facing solutions, and then the core functionality system, you keep them, and then you, as you go home, you keep updating them.

GREENFIELD: It is an approach of complete replacement of the core legacy systems, so it is, you have to go with this approach after doing a proper assessment in your organization, and then ensuring that I cannot move with any customer solution.

Selection criteria for a successful System Integrator

Summary

The core digital transformation is a long and hard journey towards upgrading existing systems. Therefore, the most important step for any company that take the decision to transform and replace their core is to commit fully all of the company's leadership, employees and resources to the journey. The leadership should be directly engaged in the management and governance of the transformation. This is not an exercise where the responsibility is passed to an system integrator or IT; instead this is the very essence to surviving and competing in a rapidly changing banking landscape. However, such a transformation holds great risk, resulting in large complex programs. The blueprint for digital transformation should address all aspects of the transformation and is structured into interrelated services/work-streams, which are critical for a successful transformation. When selecting a system integrator, the company should emphasize on most, if not all, of the following services/work packages to be delivered by the system integrator:

? Program management

? Strategy and business case development,

? Future business and technology operations mapping

? Stakeholders’ communication and change management

? Convergence management

The role of an the team is pivotal in coordinating the effort of all stakeholders while managing the thousands of inter dependencies and hundreds of risks, thereby reducing the risk of the transformation. A partner in the transformation journey and is an integral part of the program: their role is to manage the transformation program and to map and implement the future state of the business. In summary, there is a compelling need for the company to on-board a capable and experienced SI to lead and deliver their core banking transformation initiative.

Further Readings