What is referred to as digital transformation? A necessary change

Already a critical strategic effort, digital transformation — a catchall phrase that refers to the adoption of new technologies, people, and procedures in order to enhance company operations and delight consumers — has taken on additional significance in the aftermath of the COVID-19 epidemic.

According to Laura Laberge, McKinsey's head of capabilities for digital strategy, businesses' adoption of digital technology has accelerated by three to seven years in recent months, with corporations increasing efforts out of concern of being outflanked by rivals. Indeed, what was previously considered best-in-class performance for the majority of business cases is now slower than average.

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Add to that the sobering statistic that just 11% of 1,140 company leaders polled by McKinsey think their existing business models will be commercially sustainable in 2023, and it's easy to see why 64% of those executives feel their firms must create new digital enterprises.

Here, professionals dissect digital transformation and provide guidance to IT executives starting on digital transformation initiatives.

Defined digital transformation

Digital transformation entails rethinking an organization's approach to technology, people, and processes in order to pursue new business models and income streams as a result of shifting consumer expectations for goods and services.

For many conventional goods manufacturers, this entails developing digital products, such as mobile apps or an ecommerce platform. They must do it by following the rhythm of software firms, the majority of which operate on a product-based model, according to Forrester analyst Nigel Fenwick. “Software creates greater value, or perceived value,” he adds.

Digital transformation, which is best managed by the CEO in cooperation with CIOs, CHROs, and other senior executives, needs cross-departmental collaboration to align business-focused philosophies with fast application development methods.

Strategy for digital transformation

Companies have been embarking on digital transformation journeys for many years in order to combat the threat of disruption from incumbents and startups, but progress has been sluggish – until the epidemic. Retailers like as Walmart and Bed Bath & Beyond restructured their shop operations by using curbside delivery and other contactless payment alternatives to ensure that customers get their purchases securely.

Meanwhile, IT executives reprioritized their strategic IT roadmaps, with many deploying cloud-based video collaboration software and machine learning (ML) software that enables businesses to control the flow of goods via supply chains.

Such solutions do not enable transformation on a point-by-point basis. Rather than that, the way these tools and other solutions are integrated across an organisation paints a more complete picture of a firm's digital health — and reflects its business objectives.

See "4 digital transformation success stories" for more instances of digital transformations in operation.

The path to digital transformation

The following are five actions that businesses may take to effect the change they want.

Align objectives with organisational goals. Respond to the following question: What business results are you seeking for your customers? According to Stacey Goodman, CIO of insurer Prudential Financial, IT executives must understand the business issue they are attempting to address and connect their objectives with the desired result. “The businesses from which I came were all focused on the business outcome,” Goodman explains. As a guidance, refer to your customer journey map.

IT and business must collaborate to develop. Historically, IT teams have been tasked with the responsibility of repairing failing systems, according to Julie Averill, CIO of retailer Lululemon. Today, IT must collaborate with the business to solve issues and provide value to the customer experience. “It needs to be reciprocal,” Averill explains. “The company cannot just demand technology; it must understand what it is requesting.”

Choose strategic alliances. Whether they work for a Big 5 consulting firm, a system integrator, or a boutique design firm, IT executives need assistance in meeting digital imperatives and reducing time to business value, according to Fenwick. Place your bets on those that have a track record of success and whose values match most closely with yours.

Rethink your company and goods in terms of customer outcomes. This may involve accelerating transformation via the use of cloud computing and adopting artificial intelligence to improve operational efficiency and react to changing consumer expectations, Fenwick adds. For example, banking services companies are reimagining how they offer wealth and retirement to customers via the use of digital platforms, Fenwick notes.

Employees must be retrained in digital. Businesses that want to match their digital imperatives with consumer preferences must guarantee that all workers are on the same page. Financial services companies such as TransUnion and TIAA are retraining employees in cloud, DevOps, continuous integration and continuous delivery (CI/CD), and other contemporary technologies and techniques in order to prepare for the future. “As a result of the transition to become a digital firm, software has become a strategic asset, and you will need the same strategic capabilities as a software company,” Fenwick explains.

Roles and responsibilities in digital transition

While new technology and redesigned processes are critical, every digital transformation requires the appropriate capabilities.

Software engineers, cloud computing experts, and digital product managers continue to be critical positions for businesses looking to launch new products and services. By combining development and operations, DevOps executives energise software development, allowing businesses to constantly iterate software to accelerate delivery.

Additionally, data scientists and data architects are in great demand, as businesses seek insights from massive troves of data and transformations increasingly rely on machine learning and artificial intelligence.

The talent priorities include UX designers, digital trainers, authors, conversational brand strategists, forensic analysts, ethical compliance managers, and workplace technology managers.

Naturally, leadership is critical. Many CIOs have added the term of chief digital officer (CDO) to their position, while others have simply rebranded as a CDO. At times, the CIO and CDO responsibilities are clearly segregated. Typically, these decisions rest with the CEO. However, Fenwick notes that it is irrelevant who controls the digital imperative as long as someone is capable of utilising technology to generate revenue development.

Pitfalls of digital transition

According to a report from Capgemini Digital Transformation Institute and MIT Sloan School of Management, digital transformations are lagging or even failing due to a variety of factors, including ineffective leadership, disconnects between IT and the business, low employee engagement, and substandard operations.

However, the primary causes of a derailed digital transformation include a preoccupation with big bang change, a concentration on cost reduction as a business driver, and a failure to include the business in the process.