Digital Transformation

1. What is digital transformation?

Digital transformation is the integration of digital technologies into all aspects of an organization, radically transforming how you work and providing consumers with value. It is also a cultural transition that allows organizations to question the status quo on an ongoing basis, to experiment, and to be comfortable with failure.

Digital transformation is characterized as the integration of digital technologies into all areas of an organization, resulting in profound changes with respect to how companies function and how customers deliver value. Moreover, it's a cultural shift that encourages companies to continuously question the status quo, experiment often, and get comfortable with failure. This sometimes suggests that businesses have been founded by walking away from long-standing business processes in favor of relatively new methods that are still being defined.

2. Why does digital transformation matter?

For many factors, an organization should accept digital transformation. But the most plausible explanation, by far is that they have to: It's a matter of survival. The capacity of a company to quickly respond to supply chain disruptions, time to market demands, and rapidly shifting consumer preferences have become crucial in the aftermath of the pandemic.

Improving the customer experience has become a central priority and thus a key component of digital transformation. Seamless customer service is the most significant discriminating factor in the performance of a business.

3. How has the COVID-19 pandemic changed digital transformation?

We have seen the COVID crisis re-shaping both the “what" and the “how" of companies quickly. Take employee experience, for instance, even as employee experience has become a key theme in the HR culture, this term has received a mixed reception in IT circles, often stereotyped as spoiled workers expecting best-in-class consumer-grade technology on shoestring budgets.

Today, with a vast portion of the workforce now remote, digital technology employee experience has gone from good to the only way work is done. As a consequence, it is getting the problem-solving attention it probably needed for a long time. Here are several other areas of efforts for digital transformation that COVID-19 moved higher up CIO’s agendas: 

  • Promoting the scope of customer service through tools such as chatbots.
  • For purposes of resilience, automation tools.
  • A radical home cleaning of structures that are obsolete or conflicting.

4. What does a digital transformation framework look like?

Although digital transformation can vary widely depending on the particular challenges and demands of an organization, there are a few constant and popular trends within current case studies and published frameworks that should be considered by all business and technology leaders as they embark on digital transformation.

These digital transformation components, for instance, are often cited as:

  • Experience with customers.
  • Agility for operations.
  • Community and management.
  • Enablement of Workforce.
  • Digital incorporation of technology.

Although each guide has its guidelines and different steps or considerations, when designing their digital transformation plan, CIOs should look for some essential common themes.

5. What role does IT culture play in digital transformation?

IT's position has fundamentally shifted in recent years. Increasingly, CEOs want their CIOs to help the company produce profits. IT has been the main catalyst of market innovation, rather than concentrating on cost savings. Embracing this change helps everyone in the organization to reconsider the role and effect of IT in their everyday experience.

When you take things out of an operating mode, there is a very different mentality at work, “Let's run a bunch of bundled solutions we've purchased and stood up” to “Let's develop and construct new capabilities that didn't exist before”. If you look at the overwhelming majority of startups, they're not beginning the foundation of their business with big, shrink-wrapped software packages. If you're trying to build creativity inside a large organization, then you shouldn't even start with that. You're no longer here to operate the mainframe. You're not here to get servers running.

Although IT will play an important role in driving the strategy of digital transformation, everyone is responsible for the work of introducing and adapting to the major changes that go along with the digital transformation. More than ever, IT leaders find themselves operating in cross-functional teams. Workgroups, job names, and long-time company processes are also reshaped by digital transformation programs. If individuals fear their worth or even their jobs are at risk, the pushback will be felt by IT leaders. The “soft skills” of leadership, which turn out to be very difficult, are therefore in great demand.

Leading progress begins with compassion. You start to build trust when your empathy is real. It's difficult to thrive if you don't have an organization that is supportive and completely on board with the transition efforts. You need to have leaders who know what “good” looks like and who are inspired to help the business know why you do what you do.

6. What drives digital transformation?

Technology is an important element of digital transformation. Yet, it's more about the shedding of obsolete systems and legacy technologies than the introduction of modern technology. It's about allowing for creativity as well.

For instance, in the field of government IT, more government agencies are on the verge of realizing the full potential of the cloud model beyond cost-cutting, to use the cloud for a strategic advantage.

In the IT enterprise, the prevalence of outdated technology still hinders the capacity of CIO’s to embark on a digital transformation plan successfully. Legacy technology can become a costly obstacle to conversion. There's not much left to seize new opportunities and move the company forward if you spend 70 to 80 percent of the IT budget running and sustaining legacy systems. As technology ages and becomes more vulnerable, this investment will increase.

What's more is that, by using cloud architectures and techniques, new technologies are created.

There are quite a few long-term benefits of using the latest technology for your company and customers. Technological relevance is a key factor in driving legacy updates. Because of obsolete languages, databases, and architectures, legacy solutions lack versatility and bear a substantial technological debt. This liability prevents many businesses from advancing and embracing analytics, real-time transactions, and digital experience.

7. What are the key trends in digital transformation in 2020?

2020 has been a year of some reckoning for digital ventures. Organizations that continue to underestimate the need for culture change do so at their own risk.

In 2020, digital projects spanning sectors have been quickly scaled up. CIO’s and organizations have prepared their organizations for change in many ways, but have not taken the full leap to transform their community to truly recognize the change.

Here are eight main trends in digital transformation that should be identified by business and IT leaders in 2020:

  • The rapid implementation, including integrated cross-functional teams, of digital operating models.
  • A shakeout, as those who have invested in the governance of big data and analytics, surpass their rivals.
  • Better use of machine learning and AI.
  • The continued business of merger and acquisition in the IT outsourcing sector.
  • New digital alliances are established by consultancies.
  • Expanding the use of the public cloud.
  • Fresh metrics of performance for digital transformation.
  • Increased commitment to digital projects' long-term importance.

8. How can I measure ROI on digital transformation?

Leaders need to measure the return on investment to show the effectiveness of digital transformation efforts. It is more often easier said than done with ventures that cross functional and company boundaries, alter how a business goes to the market, and also radically reshape relationships with consumers and staff.

There could be a short-term payoff for a project like revamping a mobile application, but other projects pursue longer-term market value.

Besides, attempts at digital transformation are ongoing and changing, which may make conventional calculations of market value and approaches to financial governance less successful. It is not enough to just incorporate the technology; the technology must be directly related to tracking key performance metrics on consumer insights and efficiency of business processes.

Next, ask if there are enough risks you're taking.

It's best to take a portfolio view and not a project level view when assessing how well digital transformation investments are performing. Just as an aggregate result would be looked at by a mutual fund manager or venture capital company to assess how well things are going, leaders of digital transformation must take a holistic view of the efforts of digital change.

This is especially relevant in order to not adversely represent the underperformance of a specific project on the overall IT efforts. It also creates tolerance for the requisite risks to be taken to achieve true digital transformation.

Next, consider best practices about metrics for digital transformation:

  1. Set in advance initial metrics.
  2. For agile experiments, develop micro-metrics: The aim is to learn and adapt.
  3. Incorporate company results: Take a look at the strategic effect (e.g. sales development, consumer value for life, time to market), operational impact (e.g. improvements in efficiency, size, operational efficiencies), and cost impact.
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