The rapidly changing business environment has left organisations struggling to deal with digital transformation.
While it may feel like most businesses are embracing digital quickly to meet customer expectations, the reality is that many disagree on what it actually means and how to make it a success.
Broadly speaking, digital transformation refers to the confluence of the enterprise’s most impactful technologies: social, mobile, analytics and cloud. But at its heart is an ongoing desire to improve user experience without being obstructed by silos, which requires cutting through processes, seamless IT integration and an agile environment.
According to a study by Genpact, large companies are throwing away roughly £258 billion a year on digital and analytic business transformations, with more than two-thirds of projects failing to meet expectations.
Major bottlenecks include poor communication between IT and business teams, legacy integration and a lack of talent.
Sink or swim
For CIOs, this is a make-or-break moment to cement their position as a driver of business growth, rather than just a cost centre. Research by CA Technologies indicated that companies with successful digital transformation strategies benefit from double the revenue growth of mainstream organisations.
Those who let the opportunity of digital pass them by, however, are likely to be punished in the same manner as high-profile casualties such as Woolworths, HMV, Blockbuster and Borders.
>See also: What is a true digital enterprise?
‘The rise of digital technologies has led to a rapid and ongoing transition into a new economic era,’ says Satya Ramaswamy, VP and global head of TCS Digital Enterprise at Tata Consultancy Services. ‘One where analytics rules over instinct, where customer experience defines your brand, and where the winners will be determined not by size and scale but by innovation, insight and agility.’
Competition is fiercer than ever in this environment, and businesses need to adapt their IT and working practices if they are to survive and thrive.
A global study conducted by TCS found that 70% of multinationals believe digital initiatives will be critical to their success over the next five years, and 95% of companies now recognise digital technologies as a critical way to connect with customers.
However, to really embrace the opportunities presented by digital technology, organisations need to go further than simply transforming existing processes or services – they must fundamentally reimagine all aspects of their business.
Ramaswamy says this means completely reimagining the enterprise along six dimensions: business models, products and services, customer segments, channels, business processes and workplaces.
Digital transformation requires businesses to evolve continuously by deploying new products, services and experiences at speed, ultimately keeping the ideas flowing and empowering the business through interactions enabled by technology.
But, more than just technology, it’s about integrating creativity and talent into the equation to achieve the vision of a digital business – and moulding company culture to fit with the ethos.
‘Companies today must be able to roll out new technologies quickly, yet still rely on the processes and back-end infrastructure provided by their traditional IT architecture,’ says Neil Sholay, head of digital at Oracle. ‘In combining digital technologies like social, mobile, cloud and analytics to create blended experiences, the value of each technology increases because it builds off one or more of the others.’
In the UK, companies are making slow but good progress. According to CA’s survey, 56% of UK organisations are executing some digital transformation initiatives as a coordinated strategic programme.
The most popular ongoing projects in the UK are workforce efficiency (cited by 48% of respondents), product and service development (43%) and operations and delivery (43%), according to the study.
However, they must up their game if they want to compete more effectively in the application economy. As much as 18% still undertake digital initiatives via separate, not-always-coordinated routes, and 16% use digital more to enhance rather than transform their business.
‘People at the grass roots know best how to innovate with digital technology to transform their part of the business, whether that’s HR, R&D or customer experience,’ says Ashish Gupta, president of BT Global Services UK. ‘So we need to let digital transformation occur organically.
‘But along with this we need some way of monitoring all these separate initiatives so that we don’t end up with yet more silos of information, or insecure consumer-grade services.’
From a people and process perspective, digital transformation requires structural change, which should be led by IT leadership. Traditionally, CIOs have acted as technology enablers, but now they must become business enablers.
Former Adobe CIO Gerri Martin-Flickinger, who recently left to become CTO of Starbucks, helped Adobe evolve from a software product company into a services business.
She and her team saw the opportunity the cloud afforded them and developed an IT-as-a-service model, positioning themselves as a partner to the business by being agile.
Previously, products and services were delivered on a nine-month basis, but with the ITaaS model, Adobe’s product team was able to deliver solutions in 90-day sprints.
‘The role of the CIO and the IT teams within an organisation will continue to change,’ says Phil Turner, VP EMEA at Okta. ‘They have the opportunity to truly empower employees, partners and customers to never worry about IT and instead focus on being creative and driving business value.’
There already exists tension between the business and the IT department, and the advent of digital technologies has made shadow IT more prevalent.
In essence, the demand for change from the business exceeds the pace that the IT organisation can cope with, and therefore a different engagement approach between the business and IT is required, as well as a different engagement approach between the IT supply chain and the IT department.
‘Technology partners should be enabled by the IT department to work with the business, as opposed to being kept at arm’s length,’ says Mike Sewart, director of digital services, UK and Ireland at Fujitsu. ‘Collectively, we will all add more value.’
So the burden doesn’t fall upon just one area, but becomes a conversation between those who provide IT services and those who consume them. IT can’t operate as a silo today, but really as a service provider internally.
Consider an internal IT group that provides a critical application to a business unit: there needs to be a discussion not only on how it will be implemented, but what would happen should something not go as expected. Can the business agree to a 15-minute recovery time and point objectives for this critical application?
‘This has a significant impact on the design not only of the running state of the business service but downstream to availability decisions to meet the needs of the always-on business,’ says Rick Vanover, senior product strategy manager at Veeam.
And while digital transformation often focuses on user-centric implementations at the front end, it’s critical that necessary changes aren’t overlooked in the back-end IT infrastructure.
The rigid, predefined network configurations of the past were fine for companies that changed slowly and had predictable traffic patterns. But change is much faster and less predictable in the digital age, and the business demands a lot more.
Companies need networks that are fit for purpose, and stay fit for purpose even as business needs change over time. This will require networks that are intelligent and able to dynamically reallocate capacity based on business rules with minimal manual intervention.
‘Modern technologies like software-defined networking (SDN) can create sophisticated platforms that are application-aware, able to prioritise traffic dynamically based on business rules, and self-healing,’ says Tony Judd, managing director UKI and Nordics at Verizon. ‘These platforms can unite storage and processing power, respond to spikes in demand, and enable companies to manage their business without worrying about managing servers and routers.’
A painful reality
The world is changing and customers rightly expect a new experience – one where commerce is seamless and immediate, and where technology is simply enabling or even invisible, making lives easier and allowing goals to be reached sooner.
People expect real-time trusted data, immediately to hand, wherever and whenever they want it, and businesses will need to be at the forefront of this to stay ahead of the competition.
But this data needs to bring value and inform decisions, not enforce or restrict. Research shows that within the next ten years, 40% of the S&P 500 won’t exist if they don’t keep up with the technology and trends that their customers can benefit from.
So what are the consequences for those companies that don’t embrace digital transformation?
‘Slow death,’ says Mark Darbyshire, chief technology adviser at SAP UKI. ‘Without undergoing their own digital transformation and participation in digital economies, customers will go elsewhere for what they need.
‘Digital transformation can be a difficult and painful process for companies, but it’s also essential in allowing businesses to stay relevant to their customers.’