Digital transformation — described by Harvard Business Review as ‘the use of technology to radically improve performance’ — seems to be replacing the traditional business transformation projects that kept the management consulting firms so busy in the noughties.
Indeed this had fallen to just 4% of fee income in 2013, according to the Management Consulting Association (MCA), with further 5% on ‘change management’ — compared to a whopping 25% on ‘digital and technology consulting’.
As the MCA puts it, ‘More than a quarter of consulting in the UK is now digital. This is the largest and the fastest growing part of the consulting industry.’
So why are organisations embarking on digital transformation? Customers now expect a higher level of service from organisations. Mobile technology has created a need for ‘always on service and search has put the competition a click away.
The price of missing the boat is now higher — and more public — since social media has given them a voice. While the key technical enablers — social, mobile, analytics and cloud — make digital transformation possible, most of the obstacles to a successful result are about people.
Digital must permeate every aspect of your organisation — people, processes and strategy — and making insights must be ‘self service’ to facilitate the widest take-up by business managers.
However, large companies are throwing away roughly $400 billion (£258 billion) a year on digital and analytic business transformations that fail to deliver what they promise.
According to a new study from Genpact, more than two thirds of digital transformation projects fail to meet expectations. Problems aligning communication between IT and business teams is cited as the central issue for implementation failure, with legacy integration and talent earmarked as other major bottlenecks.
But role models for digital transformation can be found — Burberry and American Express to name but two. Burberry is well known for its success in combining digital operational excellence with a customer experience focus. Central to its ongoing long-term turnaround, its digital transformation has been building incrementally since 2006.
An illustration of the ‘big-bang’ approach more popular in the US is Disney, which recently completed a $1 billion operational and customer-facing transformation with the MagicBand initiative, through which Disney World connected its entire end-to-end park experience through a sensor-enabled wristband.
A survey recently conducted by the Altimeter Group found that organisations that invested in new technologies, people and process to compete in digital markets saw returns that included greater profits, margins and market share, as well as talent and a number of other factors.
Companies that fail to navigate this transition will rapidly become disadvantaged in this new environment. The top 5 performance orientated benefits were improved customer engagement (75%), improved customer satisfaction (63%), higher digital traffic (53%), increased lead generation (49%), and geater conversion rate (46%).
But how should IT departments themselves change so as to be able to play an active part? The arm's-length, transactional relationship between business and technology teams must change, according to CIO Magazine, to design new architectures, move to iterative delivery, and form the collaborative culture of a DevOps operation that makes technology management leaders adopt new ways of working.
They must take more responsibility for the ongoing implications of technology choices to help reduce complexity, and learn to trust their customers — and listen to their feedback — if they are to see the benefits of design thinking and Agile software development.
They must also work closely with each of their executive counterparts across all functions to co-create their digital business through their transformation agenda, rather than mandate it through a requirements specification.
For many CIOs this represents a transformation in itself for them to become a respected partner for functional heads, rather than just a cost centre. It requires that they better understand the business context of the decisions they take, and that they communicate in the language of business, not technology.
There are thus two elements that are necessary for successful digital transformation: to start collaboratively with the business requirement and work back towards the technology enablers; and to accept that big-bang transformation is risky.
Digital is best adopted via smaller, iterative initiatives that require an entirely different project approach compared to the monolithic deployments of SAP and other corporate applications in the past. Both will require new skills of CIOs, but those that can demonstrate results will have a dazzling choice of roles.
Sourced from Mike Fish, CEO of BigData4Analytics