Author’s note: The old model of IT (information technology) is being replaced with the new model of OT (operational technology) as organizations pursue Digital Transformation to adapt to competitive pressures and deliver on new expectations from customers, employees, and partners.
This post is the first in a new “How-To Guide” about Digital Transformation.
First up: What is it?
No company today can risk avoiding a Digital business strategy. If you talk to the CEOs of 20 companies, they will all tell you that their industries are adopting Digital capabilities and they must change with them or fall behind. Eighty-three percent of CEOs agree that Digital Transformation is already at the top of the business plan. They know that competitive pressures and changing expectations means constant adaptation is required.
Digital technology and new platforms have been evolving at an accelerated pace over the last five years. This acceleration is not only not slowing down; it’s actually increasing annually by 3x. Therefore, as companies look at moving business platforms, processes and technologies forward, corporate leaders face an endless list of initiatives to consider, prioritize, evaluate, validate, and execute on. The challenge is to ensure priorities are aligned wisely. Without a strategic direction, attempts at Digital Transformation can end up disjointed and ineffective—without any essential forward-movement. That’s not transformation. That’s just a bunch of IT projects.
To get started on understanding what is Digital Transformation, here’s a broad definition of the term: Digital Transformation means using Cloud and other technologies in ways that change business operations, interactions and business models with profound impact for customers, partners, and employees.
In contrast, here’s what Digital Transformation is not: a specific project or projects with a beginning phase, an implementation phase, and a maintenance phase. As implied by the word transformation, Digital Transformation is a process. It’s a long-term requirement for success in a world characterized by changing technology and changing expectations.
DIFFERENT COMPANIES, DIFFERENT NEEDS
As with any transformative process, Digital Transformation begins with the current state, which will vary substantially across companies.
Companies have very different maturity levels when it comes to ERP, Analytics, Cloud, Mobile and other technologies. They also have different customers, partners, and employees. Therefore, Digital Transformation means different things to different companies—but consistently the theme is to increasingly apply technology across the organization to improve operational success.
For a specific company, the relevant question isn’t “What is Digital Transformation” so much as “What does Digital Transformation mean to me?” Digital Business models are specific to the strategies and directions of each individual company. There is no one business strategy that addresses the needs for all companies. There are industry themes that allows retailers, manufactures, insurance companies, etc. to follow a similar path—but that’s where the commonality stops. Each company needs to determine individually what its Digital Business journey will be, and while there are common pieces that can impact multiple companies, each puzzle ends up looking very different in the end.
WHERE TO START?
When determining a starting point, let’s agree there are a few things to look at.
First, where is your industry today from a Digital Business standpoint?
- Keep in mind the comparison can’t be based on a simple numerical score because industries today are being disrupted by new technologies and new business models. You have to worry about your traditional competitors as well as new startups. If you are in an industry being driven by disruptive upstarts, you have to be ready to make decisions quickly and take action.
- Once you know where your industry is and who your true competitors are, you can compare yourself to them—that’s the starting point. Then, beyond where your industry is as a whole, you need to evaluate specific functional or horizontal capabilities. Specifically, you need to look at these three topics to establish your priorities:
- Where and what are your customers’ expectations? Are they leading or following providers? Are they adopting digital strategies themselves? Are they looking to partner and improve overall products and service levels? Remember all the investment in the world will go for naught without alignment to customer needs and wants.
- How can your partners help support your digital direction? Are they adopting digital strategies of their own? Are they pushing you to become more digital to help increase velocity and cut cost? Are they looking to flatten the value chain and further improve customer service levels?
- Where are your employees in terms of digital expectation? This might be the most important consideration of all. By 2020, 50% of the workforce will be made up of Millennials, so attracting and keeping top talent might be the biggest driver of your Digital Transformation needs. Without top employees, competitive pressures will overtake and consume companies.
Second, what are your priorities? Once you have fully understood your industry, competitors, customers, partners and employees, you can evaluate the following five key areas to set priorities.
- IT Management. Modern IT Management is a must if you are fully going to embrace and control the Digital Business. No longer can IT be the bottleneck or the naysayers in your Digital World. IT needs the practices and governance to confidently partner within their organizations to drive and implement initiatives that support Digital Business success. Security, integration, and scalability must be blended with control, oversight and governance to deliver results.
- Cloud & Datacenter. The cloud is a fundamental building block of your Digital Strategy but does not replace your Datacenter. The cloud is an enabler that brings agility and elastic supply to your workloads. Both environments need to be managed and monitored as a single asset for the business. Identities, devices and applications need to be managed as they cross between your traditional data center and your intelligent cloud.
- Modern Applications. Modern business applications are the cornerstone to keeping customers, employees and partners from going to your competitors. These applications need to allow easy access, provide intuitive interfaces, deliver mobile and tablet support, cross-device integration boundaries and support sensors and machine interfaces. These new applications should be easy to access and log into. They should allow processes to start on one device and be monitored and finished on another. And they should integrate forms, workflow, sensors and transactional systems. ERP and CRM boundaries must not be allowed to impact applications. Instead, Modern Applications should seamlessly cross systems and authentication domains.
- Analytics & Data. No other area has seen more disruption and opportunity than the analytics arena. Data is doubling every 30 months worldwide. 90% of all stored data has been created in the last two years. Accessing, understanding and collaborating on information has never been easier—or more critical to the business. From production line workers to executives, accessing dashboards and reports should all be part of a day’s work. So should interfacing with corporate, third-party and geospatial information generated from millions of sensors.
- Customer Engagement. The applications your customers access to research, educate, design and purchase your products have never been more relevant. It is no longer acceptable to not have online, mobile, integrated and accessible solutions to support your customer’s business objectives. Your platforms need to be able to track your customer’s past touchpoints, current online activities, understand what they are looking for, anticipate contact points, and deliver a world-class buying experience.
Today more than ever, you cannot fall behind your competitors. The life expectancy of a FORTUNE 500 company is getting shorter every year, with today's success rate sitting at 13%. Understanding and executing on a Digital Business Plan is no longer an option; it is a necessity.
UP NEXT: DIGITAL TRANSFORMATION CHALLENGES
Because Digital Transformation is complex and far-reaching, it’s a process that demands much of corporate leaders. In the next post in this “How-To” series, I’ll cover some of the most prominent challenges facing executives who understand they cannot afford to let their companies fall behind.