Digital transformation is getting a lot of attention around South East Asia these days, with many IT conferences, news articles, and industry analyst reports covering the topic and attempting to address its challenges. Many IT leaders around Asia see it both as a necessary evil and the unknown beast they don’t know how to tame.
Naturally, the topic is also top of mind for many of the Dell Boomi customers I meet in the region. They are looking for answers on how to successfully embark on a digital transformation journey and, more importantly, they are seeking to understand the role cloud technologies could play in their efforts to reshape their companies into connected businesses.
So what, exactly, is digital transformation? Capgemini defines it as “the use of new digital technologies to enable major business improvements such as enhancing the customer experience, streamlining operations or creating new business models.”
Digital transformation goes beyond improving the status quo. It is about applying technology to create new processes and products, moving beyond the IT department to engage business units and create a cultural shift towards a fully digital mentality. It is about embracing the cloud and the myriad of benefits it has to offer to make an organisation agile and able to do more for less, faster.
While there is so much talk of this imperative, research shows that most organisations are not ready for it or don’t know how to successfully build and implement a digital transformation strategy. In the absence of a well thought-out digital strategy to deliver long-term benefits, an organization puts itself at risk…possibly moving beyond the extinction tipping point.
Given all the hype surrounding digital transformation, I think it’s important to pause first to define exactly what this major IT movement entails. So let’s start with the basics.
The What: Digital Transformation vs. Technical Optimization
Key to the idea of digital transformation is that it’s about business, not technology. This is a transformation initiative where organisations aim to use technology, especially cloud, to radically evolve a business — creating new capabilities that facilitate significant improvements in business models and operational systems while unfolding new markets. It’s not simply technical optimization from using the latest and greatest digital tools.
This is an important distinction, because a lot of what gets called digital transformation turns out to be no more than technical optimization. And businesses have a hard time seeing how to extend or scale these optimizations to achieve the sweeping, sustainable and tangible business benefits promised by digital transformation.
Adding an ecommerce site for an existing business, improving tech support with a chatbot, and using telemetrics to improve the routing of delivery vans are all examples of digital optimization. These efforts are improving — not replacing — existing products, services or operations and deliver only short-term benefits.
Even if an IT initiative features cutting-edge technology, such as serverless computing or the Internet of Things (IoT), it is still merely optimization — not digital transformation — if its scope is limited to streamlining or automating an existing process.
The true measure of digital transformation is in how it can change the business itself. It’s creating or radically altering a business and its operating model through the use of technology, making it possible for an organization to continually and rapidly evolve to keep finding new ways to gain competitive advantage and, critically, staying in step with the speed at which competitive advantage is changing.
A 2015 study by IDC found that only about one out of five enterprises is really engaged in transforming or disrupting its business and operations. The rest are exploring or implementing various degrees of improvement — laudable in itself but insufficient for emerging as a durable market leader.
The Why: The Importance of Digital Transformation
Here’s why digital transformation is critical: As in the past, a new wave of technology innovation will lead to the irrelevance of many of today’s market leaders.
IDC predicts that by 2020, one third of leading businesses will be disrupted by competitors who are more effectively engaged in digital transformation. These companies will build deeper relationships with customers faster, innovating around new products and services while continuously improving their internal operations. Therefore, evolving to the new state is pivotal for survival, and it needs to be done now.
Many C-suite executives already recognize the importance of digital transformation. In Dell’s recent Digital Transformation Index study, senior decision makers from around the world agreed that major changes in IT are taking place and that the very survival of their organizations depends on responding to and capitalizing on these changes effectively. In the survey:
- 45% of respondents said they were concerned their organizations would become obsolete in just 3-5 years
- 48% didn’t know what their industry will look like in just three years’ time
- 73% believe they need to be more ‘digital’ to succeed in the future
(For more on this survey and another Dell-sponsored survey on the future of the Internet, read this blog post .)
The How: Best Practices for Digital Transformation
If enterprises are going to do more than simply accelerate and streamline their existing operations, products and services, how should they proceed?
Here are some best practices for moving beyond optimization into true high-stakes digital transformation.
- Think in terms of business, not technology
As George Westerman, principal research scientist with the MIT Sloan Initiative on the Digital Economy, has said, digital transformation should change the reach or performance of the organization. It’s about doing business utterly differently. Leaders should begin by imagining how their business could change, rather than what new technologies could be applied. They should ask questions such as: What impact would this transformation have on customers and partners? What opportunities does it create? How can we deliver new experiences to employees, customers and partners at the speed of business? How can we leverage the cloud, agile development and other new technologies and practices to make this happen?
- Don’t just optimize, disrupt
Faster, cheaper, better is fine, but those optimizations won’t let an enterprise keep up with the pace of change sweeping today’s markets. Instead, set an audacious goal that benefits customers and your business overall, identify the technical obstacles to that goal, and develop a transformational plan to achieve the goal.
- Share the vision
Once a digital transformation vision has been identified, it should be shared broadly in the organization. All stakeholders should be familiar with the vision. This is where the cultural shift will take place, which is critical to sustaining the momentum of any sweeping transformation.
- Lead from the top and assign champions
Digital transformation should be lead from the C-suite, and it should have support across divisions and departments. In addition, business units should be assigned champions who can work with top executives to continuously monitor and drive adoption of the new processes and guide team members.
- Assemble the right team
Digital transformation requires a broad range of skills, including business strategy, process re-engineering, customer journey mapping, customer experience design and IT expertise in areas such as cloud computing, AI, and DevOps. The team leading the digital transformation initiative should make sure it has the talent it needs.
- Broaden the mindset
Never assume that an internal team has all the answers. Real innovation almost always requires influence from external sources. Find the experts in this field who have broader knowledge of the market and its needs, and benefit from their knowledge and skills. This is the best way to overcome corporate myopia and broaden an organization’s capabilities.
- Define Key Performance Indicators (KPIs) and other metrics for tracking progress
Digital transformation shouldn’t remain a “blue sky” project. It should have deadlines, metrics, and deliverables like any other project and should be continuously monitored and evaluated. Identify requirements, dependencies, resources, and the people that need to be involved and measure their effective usage.
- Adopt a phased strategy
No mid-sized business or large enterprise can afford to disrupt its daily operations in a single sweeping technology overhaul. A more feasible approach is to adopt a step-wise strategy, in which the majority of the organization continues working with existing infrastructure and processes, while smaller groups develop new business models and the technology required to support those models. Ultimately, these smaller teams will need to integrate their work with the larger organization’s legacy infrastructure, processes and mindset, so new offerings should be designed with integration and future deployments in mind.
- Make IT agile
Businesses won’t be able to keep up with their industries’ pace of transformation if they are stuck with slow internal processes and closed, proprietary IT systems. Six-month waterfall development cycles, common in the software industry a decade ago, will cause product iterations to take years instead or months. IT silos will hamper any data-centric innovation. So, in parallel with the development of digital transformation projects themselves, enterprises should modernize their IT infrastructures with new development approaches (e.g., agile development with scrum teams) and fast, efficient technologies (e.g., elastic cloud services and low-code data integration platforms) available today. Digital transformation always involves data and connections, so integration considerations will be a critical part of any IT infrastructure modernization.
- Let business people drive change.
As much as possible, IT functions and controls should be streamlined, automated and put in the control of business users. If business users can build simple applications and integrations in days, rather than requiring multi-month projects with senior software developers, the organization will be able to innovate exponentially faster and more successfully.
Looking Ahead and Dreaming Big
I don’t think there’s ever been such an exciting time to be involved in IT. Tremendous market pressure is forcing businesses to innovate. At the same time, ever-present budget constraints are forcing businesses to innovate prudently, taking full advantage of the latest cost-effective technologies, such as the cloud.
Low-code cloud approaches that accelerate release cycles and put business users closer to the design and implementation of products and services will play a starring role in the transformations that businesses create in the coming years.
The challenge for business leaders is to look beyond exciting new projects in the next quarter or two and to embrace digital transformation as a strategic necessity for delivering benefits in the long run. This is where harnessing the collective imaginations of employees and seeking broader industry knowledge from experts outside of an organisation becomes critical.
Give stakeholders a clear strategy and the best IT tools, and they will re-think products, companies, and markets with an innovative mindset.
The companies that succeed at digital transformation will fundamentally alter not only their IT capabilities but also the health of their finances and the experiences of their customers and partners. That’s precisely the reward any organization seeks, and one that merits aiming beyond mere optimization for genuine transformation.
To explore how Boomi can help your organization with its digital transformation goals, please contact our integration experts today.
About the Author Based in Singapore, William Fu is a Managing Director, Asia at Dell Boomi.