Babbitt Column | What is Digital Transformation?

In the era of the digital economy, DT, digital assets are the core and engine of the digital economy. Digital assets include asset digitization and data assetization. Digital transformation and upgrading are the foundation and necessity. Digital transformation is the way to integrate digital technology into all areas of business and business, fundamentally changing the way we operate and provide value to our customers. This is also a cultural change that requires organizations to constantly challenge the status quo, experiment and adapt to failure.

Digitalization consists of BASICED Internet of Things (collecting data), 5G (transmitting data), cloud computing (storing and processing data), security (data privacy protection and security), blockchain (data confirmation and trust), AI (data analysis And decision making), big data, edge computing (distributed computing storage) and other eight pillars. They integrate with each other and provide power for digitalization, provide users with an unprecedented experience, and promote the evolution of society to the era of robots based on digital transformation.

Directory of this article:

  • What is digital transformation?
  • Why is digital transformation important?
  • What is a digital transformation framework?
  • What role does culture play in digital transformation?
  • What drives digital transformation?
  • How to start digital transformation?
  • Where can I learn more?

From small businesses to large enterprises, all businesses must undergo digital transformation. As the world becomes more digital, this information is clearly communicated in almost every keynote, panel discussion, article, or research about how companies stay competitive and value. Many business leaders don't know what digital transformation means. Is this just a way to appeal to moving to the cloud? What specific steps do we need to take? Do we need to design new positions to help us create a framework for digital transformation or hire consulting services? What parts of our business strategy need to change? Is it really worth it?

Some leaders feel that the term "digital transformation" has become so broad that it is useless. The business mission behind it (rethinking the old operating model, conducting more experiments, and improving the flexibility to respond to customers and competitors) will not change.

This article aims to answer some common questions about digital transformation and provide clear ideas for everyone, especially CIOs and leaders, including learning from peers and digital transformation experts. Because technology plays a vital role in an organization's ability to grow with the market and continuously increase customer value, CIOs also play a key role in digital transformation.

It's also worth noting that today's organizations are in different positions on the road to digital transformation. If you feel you are involved in digital transformation, you are not alone. One of the most difficult issues in digital transformation is how to overcome the initial obstacles from vision to execution. Many CIOs and organizations worry that they are lagging far behind their peers in transformation, which is not the case.

Even organizations that are off the road to digital transformation face difficult and ongoing obstacles, such as budgeting, competition for talent, and cultural change. Let's seek some advice for organizations at all stages of the road to change.

What is digital transformation?

Since digital transformation will be different for each company, it is difficult to determine a definition that applies to all businesses. In general, however, we define digital transformation as the integration of digital technology into all areas of commerce and business, thereby driving fundamental changes in business activities, business operations and providing value to customers. This is a cultural change that requires organizations to constantly challenge the status quo, experiment often and adapt to failures. This may mean abandoning the long-term business processes established by the company and adopting a relatively new approach that is still being defined.

Digitalization is very different from traditional IT informationization . From the perspective of thinking mode, the thinking mode of IT is essentially process automation; the essence of digitalization is connection and data processing, not just process automation. It emphasizes on Data is connected to the largest extent in the entire enterprise, so that more data can be analyzed more quickly and comprehensively, business applications can become intelligent, and even production relationships can be changed, and new business models appear. Digitalization is more customer-centric, focusing on business transformation; traditional informatization is more focused on internal efficiency / benefit, emphasizing internal process automation and standardization, etc., while digitalization is more focused on connection capabilities And ecological creativity.

Despite the large number of articles and definitions about digital transformation, it's easy to see why everyone is confused about this topic. Greg Verdino, who specializes in digital transformation enterprise research, said: "Digital transformation has closed the gap between the expectations of digital customers and the actual delivery of analog services.

Companies may need to adjust all their existing practices. Digital transformation involves changes in leadership, changes in thinking, encouragement of innovation and new business models, increased use of technology, and digitalization of assets to improve the organization's employees, customers, and suppliers. , Partner and stakeholder experience.

Although the definition of Wikipedia is vague, it involves how the impact of digital transformation extends from the enterprise to the entire society. Digital transformation is the change associated with the application of digital technology in all aspects of human society.

Leaders need to think about what digital transformation will mean for your company in practice and how you will express it. Jim Swanson, senior vice president / chief information officer / head of digital transformation at Bayer CropScience (formerly CTO of Monsanto) suggests: "Digital is an abused word that means different things to many people. When you When discussing digital transformation, understand what it means. "

In Monsanto, Swanson discusses customer-centric digital transformation: "The automation, people, and new business models we talk about, these topics include data analysis, technology, and software, all of which are enabling factors, not Drivers … The core of all this is leadership and culture. You may have a customer perspective, products and services, data, and cool technology, but if leadership and culture are not the core, it will still lead to failure. Whether it is finance , Agriculture, pharmaceuticals, or retail, it's important to understand what digital means to a company. "

Why is digital transformation important?

There are several reasons why businesses may be digitally transformed, but the most likely reason for many businesses today is that they must do so in order to survive. Digitization has given the business a great deal of vitality, using data to verify the direction, method, and pace of the business, rather than slap the head.

Howard King said in an article in the Guardian: "Companies will not actively choose transformation because it is costly and risky. When companies cannot develop, they will undergo transformation." Digital transformation is the general trend and digital technology is redefining Industries and industries, digital products and services will prevail, restructuring of supply chains and intermediaries will promote efficiency changes, improvement of ecosystems will promote the creation of new value by enterprises, and digitalization is about the survival of enterprises.

Pioneer Group Chief Information Officer John Marcante also pointed out: "You can look at the S & P 500 Index. According to data from the American Enterprise Foundation, the average residence time of American companies on the index in 1958 was 61 years. By 2011, For 18 years, today, Standard & Poor's companies change about every two weeks. Technology is driving this change, and companies that want to succeed must understand how to integrate technology with strategy. "

Business leaders have roughly understood this and are prioritizing accordingly. IDC predicts that according to IDC's Global Semi-annual Digital Transformation Spending Guide, by 2022, global spending on technologies and services for digital transformation will reach $ 1.97 trillion. IDC forecasts that digital transformation spending will grow steadily, with a five-year compound annual growth rate from 2017 to 2022 of 16.7%.

Shawn Fitzgerald, Director of Global Digital Transformation Strategy Research, said: "IDC predicts that by 2020, 30% of G2000 companies will allocate more than 10% of their capital budget to support the development of their digital strategy. As corporate executives gradually realize Digital transformation is a long-term investment, and capital investment will become an important task. Over the next ten years, the commitment to fund DX will continue to drive spending. ”According to research by Hackett Group, as of 2018, advanced analytics has become Number one in digital investment, especially data visualization tools and machine learning, companies plan to increase related deployments by 75% over the next 12 to 18 months.

Different organizations are in different positions in the digital transformation process, but the speed of development has become a top priority for all enterprises. IT leaders are under pressure to demonstrate that digital initiatives will continue to translate into increased agility and speed of growth across the organization.

In today's fast-growing organizations, IT executives must keep up with the pace of change. This is a survival problem facing the current era of digital injection, and we must actively and boldly carry out experiments and explorations out of the box. Do this even in the face of day-to-day management and operational issues, service delivery, and emergencies such as major cyber attacks or information leaks. This year's CIO must be both a decision maker with rich decision control on important issues and an effective digital leader from the front.

Improving the customer experience has become a key goal and therefore a key part of digital transformation. Hinchcliffe refers to the seamless customer experience as "the most important discriminator for business performance."

What is a digital transformation framework?

Although digital transformation can vary greatly depending on the specific tasks and requirements of the organization, in existing case studies and published frameworks, digital transformation is divided into five broad areas: leadership transformation, all-round experience transformation, information and Data transformation, operation model transformation, and work resource transformation. There are a few constants and common themes that all business and technology leaders should consider when embarking on a digital transformation. These digital transformation elements are often cited:

  • Customer Experience
  • Operational agility
  • Culture and leadership
  • Labor support

Digital technology integration

Although each guide has its own recommendations, different steps, and considerations, CIOs should look for important common themes when developing their own digital transformation strategy. Examples of digital transformation frameworks include:

  • MIT: Nine Elements of Digital Transformation
  • Cognizant: A Framework for Digital Business Transformation
  • Altimeter: Six Phases of Digital Transformation
  • Ionology: A Step-by-Step Guide to Digital Transformation

What role does culture play in digital transformation?

The role of IT has changed radically in recent years. CEOs increasingly want their CIOs to help companies generate revenue. According to a survey of more than 4,600 CIOs conducted by Harvey Nash / KPMG in 2018, its top operating task is "improving business processes." But among the CIOs considered to be the best-performing company "digital leader", its top operating task It is "developing innovative new products".

IT becomes the main driver of business innovation , instead of focusing on cost savings. Accepting this change requires everyone in the company to reconsider the role and influence of IT in their daily experience.

Bryson Koehler, CTO of Equifax, said, "When you move IT out of an operating model, there is a completely different mindset: From 'Let's run a set of packaged solutions that we have purchased and justified. Solution 'has become' Building and Creating New Features That Did Not Exist Before '. We see that most startups do not use huge, packaged software packages as the basis for the company. If you want to do it inside a large enterprise Innovation should not start there. You are no longer running mainframes, servers, data centers, networks or operations here, those are just chips and things you can outsource. "

Although IT will play an important role in advancing digital transformation strategies, the task of implementing and adapting to the tremendous changes that accompany digital transformation lies with everyone. Therefore, digital transformation is related to corporate culture and is a collective issue, covering all functional departments from top to bottom.

IT leaders find they need to work in cross-functional teams more than ever. Digital transformation initiatives often reshape workgroups, positions, and long-term business processes. IT leaders feel stressed when people worry about their value or their work at risk. As a result, leadership “soft skills” are in great demand, and these skills have proven to be quite difficult to master.

Sven Gerjets, Mattel's executive vice president and chief technology officer, says that starting the transformation starts with empathy. He said: "When your empathy is sincere, you begin to build trust. If your business cannot fully support transformation, it will not succeed. You need to let leaders know what" good "looks like and motivate them to help The company understands why you do these things. "

"If you hear, 'It feels very different to work with your team' 'or' It's incredible that the IT department delivered the project early and met my business needs. 'This becomes obvious when there is similar information."

In her consulting work, Melissa Swift, who leads Korn / Ferry's North American and global customer digital consulting business, found that there are three types of employees who tend to slow down the transformation: veteran employees, dogmatic employees, and lone wolf.

The company must not ignore these three groups and attract them, otherwise it will be in danger. She suggests: Segment your people in one way and work hard to meet different groups. “Many companies have launched their digital journey in a highly unified manner and deployed the same information and technology throughout the process. Everyone needs retraining! New team! Welcome to the new world!” From the perspective of reform management This is purely stupid, and it is an abuse of investment funds that may be used for smaller, more strategically targeted groups. Companies should consider the digital experiences and behavioral preferences of different subgroups within their organization, and should carefully design messages, procedures, and even the environment to find the right starting point and realistic end point for different groups.

What drives digital transformation?

The important factors of digital transformation are of course technological progress and innovation. But usually, rather than adopting new technologies, it is better to eliminate obsolete processes and backward technologies. In 2017, more than 70% of US federal IT spending was spent on government-wide operations and maintenance of older systems.

In the medical industry, despite the widespread use of smartphones and other mobile devices by healthcare providers, nearly 80% of clinicians continue to use pagers provided by hospitals, and 49% of them say they receive patient care-related The most commonly used message is a pager.

Examples like these are found in all industries, and the spread of backward technologies hinders the ability of CIOs to successfully implement digital transformation strategies. Forrester research shows that CIOs spend an average of 72% of their budget on existing IT issues concerns, while only 28% are on new projects and innovations.

If companies want to grow with the rapid development of today's digital transformation, they must use technology to improve efficiency as much as possible. In most cases, this means adopting agile principles throughout the enterprise. Automation technology has also helped many IT organizations increase speed and reduce technical burdens.

How to start digital transformation?

If all this makes you pessimistic, don't worry. One of CIO's biggest misconceptions about digital transformation is that all of their competitors are far ahead of them. Tim Yeaton, Red Hat's chief marketing officer, said, "Because people (and the mass media around them) praise the fastest transitioners, how difficult or long it takes for a typical global 2,000 company to transform Time is rarely commented. "

Digital transformation development path and roadmap:

  • Build a vision and build a roadmap with application scenarios at its core
  • Need to make the most of digital technology and build digital platforms
  • Establish an organizational structure that matches digital transformation
  • Development of new digital transformation-related KPIs / OKRs for performance management and evaluation
  • Do the transformation of human resources itself
  • Choosing the right partner

As companies develop their own digital transformation strategies, we will learn a lot from CIOs and IT leaders who are already transforming. Here are digital transformation case studies and digital transformation must-reads you can explore further:

  • How Landauer CIO built a revenue-generating mindset in IT
  • SunTrust CIO's formula for speed relies on cloud, DevOps
  • Increasing IT's speed: 3 levers CIOs can use
  • Teaching IT to embrace change: 9 execs share advice
  • Matson CIO: The most painful, gut-wrenching part of leading transformation
  • How hybrid cloud aids digital transformation
  • Budgeting smarts for digital transformation: 4 tips
  • Digital transformation: 3 strategies to manage change
  • Digital transformation: 5 principles for the retail industry
  • What absolutely won't work when it comes to digital transformation

Where can I learn more?

Digital transformation is a difficult task, especially for large, mature companies. If done right, it will generate businesses that are more in line with customer needs and will be resilient in the fast-growing digital future.

For more information on digital transformation, see the following:

  • Our entire collection of digital transformations provides more operational advice.
  • Teaching Elephants to Dance (Digital Transformation eBook)
  • Automation Enterprise (ebook on managing IT with automation)
  • How Best-in-Class CIOs Increase Revenue: Harvard Business Review Analysis Services Report