3 fundamental keys to digital transformation

Jul 24, 2018
Digital TransformationIT Leadership

From confusion to practical results.

number 3 with network nodes top three
Credit: Getty Images

A surprising number of enterprises underestimate the momentum of digitization, and more significantly, the behavioral changes and expectations that come with it. Every enterprise knows that the only way to combat digital disruption from a competitor is total digital transformation, yet an astonishing 84 percent fail to achieve it. A major reason for this is that digital transformation often means abandoning the status quo to ensure future survival.

This is not an easy call to make when it means shifting focus from a declining but still profitable line of business to a more digital approach, and companies that act boldly and succeed are highly admired. Netflix, which dared to cannibalize a hugely popular DVD distribution business to make way for online streaming, is a good example. McDonalds hopes to follow suit. Spurred on by companies like UberEATS and UK-based Deliveroo that are accelerating the ‘fast’ in fast food, McDonalds is taking huge strides towards digitizing its business.

The power of digital transformation isn’t reserved for global brands.  It’s available to any company committed to innovation. Here are the three keys to success.

1. Establish clarity

Digital transformation means more than advancing the technical capabilities of IT, or making digital improvements to specific business functions like operations or sales. It begins with identify and prioritizing those parts of your incumbent business that are most vulnerable to the disruption created by digitalization, and those that have the greatest potential (or need) for delivering the new kinds of experiences that digital makes possible.

Historically, companies have analyzed data samples to draw inferences that were used to inform business decisions. Then Big Data came along, and we started to analyze all the data, not just samples. Today we can count on AI that uses machine and deep learning to develop self-teaching algorithms to give us precise predictive and prescriptive analytics. Instead of catalyzing reactive responses born from a post-facto analysis of facts and figures, data is becoming active and actually driving proactive actions people should take.

2. Prepare from the core

Most large companies carry legacy baggage that inevitably acts as a roadblock to change. Digital transformation begins by better understanding the use of legacy systems and optimizing how their various components function effectively under different circumstances. That includes modernizing legacy systems, processes and attitudes; simplifying monolithic, interdependent core systems; and moving to platform-led, loosely coupled components built on open source software.

The next task is the development of microservices, and Application Programming Interfaces (APIs) that create a secure pathway for accessing data contained in legacy systems. This allows hitherto buried insights to surface and inform—or even direct—decision making. The APIs also allow data to flow back from users to the enterprise, fueling a virtuous cycle of innovation possibilities. Finally, organizations in the process of digital transformation can migrate the non-core aspects of their legacy landscape to the cloud.

These steps help create an agile, flexible and adaptable enterprise, one that is able to continuously restructure processes for efficiency and productivity at one end and deliver high quality customer experiences at the other.

3. Learn to iterate quickly

Once the organization is ready internally for transformation, leaders need to make the aggressive moves that are inextricably tied to organizational issues. These include building out new business models, extending agility enterprise-wide, and conceptualizing the best possible experiences and innovations for customers. Concerning customer experiences, it’s best to take the consumer universe as a starting point. Today’s highly evolved digital consumers measure their experiences against the best they know. They expect all providers, regardless of industry, to offer something similar to—or better than—what they encounter in their daily lives.

In this regard, the best approach is to iterate quickly, testing each version of the prototype in the market until it hits the target, rather than struggling to make an ideal prototype first. A talent mix that is very different from the conventional one is required.  One approach for global enterprises is the networks talent model, which entails building talent pools in-market, that is, as close as possible to end customers. These talent pools should include not only freshly minted engineers, but experienced designers and graduates with liberal art backgrounds as well. For some businesses, the support of a technically strong and experienced partner who shares their talent value chain can prove extremely helpful. 

It’s a state of mind

The very term “digital transformation” calls up visions of a world where everything is deeply automated, with coders working around the clock to crank out new applications. While technology obviously plays a very significant role, it’s important to remember that digital transformation is ultimately a way to reimagine business models, customer journeys, and organizational agility. Changes in attitudes and willingness to go beyond the status quo is as important as new technology.