Assessing your organization’s digital transformation maturity
While there are perennial capabilities and skills that are required for business success u2013 investment, leadership, culture, change management, governance u2013 digital transformation requires new capabilities that organizations need to acquire and develop mastery around.
Managing Innovation & Disruptive Technology
By Nicholas D. Evans, CIO
With most organizations now several years into their digital transformation journeys, many are looking to measure progress, gauge maturity, and benchmark against peers in their industry. The key questions are how to assess this maturity, what are the key pillars and elements of maturity, and which capabilities are new and different compared to business as usual.
Digital transformation is a broad subject that requires competency across strategy and vision, people and culture, process and governance, and technology and capabilities, as show in following chart:
While there are perennial capabilities and skills that are required for business success (e.g. investment, leadership, culture, change management and governance), digital transformation requires new capabilities that organizations need to acquire and develop mastery around. These include capabilities related to disruptive technology enablers, platform architectures and business models, digital services mastery, and digital innovation.
These new capabilities are based upon findings in studying world-class organizations in my recent book “Mastering Digital Business” where I found that many of these organizations shared a common DNA with regard to how they achieved industry-leading financial performance. It is these capabilities that I believe are the four strategic themes for leading digital disruption in the years ahead and which differentiate this maturity model from others.
Key pillars of digital transformation
We’ll now take a quick look at these various pillars, their key elements, and the rationale for why each of these elements is important.
Strategy & vision
Some of the key elements of this pillar include digital transformation strategy, digital transformation focus and investments. It takes strategy to set the agenda in terms of transformation objectives, focus to maintain the customer-centric (outside-in) perspective and align the organization, and investment to drive transformational change as follows:
Digital strategy. As you progress from strategy to execution, it’s important for the digital strategy to set the stake in the ground in terms of target business outcomes. Every organization will have a slightly different set of transformational objectives, with different priorities, but this is a vital first step for organizational alignment.
Digital focus. Digital transformation focus is important to establish a customer-centric (outside-in) perspective that drives transformation journeys and continuously adjusts based on changing customer demands.
Investment. Investments specifically allocated to digital transformation are critical to fund the large-scale transformational change that’s essential across business models, business processes, products and services.
People & culture
Some of the key elements of this pillar include leadership, culture and digital skills as follows:
Leadership. Since digital transformation initiatives span traditional business units and silos, affecting all parts of the organization, it takes leadership to make digital transformation a necessity, to enforce behaviors, and to keep programs chartered and aligned with the external perspective front of mind.
Culture. Because digital transformation initiatives require re-inventing and re-designing traditional business models, processes and ways of working, it necessitates an innovative and collaborative culture to enable tolerance and receptivity to risk, to embrace and empower change, and to encourage innovation and experimentation.
Digital skills. Digital transformation initiatives require new technologies, capabilities and approaches, so it takes strong digital skills embedded in all strategic areas across the organization to do the heavy lifting with a completely new set of tools and techniques.
Process & governance
Some of the key elements of this pillar include innovation management, change management and governance as follows:
Digital innovation. Leading practices in corporate innovation are important to identify and accelerate digital transformation initiatives from idea to execution and to provide a mechanism for continuous and collaborative innovation across internal and external constituencies.
Change management. Because digital transformation initiatives typically have a broader and deeper change impact than traditional ones, change management programs need to take a more holistic view across a wider range of stakeholders with a richer, ongoing engagement model.
Governance. Digital transformation initiatives span traditional business units and silos, affecting all parts of the organization. As a result, effective digital governance is important to promote the right levels of coordination and sharing to minimize risk and cost and to ensure close and continual alignment with strategic priorities.
Technology & capabilities
Some of the key elements of this pillar include disruptive technologies, platform business models, and digital services mastery as follows:
Disruptive technologies. When building the next wave of digital applications, disruptive technologies can be applied in powerful combinations – first as digital experience essentials (with technologies such as social, mobile, analytics and cloud) and then as digital experience enhancers (with technologies such as personas and context, intelligent automation, IoT and next generation cybersecurity) – to create unique new value propositions for customers.
Platform business models. Platform business models are compelling because they convert traditional, linear value chains into multi-dimensional value networks. They convert the pipeline business model, where value creation is one-way and subject to bottlenecks throughout the supply chain, into a platform business model where value creation is two-way and continuous.
Digital services mastery. Digital services mastery is important because the next step for IT is to consider the “how” as well as the “what”. It’s no longer sufficient to have an innovative set of products or services (the “what”); you have to be a master of how you design, develop, deploy, manage and continually evolve your digital services (the “how”) as well. The six key capabilities of digital services mastery include agile, DevOps, as-a-service infrastructure, intelligent automation, personas and context, and digital service management.
Digital transformation is a journey, not a destination
Digital transformation is clearly a journey, not a destination, so even once you reach maturity across all dimensions, there will be a need for continuous innovation and rapid response to change, and to challenges and opportunities as they arise. One of the benefits of moving along the maturity curve is that you can essentially incorporate next-generation skills and capabilities so that agility becomes an intrinsic part of the organization’s operating model. For example:
Platform business models enable rapid growth and changes to the ecosystem, because they rely on external producers and consumers to provide the actual – physical or digital – products, services and social currency that enable them to scale up and achieve critical mass very quickly.
Digitally re-designed business processes have a number of characteristics that enable them to trump traditional processes by being experience-centric, automated, simplified, digitized, personalized, dynamic, real time, granular, aggregated and scalable.
Techniques such as agile and DevOps enable organizations to iterate rapidly in terms of experimenting with new features, or even entirely new service offerings, and quickly place applications into production once they’re developed.
The overall concept of digital service mastery helps to accelerate digital service development and deployment; makes services agile, scalable and available on demand; automates extensively; personalizes and contextualizes for the customer experience; and enables holistic management of the entire process.
Innovation programs that are highly adapted and fine-tuned to support digital transformation initiatives can embrace the same operating principles – that is, lean, agile, flexible, efficient, and more – so they can be executed at speed and at scale.
What lies ahead for digital transformation?
We can be certain that one of the only constants will be change. We can expect change to occur across all the key pillars of digital transformation that we’ve discussed here: from strategy, to people, to process and technology. These may seem like traditional pillars, but there’s nothing traditional about them. As we’ve seen, each pillar involves vastly new approaches when compared to business as usual.
If you’re curious about your own organization’s digital transformation maturity, we’re currently conducting an online survey entitled “mastering your digital transformation” in conjunction with the British Computer Society (BCS) that you can take to assess your maturity level. All responses are confidential and no individual responses with be revealed. In addition, all participants who opt-in will be provided with top-line survey results to benchmark against.