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Digital Transformation: Five Critical Success Factors

it cost optimization
istock

Digital transformation is not likely to come easily for most CIOs. When the CEO and the board call you in to ask, “How are you going to contribute to our growth and transformation?” you don’t want to have to hesitate and talk about how most of your budget is going to keep the lights on and the growing maintenance costs for your ERP system.

R “Ray” Wang, author of the best-selling Disrupting Digital Business, offers up five critical success factors to digital transformation in a recent issue of his A Software Insider’s Point of View blog.

Number 1 on his list is to craft a “cultural renaissance,” starting from the top down. “Successful organizations drive digital transformation from the board level on down,” says Wang. He adds that “Organizations that have mastered digital transformation build a continuous pipeline of innovation and a deep bench of execution.”

Number 2 is to start with design thinking and unlocking “solutions to questions that never would have been asked.”

Number 4 on Wang’s list is to apply a “form follows function approach” to tech adoption, and Number 5 is to institutionalize and incentivize the “concept to commercialization” process to avoid taking the safe path.

Making the commitment

I skipped over Number 3 because that’s what I want to emphasize: “commit to business model disruption.” According to Wang, “In this post-sale, on-demand, attention economy, digital transformation is more than a technology shift, it’s about transforming business models and how organizations and brands engage.”

One operating model more and more IT organizations are looking at is to balance between funding core aspects of the business versus investing in the new business and technology innovations needed to compete in today’s dynamic environment.  How can you fully commit to looking seriously at transformation if, like many, you’re spending an estimated 89% of your budget just to ensure that your existing ERP or other critical systems of record are functioning smoothly? Every dollar you spend on maintenance and support of existing infrastructure is a dollar that you can’t spend on disruption and innovation.

Vendors maximize revenue, minimize satisfaction

Most enterprises are paying steep fees for maintenance of critical systems and the forced upgrades needed to stay on current release with their vendors. In the meantime, those vendors you rely on are freeing up resources—and talent—to invest in new cloud technologies to stay competitive themselves. That means the quality and consistency of what they provide in supporting your current environment—let alone the true business value in continued, often forced upgrades—are most likely suffering.

Meanwhile, their business models call for charging you additionally for these new cloud products. You have to ask yourself: How can we limit our exposure? Is this a model that serves our business needs or is it ripe for disruption? What are our options?

According to IDC, in 2017 global organizations will spend $1.2 trillion on digital transformation. CIOs are going to be walking a tightrope as digital transformation unfolds, finding a balance between managing essential legacy systems while shifting funds to digital systems of engagement.

You’ve got to exhibit what Wang calls the “digital DNA” critical to the success of the business.