What is Digital Transformation and the Pitfalls?

Posted May 23, 2017

A Simple Explanation of Digital Transformation

In the digital era, every business is data driven. This leads to an ocean of opportunities to redefine your business using digital technologies as your backbone. Redefinition of business process is becoming a norm these days; some consultants term this wave as Business Disruption, others term it as Business Reimagination or Reinvention. Whatever we call it, the opportunity is to use the current digital technologies as the backbone to enhance customer experience and/or to increase operational efficiency and/or to generate a new source of revenue. Unlike yesteryears, continuous innovation and transformation is critical for sheer business existence.

During the 1990s, business lifespan was assumed to be about 30 years or so. In today’s world, it has the expectation has declined to 10 years or less. Therefore, unless a business transforms continuously, its very existence may become a question mark.

Digital transformation, in simple words, enables a business to reinvent itself from time to time by using following elements:

Sea of data that a business gathers through multiple external sources such as social media and internal sources over time and drawing intelligence from it
Mobile and smart devices that have been the fulcrum of innovation in today’s world
Automation through robotics and artificial intelligence (AI)
Storage and accessibility of information on cloud

It all sounds exciting and everyone is running to achieve a digitally transformed organization, yet only a few have managed to reach to the finish line. It is not an easy journey. Let us look at some of the common pitfalls that we have been observing in recent times.

The Success Factors of Digital Transformation

Every business in today’s era is trying to use one or more of the above elements of Digital Transformation to redefine itself and address the following three success factors:

Customer Experience
Operational Efficiency
New Revenue Stream

Common Pitfalls of the Digital Transformation Journey

Companies face extremely tough terrain as the digital transformation journey is not an easy one, mainly because of the following pitfalls.

Lack of well defined business process:

In order to understand how and what can be rediscovered/reimagined/disrupted—it is extremely critical to clearly define the existing business process. This sets the foundation for the transformation. Unless an organization is clear about its current business process, it is almost impossible to transform it, or even rediscover it. This in any case is an easy one to address as there are tons of tools available in the industry to ensure that the business process is captured and maintained to the required level or accuracy. More importantly, this needs to be embraced by the organization and every team member needs to understand his/her role in the process and the organization. This sets the foundation for determining what needs to be changed or transformed.

Leadership focus and commitment:

Most businesses find it difficult to go through this transformation journey as they lack dedicated focus and zeal from a C-level executive. Some are on the right trak and have coined a new role to drive digital transformation in their business, e.g., Chief Digital Officer (CDO). This approach is becoming more and more common these days and needless to say, the CDO and its office must run with the digital transformation journey for a successful outcome. Close coordination and cooperation of other CXOs with the CDO is critical to ensure a smooth ride on this journey.

Incomplete or cluttered roadmap:

A transformation roadmap needs to be drawn with extreme caution. More often than not, organizations lack understanding of the true meaning of digital transformation and are unclear on how to reinvent their business and address the three factors for success (see above). Some small to medium-size businesses are under the false impression that by developing some mobile apps to provide accessibility to their customers or internal workforce, or by developing one or two Internet of things (IoT) based solution to enhance their operational efficiency, they have transformed their business and that will result in a positive outcome on all three success factors. This is not digital transformation. Your roadmap cannot be short-sighted. In developing a transformation roadmap, the following must be considered:

Organization awareness and maturity—ease of change enablement in the organization
Proximity to your customer by redefining your business process through digital technology
Commitment to continuous feedback of your customer (internal/ external) during the journey
Close watch on continuous evolution of digital technology
Timeline—a three to five year Transformation Roadmap

There could be many more factors that you need to look at and define your transformation roadmap. Don’t get over aggressive with your roadmap. It’s good to attain a first mover advantage, but there is no harm learning from someone else’s mistake; being a little cautious with your roadmap is not bad at all.

Not having enough technical capabilities:

Digital technology is the main backbone of the transformation. If you look at the banking transformation of 1960s, technology played a key role. And the only banks that survived welcomed and understood technology to the core. Unless the transformation technical team is expert with the day to day advancement in digital technology, e.g., the progressive development in cloud computing, mobile computing, big data analytics, artificial intelligence (AI) and robotics, the transformation will not be successful. The technical architecture and blueprint for this transformation needs to be thought through taking the technical capabilities of the team into account. Global flagship technology companies, such as Microsoft, Google, Oracle and others, are continuously evolving their digital product suites trying to innovate their solutions at a rapid speed to reduce complexity and challenges in adapting these technical solutions by any business or industry. A microscopic examination of the right fit ‘best of breed’ or ‘best of suite’ technology is one the most critical items for the transformation.

Change management—an introspection is a must:

Don’t be be fooled or over confident on your own workforce when it comes to change management of this nature. Typically, this needs to be closely tied to your roadmap, business process, organization size and maturity, to name but a few. Change management has always been the most important aspect of any transformation. Here with digital transformation, you are trying to redefine your business process—this means most of the existing processes will soon be tagged as ‘legacy’. Abandoning existing processes and embracing new ones—in some cases ‘completely new one’ is not easy. This needs to be driven very closely by the CDO in close coordination and support by all the business heads, so that the change can be implemented across the company without much hassle. We have seen many organizations failing to adapt to change and consequently losing millions of dollars without achieving the desired goal of transformation. Be careful—devise a proper change management plan and drive it top down.

Digital security – not matured or lack of confidence:

This is another area where many organizations are still struggling to understand whether it’s safe to go digital. Their apprehension is understandable. Currently, this is one area that is still lacking focus from the technology partners. Either they are improving security, or the security solution is robust. There is a lack of confidence around the anwer. Businesses in the financial sector, trading companies, and companies dealing with customer sensitive information are finding it difficult to expose their sensitive data over cloud. This is changing, but there remains a lack of trust from some these industry group. This is likely to change change pretty soon, but needs to be looked at by technology partners carefully.

Light at the End of the Tunnel

Despite the common pitfalls we’ve outlined here, there are companies successfully engaged in the digital transformation journey at the right pace and that are achieving the desired results. If companies step into this journey with dedicated executive level sponsorship and governance and embrace digital technology based on their desired goal—they will disrupt their business in the right manner and achieve success.