Digital transformation is a buzzword that cynics suspect of being popular mainly because it is so vague and applicable to pretty much anything. Outsourcing email to a SaaS vendor? Digital transformation. Launching some half-baked social media initiative? Digital transformation. Something — anything! — involving the blockchain? You better believe that’s digital transformation.
Here’s the problem. The examples I just cited are perfectly valid initiatives — but they’re tactical, not strategic. If this is all that’s happening, the vaunted “digital transformation” is paper-thin, as is its contribution business results. Yet, too many companies are only dipping a toe into the digital waters.
One of the big warning signs of an organization that is not fully committed to the new way of doing things is, perhaps paradoxically, the creation of a dedicated “digital” department. The appointment of a Chief Digital Officer (or CDO) could be taken as an indication that digital transformation is indeed a C-level priority. However, a closer examination will all too often reveal that the freshly minted CDO does not actually report directly to the CEO, and that the CIO (who does) continues to be measured and incentivized according to the same narrowly technical and tactical metrics as before.
Make It Strategic, Not Tactical
There is a lot of talk about enabling more strategic alignment between the business and IT, but in most organizations this alignment remains at the level of talk. Gartner analysts talk about the need for “versatilists” as opposed to technology specialists, citing statistics such as their projection that data center infrastructure will only grow by 0.5% in 2018, and that by 2025, 80% of organizations will have closed down their data centres entirely, moving wholesale to various forms of cloud computing. However, this transition will be hampered by organization and incentive structures that reward business as usual.
One of the big warning signs of an organization that is not fully committed to the new way of doing things is, perhaps paradoxically, the creation of a dedicated “digital” department.
Digital transformation holds out the promise of navigating that transition successfully, both for individuals and organizations. At a Forrester event I attended recently, the talk was about the fast-changing requirements imposed on companies by the combination of newly empowered customers and digital technologies. This has the potential to be an existential risk for companies whose competitors achieve a successful transformation before they do. The IT agility required to navigate that bottleneck is therefore directly connected to business agility and even viability — but it is being held back by outdated thinking.
Jeff Bezos of Amazon understands this intrinsically. When he talks about how customers are “divinely discontent” and always expecting more, his thinking is also reflected in everything that his company does.
The strategic thinking used to be that companies should focus on the basics of their business, whatever that might be. For most companies, this meant that IT was a back-office function, important but not strategic, because the axes of competition were elsewhere. With the rise of newly empowered customers, a new arena emerged, which many existing players were poorly equipped to navigate. Even worse, the entire nature of the competition in this new space is different.
Focus on Customer Experience
The received wisdom of the past two decades has been based around Professor Clayton Christiansen’s “innovator’s dilemma,” which has often been interpreted as slowing down innovation, because of the risk of overshooting customers’ requirements. The rise in the importance of digitally mediated consumer experiences does not operate in this way. It is impossible to overshoot on customer experience, and it is becoming an increasingly strong differentiator for both B2B and B2C companies.
Focus on the customer experience, or CX as it is ungracefully known, does not mean simply launching a new website or mobile app as an interface to existing systems and processes. The sorts of customers most likely to be early adopters and to be most sensitive to these types of experiences as a decisive factor in their choice of supplier are precisely the ones most likely to notice and complain about any disconnection, interruption, or incompleteness of that experience.
The only way to deliver a joined-up experience to these newly empowered and strategic customers is to have a joined-up organization behind it. Giving IT different incentives from the business, and attempting to wall off digital transformation as its own separate initiative, will doom those efforts to failure.
To succeed, organizations must truly embrace the nature of digital transformation, integrating IT throughout every facet of their business. What does it mean to shut down data centers and move to the cloud? Which long-held assumptions no longer hold true? What new offerings become possible? Which routine annoyances can now be dispensed with, and what new skills should be invested in? These are questions that an isolated CDO cannot ask — but they can be asked, and answered, by the CIO.
