Digital Transformation Is an Ongoing Journey
A recent Gartner survey of 199 CEOs and senior business executives in industries with intensive supply chains showed that 17% see cost optimization as the top issue to focus on in the near future, followed by supply chain resilience (16%).
Like many of these research reports, there are also some interesting nuggets (behind paywall) that are worth a look in more detail. In the case of digital transformation, the survey showed, for example, that the majority of respondents want to focus on technology, and they plan to increase year-over-year investments in digital capabilities (80%).
What's more interesting is that there is a shift from a general, undefined ambition for digital business transformation toward more targeted initiatives, suggesting that many of these organizations have already passed through the transformation stage and are now moving to more targeted technologies.
Is Digital Transformation Complete?
When it comes to where transformation efforts are targeted, the Gartner survey showed that the most popular areas of digital business were e-commerce/e-business (16%), customer interactions (9%), data analytics (9%) and customer experience (7%).
Does this progression mean then that the process of digital transformation is over? For clarity, Salesforce, one of the big tech vendors that has been bringing many businesses into the digital world, defines digital transformation as the process of using digital technologies to create new, or modify existing, business processes, culture and customer experiences to meet changing business and market requirements.
It is clear that the process of bringing new digital technologies into the enterprise will be an ongoing one, but there must be a point at which the actual transformation process is finished and the addition of new technologies is part of the natural evolution of business.
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Transforming Legacy Technology
Tamar Milstein, chief marketing officer at New York City-based Model9, a specialist in data migration software, pointed out that digital transformation cannot be over, especially for enterprises with legacy platforms as their core systems.
Modernizing legacy infrastructure, as in the case of mainframe modernization, and migrating to the cloud is essential for organizations to stay competitive and relevant. But many organizations choose to start with migrating applications, which may end up being a long and risky project, before they take advantage of infrastructure modernization options, which are relatively low-hanging fruits.
Many CIOs are frustrated with their digital transformation journey. There’s a gap between where they’d like to be and where they are because of the limitations of their legacy platforms. Surveys show that 74 percent of surveyed organizations have started a modernization program but failed to complete it.
Instead of taking an application-first approach, the first step of digital transformation needs to focus on the data, extracting it from legacy systems and moving it to the cloud for data management and analytics. Once it’s in the cloud, organizations can use artificial intelligence, business intelligence and machine learning to generate insights.
“In order to improve the customer experience with machine learning and AI, to reveal insights from data, they need to gain better and faster access to the data by modernizing their legacy infrastructures," Milstein said.
Related Article: How COVID-19 Has Made Digital Transformation More Relevant Than Ever
Digital Transformation and Consumer Demands
The consumer market, which runs on customer interactions, as well as data analytics are undergoing dramatic change. Evolving customer expectations, acceleration of technological innovation and shifts in competitive power are pushing transformation. These changes are revamping the way business is conducted and value is created, said Roshan Pinto, head of manufacturing at Santa Clara, Calif.-based Tavant.
Today's consumer, he said, visits a variety of channels, including websites, catalogs, social media, advertisements and stores, before making a purchase. Online channels are giving customers quick access to information, while online forums are give them a peer perspective on quality or value.
With legacy and disjointed systems, aftermarket processes suffer from high latency and lagged response. This may be because of restrictive technologies and interfaces or high cost of wrap-up solutions.
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“For example, waiting time for a service ticket is so high that it may dissuade the customer from even reaching out. Moreover, legacy systems do not enable the customer to do self-service,” Pinto said. “Additionally, without digital technologies, the customer interaction is constrained by time and geographic reach. This is where the digital transformation plays a vital role.”
Digital technologies offer a better understanding of the customer, help personalize responses, streamline operations, enhance customer experience and improve revenue by serving manifested and latent demands. Digital technologies allow companies to derive total life cycle value from their incumbent customer base.
As such, digital transformation cannot be ever truly finished. So how is digital transformation changing the landscape?
- Social Media: Customer touch points can be identified by using social media and analytical tools. Social media has made customers more comfortable with connecting and engaging with one another and sharing their concerns and thoughts.
- Mobility and connected devices: High smartphone adoption, millions of connected devices using IoT and other technologies and ubiquitous connectivity are creating new opportunities at multiple levels. These technologies are reorganizing and redefining internal and external structure and the process of companies.
- Cloud: Cloud and IoT-enabled infrastructure enable a highly cost-effective, rapidly responsive and elastic IT that is better aligned with business needs. Businesses can innovate faster while leveraging existing systems and capabilities.
- Data and Analytics: Digital technologies connect ecosystem-wide processes so that assets are efficiently managed using predictive analysis of potential errors. Aftermarket digital transformation pushes business strategies to evolve from selling a product or service to a customer experience-centric value proposition.
Beware: Transformations Often Fail
Digital transformation is one of those topics that everyone talks about, but nobody really knows how to do it. Complex change programs are a slow and grueling process, and they suffer from miserable success rates. Analysts report that more than 70% of initiatives fail, said Jon Knisley, principal of automation and process excellence at San Francisco-based FortressIQ.
People, process and technology are the required ingredients for program success, he said. But not all transformations had the right amount of each.
“Early transformation was overly oriented toward technology as the answer to our problems at the expense of the people and process dimensions. The pandemic breathed new life into initiatives that were suffering from fatigue and malaise,” Knisley said.
Investing in Technology a Necessity
Increasing year-over-year investment in technology is not a luxury, said Ruben Gamez, founder and CEO of online e-signature provider SignWell. It has become a minimum requirement to survive in the current market because technology is moving at such a considerable pace.
Those who don't adopt the latest trends are bound to be outperformed by their competitors. Automation and artificial intelligence have taken efficiency levels to a different level. E-commerce businesses are the fastest adopters, especially after the COVID-19 pandemic.
"E-commerce adoption has increased, and so has the competition," Gamez said. "As e-commerce businesses depend majorly on online prowess, agile digital transformation is the lifeblood of this business model."
Companies need to target specific areas where they can scale their technological strength. A generalist approach doesn't work anymore because everyone is using technology, Gamez said. It's critical to identify the core areas that will unlock value in your industry.