Why Digital Transformation Is a Never-Ending Process
Earlier this year, Gartner published what it described as a roadmap for transformation to help organizations speed up the pace of digital transformation across the enterprise. In typical scenarios, the introduction to the roadmap reads, the transformation journey is taking large enterprises at least twice as long and costing twice as much as they anticipated.
The roadmap's authors argue this is because of lack of cultural readiness, 53% of the organizations surveyed were untested in the face of the current digital challenge. The flip side of this, of course, is that many other enterprises and smaller companies are a long way down the road in their transformation efforts. Some are even starting to embrace new technologies like edge computing, virtual reality and distributed cloud computing.
It is clear, though, that even for these companies, there is still work to be done to push transformation as far as it can go or even to look beyond transformation. This would seem to suggest that there can be an end to digital transformation; that enterprise leaders will be happy with what they have done at some point in the future. In fact, that may be exactly the wrong conclusion.
COVID Is the Beginning of the Digital Transformation Journey
COVID-19 acted as a catalyst for digital transformation at many organizations, forcing them to adopt new technology, said John Mattinson, operations director at Chicago-based Certero, an IT service management company. The term digital transformation might be a bit of a misnomer, as this implies the transformation has an ending. In reality, it is a never-ending journey.
Digital transformation is about improving efficiencies to gain a competitive edge so why would you want to stop? "With the digital world moving at the pace it does many companies have not yet been able to exploit the technologies that already exist," he said. "Businesses should look at the digital transformation as a shift to continuous transformation to reap the benefits of current and future technologies."
However, digital transformation is not simply about technology. It is about the way company leaders adapt to the pace of change and continually rethink how they can create and deliver value in a digital economy. It is a business strategy, first and foremost. To think this has an end would be a costly mistake, said Isabelle Perreault, an Ottawa, Canada-based management consultant focused on digital transformation.
Digital transformation must be seen in the context of consumers whose habits are a major driver of change transformation. The emergence of digital technologies has empowered customers who demand consistency and immediacy as well as personalized services across multiple channels, she said. Modernizing this experience then impacts supply chains, processes, back-office operations and data management. Hence the term transformation took hold.
This is particularly true of larger, older organizations that have well established distribution channels, brand assets and investments. In many ways, these are strengths but they can also create bureaucracy and complexity that make the organization less nimble and resistant to change. In this instance, simply upgrading technology, creating new digital channels, or moving legacy apps to the cloud will not ensure long-term resilience.
“Transformation for the digital age requires us to upgrade our strategic and operating framework much more than our IT infrastructure. Organizations need to embrace and invest in skillsets and systems designed to continually adapt to the unknown,” Perreault said.
She added that as companies move from predictable value chains to more complex network systems, innovative leaders understand that this is a continual process that must be ingrained in the strategic planning muscles of the organization.
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The 3 Pillars of Digital Transformation
Digital transformation in business is like evolution in nature — a never-ending process. Organizations that claim to have finished transformation are either not well connected to their ecosystem or not well connected to their customer behavior, said Shiva Ramani, CEO at San Jose, Calif.-based iOPEX Technologies, a business services provider offering optimized IT management services. But there are logical points in the digital transformation journey where leaders need to pause and reprioritize transformation activities.
There are three distinct pillars in a digital transformation journey:
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- Replatforming the organization’s IT assets.
- Remodeling operations to become digital, which requires significant process reengineering.
- Recrafting customer experiences to match the digital-first environment.
Sometimes businesses can take the Venn diagram approach to find where all three areas intersect, but sometimes they must do them in parallel. In each of these journeys, there are points of inflection that give 10x returns. “Businesses must identify those inflection points, pause, remodel operations and ultimately claim victory,” Ramani said.
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Setting Digital Transformation Targets
The word transformation indicates there is some type of destination but it's better to think of it as a journey, said Dan Pupius, co-founder and CEO of San Francisco-based Range, a team effectiveness software platform. Each phase unlocks new capabilities which provide further opportunities for transformation but ultimately there is no end.
Moving an offline process to a wholly digital one allows for more flexibility about where people are when they are working. This unlocks the ability for remote work and distributed teams which in turn allows further transformation to how organizations staff and build teams. "For example, many of our customers now do status updates using asynchronous check-ins, freeing them up from spending so much time in meetings — a legacy from their old style of work," he said.
“We think of organizations as organisms that need to constantly evolve. As people adapt to this digital-first mindset, combined with the tools to support it, a profound transformation does take place. Building these muscles for continued transformation means you can more rapidly adapt to change, which in turn makes your team and your business more resilient,” Pupius said.
While digital transformation will never be finished, not every business is going to need the same level of digital transformation so there is a point of diminishing returns when the time and cost will outweigh the benefits, said Bernard May, CEO of the Los Angeles-based digital marketing agency National Positions.
So, a company moving all their inventory onto an e-commerce site and setting up payment processing and shipping may be fine with the level of change they have made and they are effectively done for now. There will be a time in the future where they need to evolve again but that next digital transformation will be fueled by their needs. If an organization has not yet tapped at least 80% of the capabilities of their current digital transformation, there is likely no need to push for another upgrade just yet.
“There will always be a next level that can be reached but there may not be a need to push for the latest and greatest all the time,” May said.