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The State of Digital Transformation

Digital Transformation
The State of Digital Transformation

It is easy to be sympathetic with those developing digital technologies that are frustrated with the relatively slow adoption of digital transformation. By analogy, the internet has significantly changed the way we think and operate our businesses along with our own personal lives. The internet continues to this day to be the foundation for new and exciting possibilities, including further digital transformation. It is no wonder that many are anxious to quickly move ahead and wonder why companies are only taking incremental steps.

One of the reasons for this is that companies are inherently resistant to change. This is partly due to the resiliency needed to continually create products and services their customers enjoy. This resilience manifests itself in many ways that include: processes that produce consistent output, management systems that ensure quality, programs that drive down risk to keep employees and the environment safe, and competent workers that are trained to use the latest standards and best practices. Often these are developed over years and become part of the company culture. These "structures" contribute to reliably make the products and services we depend on every day. Most of us don't think twice when we turn the light switch and discover that the light in the room actually turns on and that it does this almost every time.

This "resistance to change" comes in sharp contrast to the disruptive posture often used to promote digital transformation. There is often an appeal to evolution that argues that change is inevitable and therefore companies should adopt digital transformation or be left behind as did the proverbial dodo bird. This is understandable, but perhaps misguided, if only for the reason that we know that evolutionary change (in the Darwinian sense) results from chance not by design or intent. Asking companies to change, however, does require intent and that demands an appeal of a different sort.

Companies need a reason to change and for that they need at least an answer to the question, "how will digital transformation help my company achieve its goals?"

The promise of digital transformation

Before we can consider possible answers to this question, we first need to understand what digital transformation is. At a very high level it can be framed in the following way:

  • Digitization – the transformation of analog information into digital form

  • Digitalization – is the process of the technological-induced change brought about by digitization (ex. Internet of Things, blockchain, cryptocurrencies, Industry 4.0, etc.)

  • Digital Transformation – the total and overall societal effect of digitalization

The impact of digital transformation is often presented in terms of improved productivity. However, after you consider the cost of undergoing a transformation, it is not clear that productivity improvements, particularity incremental ones, are enough. Companies already have significant investments in technologies that remain mostly unexploited that could be used to improve productivity. Why this doesn't happen is a topic that will be discussed later in this blog.

However, the primary motivation for pursuing digital transformation is not really about improved productivity, although that may happen. It is instead more about creating new ways of doing things that result in different processes altogether. Transformations of this kind are less certain in terms of what they might be, and the nature and extent of the impacts.

We only need to look at companies like: Facebook, Twitter, Google, Amazon, Uber, as well as others to get an appreciation for this. Predicting with any measure of certainty that that these specific companies would emerge along with their specific impacts is something best left to speculation.

What should companies do?

So what do you do if you are a company that is involved in producing, let's say, physical things rather than purely digital products and services, for example, an oil producer.

CEOs for these kinds of companies are correct to question how digital transformation can help them at all. Companies have many other concerns that need to addressed such as: increasing costs, threats resulting from cyber-attacks, increased regulations, and keeping their employees, communities, and the environment safe, to name only a few.

Many CEOs may read about the "Internet of Things" and wonder how this might help their company. They already have sensors and control systems that monitor operations and collect lots of data all on their own secure networks. Perhaps, data could be made more useful by organizing it better. However, the thought of connecting all your sensors to the internet seems like it would add more risk rather than reduce it.

Consideration of other digital technologies such as: block-chain, cryptocurrencies, machine to machine communications and others may also leave companies wondering how these would help: maintain adequate margins, keep people and the environment safe, or generally reduce the level of risk in operating their business.

It is hard not to conclude that digital transformation might just be a set of technologies looking for a problem to solve, and these problems are not your problems.

This is how it it was when such things as: personal computers, the internet, and cell phones, where first introduced. We knew that change was coming but it was not clear exactly what that change would be. The best you could hope for is that when the time came you would have the time necessary to adapt.

How to get ready?

A good question that companies might ask themselves is, "what capabilities do I need to have so that I am ready to make the change when the time came?"

It may not be possible to know what specific skills you will need. However, it is possible to develop the skills and culture to adapt to changes more quickly and in a safe manner so as to increase the certainty that you will have the time you need to adapt to a new way of doing things.

One might even argue that those that are already doing continuous improvement are in a stronger position to adapt to digital transformation or any other changes for that matter. These companies already have a culture that accepts change more easily and that might be the most important thing.

Another capability worth considering is the ability to understand how to transform business processes to new ways of doing work.

This is a skill that in many ways reached its pinnacle following the first introduction of computing. During that time we learned all about business modeling, re-engineering, and the like. This was when the role of the business analyst was essential to transforming business processes to adapt to MRP and later ERP, CRM, CMMS, and other enterprise management systems. You were a business analyst because you new the business and you understood technology and that combination is rare today. In fact, with the continued outsourcing of IT, this role has been eliminated in many companies.

A jobs-to-be-done example

I recently spoke with a company looking for a solution to a problem they were having with generating calibration protocols for customized laboratory equipment to be used by field technicians. This problem involved integration with existing data and documentation. This was a jobs-to-be-done (JTBD) example in an enterprise context and clearly a candidate for digital transformation.

However, no one in their company understood the business or the problem well enough to form adequate requirements and evaluate possible solutions. In fact, the only person who best understood how to go forward was the director of marketing who was given the task because the source of the problem was a customer complaint.

This was compounded by the lack of expertise, they discovered in the marketplace, to build enterprise solutions and who understood their business processes. This was in a part of the United States that has the most high-tech companies than any other, probably in the world. However, most of them, while skilled in the latest agile, programming languages, and cloud-based architectures where heads-down trying to become the next digital technology unicorn ($1Billion valuation) and had little interest in enterprise JTBD problems using technologies they consider to be old and obsolete.

This is not a unique situation, although, it hard to know how wide-spread this issue is. However, it does appear that digital transformation is not really directed to help existing companies and is more about developing the next Facebook or Uber.

Preventative measures

Many companies have significant challenges and problems that need to addressed. They also have (for the most part) substantial untapped capabilities buried in their existing enterprise platforms that remain to be exploited. These may not be "emerging technologies" but they are definitely not obsolete either. The argument that companies need to tear down existing technologies and infrastructures in favor of the promise of something new and shiny should be considered cautiously. Change no matter how beneficial the outcome comes at a cost that needs to be accounted for.

The diminishing of capabilities primarily in business analyst roles may have come at the expense of excessive cost reduction strategies brought about by the aggressive outsourcing of IT along with re-platforming to the cloud.

It may be time for companies to bring back the role of the business analyst to help transform business processes to tackle the jobs-to-be-done right now and to help transform business processes when digital transformation strategies are more mature. Combining the role of business analyst with a continuous improvement culture is a powerful combination to prepare for change, planned or disruptive.

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