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Analyst Opinion: Digital transformation needs to be built on a strong foundation

25 Feb 16

Digital transformation has already become one of the IT industry’s hot topics, and will continue to grab headlines through 2016. Ovum has found no shortage of organisations globally that are achieving substantial outcomes from their digital initiatives. Building on these successes, experienced managers with digital credentials are being recruited across geographic boundaries to drive change initiatives. However, in this fast-moving market, there is no time to reflect on the success of past achievements. Plenty of organisations are headhunting globally for good managers, and are using industry analysis to get ahead of their competitors.

It is no longer a question of whether an organisation should consider its digital journey, but of how quickly it can start getting the basics in place. Companies setting out on the digital journey should consider the following basic principles.

Digital transformation is different from earlier technology initiatives

Digital transformation is not just about creating mobile apps or adding “digital” to project names and job titles. Most organisations have already been digitising manual transactions for the past 20 years. There is nothing particularly innovative or transformational about putting old business processes online or creating “an app for that.” Today, the world is awash with simple but ineffective apps and customers are routinely complaining about companies on social media for their naivety in doing that.

Digital transformation is born out of generational change in both the workplace and the wider community. In the past, organisations would describe IT as just a tool for achieving particular business outcomes. Today, technology needs to be an integrated part of everything we do. Companies that hope to remain in business must respond to these business realities or risk the prospect of a slow spiral into obscurity.

Digital consumers are looking for something different

The phrase “I’m not an IT person” is fast disappearing from the language of business. Today, everyone is an IT person and comes armed with an array of mobile devices, apps and personal services. The pragmatic challenges of business management and IT management have become tightly intertwined.

The old artificial boundaries between the business and IT have outlived their usefulness because these divisions create structural rigidities within the organisation. Instead, the emerging language of the digital enterprise is about breaking down internal boundaries and driving organisational agility. A good example is the increasing use of the phrase “a shared line of sight to the customer.” The objective is to ensure that all managers involved in a particular initiative share the same direct line of sight, without relying on someone else to translate customer or business requirements. Digital innovation can only happen if the expertise of each manager is informed by their direct understanding of actual customer needs.

There is a need to drive both efficiency and effectiveness

In many organisations, the traditional IT role can be a thankless task. Hemmed in by growing expectations, shrinking budgets, and a diminishing tolerance for failure, some CIOs have opted to circle the wagons to defend their budgets by enforcing the rules of procurement and project management. However, the pursuit of cost efficiency in isolation makes no sense and there is little value in enforcing rules that find the most efficient way to deliver the wrong answer. Shadow IT should not be viewed so much as a corporate problem, but as frustrated innovation looking for leadership.

Think big, start small, iterate fast

When contemplating a digital agenda, many organisations get stuck at the beginning, frozen by the complexity of the task ahead. The solution is to start small by picking low-risk initiatives that have a positive impact on customers. Future success can then be built on a foundation of proven success.

It is time to limit the number of big projects. Success is measured by timely outcomes delivered to the customer, not by the size of the project. In the past, big projects were considered to be a badge of honour on an executive resume. However, big projects now come with a lot of unwanted baggage. Today, many successful managers are resisting the temptation to create big, long-running projects, and are concentrating on short, tightly focused initiatives that deliver measurable outcomes. The key challenge is not deciding what to do, but what not to do. Scope creep is the digital executive’s worst enemy.

Project governance is traditionally built upon the principle of releasing fully functional systems, complete with as many optional features as possible. However, the emerging theory is heavily influenced by mobile apps. These start with a minimum viable product and then iterate quickly with updates that deliver increased functionality. The big advantage of this approach is the ability to leverage organisational learning by listening to customer feedback after each release. In a digital world, it is all about the customer.

Article by Kevin Noonan, research director in Ovum’s Australian government practice. 

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