Delivering a product or service competitively and sustainably is the goal of every business. Sustainability means doing more than keeping the lights on.
Digital transformation is not a technology strategy; it is a business strategy that tightly integrates technology
Typically, a business identifies a vision, develops a strategy to achieve that vision, and creates an operating model to execute that strategy. The operating model is evaluated by how well the strategic goals are met and is tweaked over time to optimize value creation as defined by the vision. External factors, such as market conditions, political and regulatory climate, and social trends, should be accounted for, but the focus is on what can be controlled within the strategic framework. This framework defines how to compete effectively. According to Harvard’s Michael Porter, this is a choice of either providing a product or service that is very different from all others, less expensive than all others, or more tightly focused on a target market.
There is no happy state where all the products/services are unique, everything is cheap to produce, and the needs of every consumer segment are 100% satisfied. Choices must be made.
Saying your strategic goal is to transform your organization digitally is like saying your team will succeed by winning more games, or your finances will improve by managing money better.
These statements are not helpful as a strategy because they are not focused on specific activities that will drive value within the organization.
Behind a business strategy is an operating model customized to generate business success. Incredible efficiencies have been created through now common tools such as word processors, spreadsheets, scanners, and printers. The increase in knowledge sharing and information gathering made possible by email and the Internet is staggering. Recent advances in the use of artificial intelligence, natural language processing, and data analytics are poised to generate a new step-level increase in productivity. In years ahead, we should see this again through harnessing quantum computing, real-time augmented reality, and ubiquitous connectivity to the Internet of Things.
Digital Strategy is about transformation — the change needed to create synergies with customers, employees, partners, products, services, and the information space all around
Tools enabling operational efficiencies are not the same as digital transformation. Digital transformation is the change necessary to execute a business strategy leveraging appropriate technologies.
Let’s take this apart and examine what it really means.
Digital transformation is the change. Digital transformation focuses on changes in engagement. Writing emails instead of letters was only a technology change. The digital transformation opportunity of email was found in contacting ten thousand people as easily as one, customizing the message based on what you know about the person, and providing an easily accessible channel for on-going communication between two people or within a group. Organizations that adopted email technology gained some efficiencies, but organizations that digitally transformed how they did business gained market share and achieved greater success in executing their strategies.
Necessary to execute a business strategy. Efficiencies gained through technology must be carefully evaluated. This is the traditional job of the Chief Information Officer or Chief Technology Officer (CIO/CTO), and it is critical to managing cost and avoiding risk. Trying new things to gain efficiencies is desirable, but if you are going to bet the farm, or at least take a big swing in changing the technology of the organization, make sure it directly supports the business strategy. When Michael Dell reformulated his company to provide massively customized computers, when banks deployed ATMs in lieu of only face-to-face banking, even when Henry Ford deployed the assembly line using standardized parts, they were all transforming how their businesses operated internally, with their partners, and with their customers.
Leveraging appropriate technologies. Faced with the technical decision of leading-edge versus bleeding-edge versus no edge at all, the CIO/CTO is faced with a dilemma. There is not a best practice because there is not a standard organization. Every organization in the world is truly unique. No company has the same combination of vision, strategy, operating model, environmental conditions, customer base, and partners. Even within a very rigid, top-down driven organization, the variations between divisions, branches, and product lines will have significant differences.
How do we determine the right technology, and more importantly, the right digital transformation approach to improve engagement? Leadership must be both aggressive and selective in making technology decisions for digital transformation.
Three questions which must be asked and answered before executing a successful digital strategy and resolving the CIO/CTO’s Dilemma.
1. Does the digital transformation align with the vision and strategy of the organization? There must be no space between where the organization says it wants to go and the method by which it will get there. Whether it is the vision and strategy that needs to be adjusted, or the approach to digital transformation, the key is to ensure alignment.
2. Is the digital transformation synergistic with the operating model, or is it disruptive? Transformation by nature is disruptive. If the approach does not call for significant changes to operations, it may not pass the sniff test. In the more likely event that digital transformation will result in a painful change that breaks the model… celebrate! The purpose of digital transformation is to do things differently, and to be precise, to create greater business value while doing so.
3. How aligned is the organization’s leadership to drive the change? The vision might come from one mind, but the view is for all to behold. Success in digital transformation is correlated to how well the vision is understood and the level of stakeholder engagement. Leadership is the most critical factor in driving change and helping the employees positively engage in that change. This will disrupt what people do, which creates a natural resistance that must be over come. Leaders themselves can be the greatest source of resistance because the change could topple the kingdoms they have built.
Here is the CIO/CTO’s dilemma. It is not unusual for a technology leader to be hired with the express purpose of digitally transforming the organization. That newly hired leader is expected to develop a killer strategy to make this happen, without causing much turmoil in the business and without taking time away from the core business activities. This is not possible and will result in disappointment within the organization and despair by the CIO/CTO.
Success comes from a better understanding of the relationship between business strategy and how it leverages technology, more thoughtful use of technology to engage with people and add business value, and in thinking through the hard questions about how the digital transformation will be executed. This requires a strong CIO/CTO, an engaged business leadership, and overall willingness to change. These are the key ingredients for successful digital transformation and a competitive, growing business.