What is Digital Tranformation
Digital Transformation is one of hot buzzwords at the moment, but it means many different things to many different people. I’ve been working with people on business and digital transformation for nearly a decade now, and I have been trying to find a way to standardize the definition to help people understand what we are aiming for and what the journey is like.
In order to explain Digital Transformation, we should take a look at what a ‘non-transformed’ business looks like, what it struggles with, and why it wants to tranform. Then we can look at what changes businesses need to make to achieve that transformation.
Whenever you try to define normal, you’re really trying to capture the center of a bell curve. While there are always exceptions, there is a large group of people near the middle with similar characteristics.
Most business have some fundamental processes they follow to achieve their business outcome. They typically have been working that way for years. They will have adopted technology over the last few decades and used it to facilitate how they work. They may have implemented CRM or ERP systems, perhaps websites with online ordering capability, or digital payment and receipt capabilities.
Through the last 5 or 6 decades there was a swing from custom software, which was the only choice in the early decades of computing, to commerical off the shelf software (COTS).
This shift to off the shelf software has made a culture that ‘the Business’ does the business, and IT just supports them in various ways, desktop support, Office productivity software, application management, and software development. (Perhaps replace Chargeback IT with elevation of CIO position to C-Suite) Chargeback IT models have reinforced this idea, that Business and IT are seperate, independent concerns.
The business asks for software to meet its requirements, IT gets tasked with a project to meet that requirement, either with COTS, or custom software. Even as, more recently in this more digtal age, the pendulum has been swinging back towards the side of custom software over COTS, it’s IT that has taken on the increase Software Engineering work because it’s “technical stuff, not business stuff”.
The Digital Transformation pressures businesses are feeling now are increasing. The pace of technology revolution is ever increasing Consumer (and employee) expectations are constantly rising thanks to trends like the “consumerization of IT” and Intelligent Enterprise. Business now have agility challenges; they need to adapt to the evolving demographics - millennials. Those that can’t adapt fast enough are losing relevance, and some are even dying.
A natural consequence of the contention between businesses wanting change and IT wanting stability, supportability, platform re-use etc has been “Shadow IT”. This is the practice of Business groups creating their own pockets of ‘IT’. Buying Cloud and SaaS platforms that enable them to get software without traditional IT concerns, like infratructure or procurement. Shadow IT is almost always frowned upon as its dangerous/disruptive/insecure/badly managed, and normally ends up being merged into the traditional IT groups or replaced with the ordained enterprise solution eventually.
What’s the Desire
Businesses now want to change, to evolve to a new way of working. They want to mimic the success of the startups that are disrupting their core business or other industries. They want to be able to differentiate their services and create unique and compelling experiences for their customers and their employees.
They are looking for the results that things like Agile, Lean Startup, and Open Source promise:
- They want to be able to make decisions faster
- bring products to market faster
- Tighten the OODA loop so they can act on feedback and pivot faster.
They want to ‘do Digital Transformation’, as they are being told thats the way to evolve, in some cases survive.
What’s the trouble?
The challenge they have is understanding what that really means. They dont have a clear idea what’s different between themselves and the industry disruption success stories. “What do they do differently?”, “What causes the startup to be successful?”. These are challenging questions for established businesses to get to grips with.
Many times, they have invested in ‘digital’, they have their CRM systems or their website, they are ‘digital’ assets. So that begs the question: “What’s the tranformation part?”, “Do we need a Digital Organization?”, “Do we need an Innovation Organization?”.
Existing established businesses also have challenges startups don’t:
- Existing customers that need supporting
- Existing organization structures that people like and are comfortable with
- Existing leaders who know how the busines works and dont know how digital works - they play to their strengths
- Existing legacy systems that support the above, but can be difficult or expensive to change
The combination of all these challenges creates an inertia - they find it hard to move the business towards any goal.
Common ‘Go Digital’ Strategies
There are several common ideas that I have seen people jump to. I’ve boiled them down to this list when I’ve ordered from bad to better:
Get a new website / CRM / ERP
This doesn’t really transform anything. It’s a new digital asset but it normally supports the same business processes. It normally takes some time to get these things live, and while they’re being built the requirements can evolve like they did to the last iteration.
Doing software development in an agile way will have benefits. If they do it well and really adopt the mindset, it can have a lot of benefits. However, most of the times I have seen IT departments go agile, it’s really waterfall planning with a planning session every ‘sprint’ to decide which bit to do next.
So really, changing the way a team in IT organizes its todo list can provide localized benefit, but still isnt transformative
Establish an Innovation group
Innovation Teams are not a really new idea now, they have been common for a decade maybe. They are often some new group of people, with a charismatic leader and some strong technologists, that get tasks with ‘innovation’. What’s often lacking are things like success criteria or plans for adopting output back into the business.
The best outcomes I’ve seen from these are new point solutions, kiosks or mobile apps, that have cool interfaces or fix something for the business, but end up like a COTS product installed by traditional IT, and sometimes never getting another version as the innovation team has moved on to another product so they eventually get shutdown.
Innovation teams sound good to the board/the street but how do you bring the innovation back to the business.
Get a Digital Group
The ‘Digital group’, increasingly led by new Chief Digital Officers is a more recent version of the Innovation group. Digital groups are often tasked with ‘Digital Transformation’. Too Often they end up working between the business and the IT group, finding niches areas in the business process where ‘digital’ can have an impact. Creating similar point solutions or one-offs that Innovation groups did. Perhaps with a larger permanent staff of User Experience and Engineering they can do better at the support and maintenance of their solutions.
Create an internal startup to disrupt yourself
This is by far the coolest sounding idea, and a much bigger bet than any of the others and it works well where i’ve seen it done properly. You basically get people to make a startup version of your own company. They work to create differentiated business processes, to create digital only versions of your non-digital or hybrid-digital offerings. They are separate from the traditional business and IT teams and have some autonomy over their business and technology choices.
Where I’ve seen this fail is when people bring it back into the main business. They hand the new digital thing to the old non-digital business which uses its existing mental models to run that new business. When this happens the ‘magic’ of the new bit fades away over time.
I think they work when you move the old non-digital business to the start-up. They cannibalize the old business units and migrate the business itself to the new systems and processes. This is a much harder task and the inertia we talked about before fights this all the way.
So, if these aren’t the optimal strategies, what is Digital Transformation?
What is Digital Transformation?
My definition of Digital Transformation:
A business is digitally transformed when there is no separation between the business structure, and the digital systems that operate that business.
I think when business get to this point, they are one structure that achieves the business outcome. That structure is one org chart, with the overarching metrics of success being attaining the business goals.
We need to stop thinking about a Business group that makes a request of IT, and the IT groups that decides to buy COTS and adapt or to implement its own. We need to start thinking about a combined group that operates the business entirely and owns the software that supports it.
(Note: This reinforces and is reinforced by the modern architecture paradigms that software should mirror the business structure through domain oriented microservices.)
I think in a Digital Business, there is no Chief Digital Officer, at least not as standard alone C-Suite position. We shouldn’t think of Digital as being separate to Operating the business. We should operate a digial business, using our digital and traditional channels, enabled by systems which map one to one with our business structure and processes.
If the CDO runs an organization that does something important, it means that important thing (normally providing some technology solution) is not part of the business, which breaks our definition.
So, a Digital Transformation is really about changing our mindset. It’s about the belief that business technology is part of the business. We have already made movements towards this as an industry. Agile engineering, Product Ownership diciplin, microservices, Shadow IT initiatives. These are all common and successful movements because they more towards this more natural and successful mindset.
So how do you get there?
This is the hard part, changing the mindset involves many things:
Software Engineering becomes a business concern
It’s not shadow IT, its business-oriented software. This is the mindset behind microservices and Domain Driven Design. Building software for the business with the busines invovled all along.
Software engineers need to think about the business
One of my great complaints about traditional IT is the propensity to concentrate on the tools you have/know, and look for ways to reuse them, along the lines of ‘to a hammer everythings a nail’.
Specializing technology people into the SAP folks, the CRM folks, the custom dev folks encourages this thinking and reinforces the boundaries. Putting technologists inside the business organizations can help re-orient their goals. Have the think about business challenges and solutions, not technologies first.
Businesses have to develop their own digital systems as products
This is a common theme in the Agile world and is also important for digital transformation. The business team should think about their products to include their technology platform. They should see them as the same thing, evolving together continually.
One of the main problems with IT projects is the baked in assumption that the software will be finished, the project will be over, and everyone will be happy. We know that isn’t true though, the business keeps evolving, they update their requirements, and they want more ‘innovation’. They need it to keep differentiating and competing in the market.
Even when they use COTS, businesses should think of it as their product. Sometimes it won’t need to differentiate too much. HR software is an example of where people dont seek constant innovation to differentiate as much. However, they do need to think of the experiences they provide to employees: are they keeping them effective, or are they wasting their time with inefficient processes and software?
Become an agile organization
Get software engineering to be truly DevOps and Agile enabled. This means changing the mindset set around requirements definition. Get the business to share in the ownership of software quality. They need to work iteratively with the technology folks to keep evolving the ‘product’.
Get the software engineers to focus on the overall goals. Don’t use metrics like Lines of Code written, User Stories complete, bugs fixed etc. Create metric on sales, reviews, sign-ups etc, whatever the business is trying to do.
Create an open by default culture. People in businesses talk, they collaborate, and they share information and ideas. People in these new style businesses should too. Because it’s one team, the business and software engineers should be doing that too. They should be working hand in hand all the time. One of my favourite teams to talk to about this is Microsofts Azure DevOps team. They completely moved away from traditional software engineering metrics and only look at metrics based on their customer usage goals.
Create Modern Software
We have lots of new (and some old) software patterns that support this structure.
- Microservices thinking
- Domain Driven Design
- Integration through Events
- API first
- Open by default software
What happens to IT?
This might sound like it’s a big change, and it is. It called transformation. These changes though are an evolution, they aren’t all or nothing, but more like a continuum of improvement. Every change you make towards the good sets you up for success, and the benefits are often cumilative.
It also might sound like I am forgetting about some important factors that IT also manages for the business:
- Common infrastructure like Phones, Messaging, Collaboration etc.
- User Management & Provisioning - New accounts, disabling leavers accounts, new Laptops, Desktops, etc
- Common tech facilities - Printers, Meeting rooms etc.
- Infrastructure support and maintenance - the servers that these business systems run on for example.
- Legacy, big package support
I think a LOT of these responsibilities will go away eventually.
Phones, Messaging, and Collaboration
These are being replaced by cloud offerings. Microsoft M365 offers Windows, Teams, Office 365 etc on this evergreen cloud hosted basis. There isn’t really a lot of management here compared to how it used to be, and the amount is decreasing over time.
User Management & Provisioning
This again is getting more automated, and that trend should continue. As we start to put more technology people in the HR business unit, we can start to get more automation around this. I expect more outsourcing type services that can manage laptop provisioning the same way mobile companies can issue company linked mobile phones.
Common Tech Facilities
This can start to be treated like facilities. As workforces digitize and distribute the need for these services decreases, they are also simpler to setup and manage and could probably shift into a more traditional facilities group.
Infrastructure and Legacy Support
The move to cloud based modern systems over the next decade will greatly reduce, probably eliminate this need for most businesses. Instructure, security, networking - all these things are becoming automated through code in the cloud. These can all be managed by the businesses that want the software that needs them.
So is IT dead?
I predict that in 30 years time, good businesses wont even have IT departments anymore. ‘Big lump of IT’ thinking will be gone. It will be business software in the cloud, and physical things and common services will be managed like facilities.
The caveat I have here is that that matrixing organizations for tech skills and tech communities makes sense. Businesses will also benefit from common strategies for software development, integration etc.
I think the traditional CIO role will be replaced by a Chief Technology Office who will focus on these ‘Center of Excellence’ type concerns. The CTO is unlikely to be a real C-Suite role, but a close advisor to the COO, who will need to be the digitally fluent operator of a digital business.