Digital Transformation 101: What are we trying to transform, and why?

It’s pretty easy to be a digital transformation consultant these days. Here’s what you do.

First, you report on the amount of data growth, the increasing rate of change and other exponential factors; you flag up the massive growth of recent, tech-first companies such as Amazon and Alibaba (whilst carefully ignoring those who tried and failed to follow similar models); you list out conveniently acronymised manifestations of technological progress — Social, Mobile, Analytics and Cloud. Oh and IoT. And AI. You get the picture.

Having engendered a suitable level of fear and uncertainty among your target audience, namely executive decision makers (who happen to control consulting budgets), you go in with the scoop: that the only possible response is to transform. Not to tweak, nor encourage stepwise progress, but to make a ground-to-sky, soup-to-nuts matrix-style inversion of the entire organisation.

How should we do this, you are asked. Well, how fortunate you have an answer for that, you say. The response is to run a series of very expensive strategy workshops, which will generate a new vision for the company. You will then review existing lines of business and operational departments, looking at existing processes and advising on the best way to bring them into the new world.

Oh, and you will also propose a cloud-first innovation strategy, which means shifting an organisation’s IT capabilities (planned and legacy) from where they are “into the cloud”. The “cloud” in question just happens to be your data centres, or those of your partner. And thus, you have the company or department in question completely set up for the future.

Strip away the gloss however, and you haven’t done much more than you would have done in years past — that is, a strategy-cum-business-modelling exercise coupled with an outsourcing contract (admittedly to a potentially more flexible infrastructure architecture). The executives involved may not be too bothered that their organisation has not been ‘transformed’, as they now have on their CV that they have overseen a multi-million change programme.

And so, round we go, with consultants taking companies and public organisations a bit further on their journeys. Don’t get me wrong, this is a reasonable outcome but digital transformation it isn’t — which smacks of a wasted opportunity given the amount of effort that went into it. And a source of risk, as all those tech-first companies continue to do all the things they are reputed to do — transform industries, disintermediate supply and demand, and so on.

This presents a conundrum: if this isn’t digital transformation, what is? Perhaps there is no such thing; the term is mere marketing, a sugar-coated way of loosening the purse strings of conservative board members. At the same time, industries are transforming, yadda, yadda, so decision makers should at least do some due diligence on where technology can actually make a difference.

There is an answer, but it is not as straightforward as you might think (it never is, right?), as it means changing board-level attitudes to those key measures of cost, stakeholder value, and risk. You can draw a simple picture, a quadrant chart, if you will — up the side are existing versus new sources of stakeholder value, and across the bottom are existing versus new working practices. The chances are that most of your business will fall into the bottom-left quadrant.

The consequence is simple: that any new sources of value are likely to be encumbered by existing operational processes, while new processes quickly hit a glass ceiling in terms of the efficiencies that new technology can bring. Understanding the dilemma between old processes and new value is fundamental to any transformational business change.

I’m not saying that drawing a picture can change the world, it’s only a model. But being able to perceive your business in terms of how new can create new, even as it makes old more efficient (without throwing the baby out with the bathwater), is profound. It also makes the choice pretty stark — just how much investment (of money, but more importantly, time and political will) do you want to make in the top-right quadrant?

An honest answer to this question will give you the clarity you need in terms of your appetite for transformation. Once you understand this, chances are you might need some consultants to help; you may also decide that outsourced, cloud-based infrastructure gives you the way forward. But at least you will be making decisions with a real grasp of what you stand to gain.