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12/4/2019
08:00 AM
Cynthia Harvey
Cynthia Harvey
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What Digital Transformation Is (And Isn't)

If you're confused about what digital transformation means, you're not alone. But survey data highlights some agreement about how it's changing the way companies do business.



Over the past few years, enterprise leaders have become captivated by the idea of digital transformation.

Perhaps that shouldn't be surprising given all the hype from analysts and vendors. These days it’s tough to find an enterprise technology product that doesn't advertise itself as a key ingredient in digital transformation. And expert analysis is full of promises that sometimes seem too good to be true. For example, Forrester proclaims, "Digital technology dramatically improves the economics and capabilities of every business. Using hardware, software, algorithms, and the Internet, it's 10 times cheaper and faster to engage customers, create offerings, harness partners, and operate your business."

That kind of promise is certainly enticing. But it's tough to find agreement on what exactly "digital transformation" means.

For some organizations, it just means getting into ecommerce. For others, it involves doing away with paper-based processes and becoming more efficient. Still others are embracing cloud computing, DevOps, automation, the Internet of Things (IoT), and artificial intelligence (AI) to become more competitive. And many seem to be doing most of this and more.

Everyone does seem to agree that digital transformation involves harnessing technology to achieve business goals. But even those goals seem to differ from company to company. Some want to generate more revenue. Others want to do a better job engaging customers, and still others are hoping to become more innovative and disrupt their industries. And of course, some are hoping for all the above.

So, what do companies agree on about digital transformation?

The following slides take a closer look at some survey data that helps shed light on what digital transformation is and isn't. It examines organization's track records with digital transformation so far and considers where it might take them next.

Image: Pixabay
Image: Pixabay



1. Digital Transformation Is a Priority

Image: Pixabay
Image: Pixabay

Enterprises may not always agree about what digital transformation is, but they all agree that it is something they should be doing. In a survey sponsored by accounting firm BDO, executives cited "developing a digital transformation strategy" as their No. 1 digital priority. Middle market executives, in particular, were likely to say that a digital transformation strategy was a key goal.

That could be a good thing because experts say that organizations need engaged leaders with a clear strategy if they want to succeed at digital transformation. But making digital transformation a priority and developing a strategy alone are not enough.



2. Digital Transformation Is Hard

Image: Pixabay
Image: Pixabay

Quite a few surveys have revealed that businesses find it difficult to achieve the goals they set for their digital transformation initiatives, and the process of reaching those goals often takes longer than expected. According to McKinsey & Company, only between 16% and 30% of digital transformation efforts succeed. Another 7% experience some short-term success that became unsustainable. Large companies in non-tech industries report even lower levels of success.

Some research paints a slightly different picture, however. In the BDO survey, 71% of companies pursuing digital transformation said that they have seen increases in revenue from digital initiatives, and 74% reported increasing profits. Yet even in this survey, respondents pointed to some key challenges with digital transformation. Fifty-four percent said that a lack of skills or insufficient training was hampering their digital transformation efforts.



3. Digital Transformation Is a Broad Effort

Image: Pixabay
Image: Pixabay

For most enterprises, digital transformation isn't just one thing. According to McKinsey, around 80% of respondents said that digital transformation efforts involved either multiple functions or business units or the whole enterprise. A separate survey from vendor Wipro found that on average, enterprises have embarked on eight different digital transformation projects in the past five years. In the U.S., the average was even higher with more than 40% having undertaken more than 10 different initiatives.

Often digital transformation is more than just deploying a particular technology -- it involves changing a business's fundamental model, processes, and culture. Given that, it's likely that organizations will need to embark on even more digital transformation projects before they achieve the widespread changes they hope for.



4. Successful Digital Transformation Requires Good Leadership

Image: Pixabay
Image: Pixabay

Nearly every study highlights the role that leadership -- including executives other than the CIO or CTO -- plays in successful digital transformation. For example, the factors that the McKinsey study identified as being more likely to lead to success with digital transformation included the following:

  • "Management team established clear change story for transformation."
  • "Senior managers fostered sense of urgency for making transformation changes."
  • "Senior managers encouraged employees to experiment with new ideas."
  • "Senior managers ensured collaboration between units on transformation initiatives."

Enterprises seem to be getting the message. In the BDO survey, nearly half of respondents (46%) said that a non-tech C-level executive was leading the digital transformation initiative.



5. Successful Digital Transformation Empowers Workers

Image: Pixabay
Image: Pixabay

The opportunities for customer engagement with digital transformation get a lot of attention, but it could be even more important to use digital transformation to open up new opportunities to engage and empower your workforce. According to McKinsey, the most successful digital transformations use formal mechanisms to reinforce new ways of working, and they give employees a vote on where and how digitization is implemented. In addition, these companies gave workers easy access to information and self-service tools that helped improve their productivity.



6. Successful Digital Transformation Embraces New Tools

Image: Pixabay
Image: Pixabay

Companies seem to agree that digital transformation is going to require some new technology. For example, in the BDO survey, 72% were planning to replace or upgrade legacy IT systems as part of their transformation initiative.

That could be a good approach. The McKinsey survey found that organizations that were succeeding with digital transformation were deploying more new tools than those whose efforts were falling short of objectives. Successful companies were more likely to deploy AI, machine learning (ML), and IoT technologies. Cybersecurity tools also seem to be particularly interesting for organizations involved in digital transformation, as cyberattacks are viewed as a big potential threat to these efforts.



7. Digital Transformation Is Not Just About Technology

Image: Pixabay
Image: Pixabay

But while technology is important to digital transformation, the efforts are not only -- or even mostly -- about new tools. If you Google the phrase "digital transformation is not," the top four autocomplete options are all some variation on "digital transformation is not about technology." People and business processes are at least as important as new technology. In fact, when Wipro asked people about the barriers to digital transformation success, respondents divided their responses almost evenly among budget, people, technology, and process, with process getting a slightly higher percentage of the vote.



8. Digital Transformation Is Not a Destination

Image: Pixabay
Image: Pixabay

Digital transformation is not something you can accomplish in a month or a quarter or even a year. Rather, business executives seem to understand that it describes a long-term shift in their way they do business.

In the Wipro study, nearly three quarters of respondents described their digital transformation goals as either "moderate and incremental" or "moderate and extended." And it's probably good that companies are taking the long view because they also said that on average it takes about 16 months to see any results from a digital transformation project.



9. It Isn't Too Late for Digital Transformation

Image: Pixabay
Image: Pixabay

Most companies have been working on digital transformation for a while. More than three quarters (76%) of the respondents in the Wipro study said that their digital transformation efforts had already been underway for at least 18 months, and in the U.S., a majority (52%) had been in the process for more than two years. However, companies that aren't that far along in the journey shouldn't give up hope. Only 13% of those surveyed said that companies that started their digital transformation later than others had no chance to beat the competition. By contrast, 87% believed that latecomers still had time to catch up with the early adopters.

Cynthia Harvey is a freelance writer and editor based in the Detroit area. She has been covering the technology industry for more than fifteen years. View Full Bio

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