The 3 phases of successful digital transformation

...And why the CIO post may be split into several roles during the process.

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David Kennedy: 'Companies must embrace continuous change/improvement concepts and integrate their own internal disruptions to meet the changing market conditions.'

As the IT market continues to mature we will see a fundamental shift in the way we identify our leaders.

Just as the medical profession has divided the capability of doctors into specialisations, the IT industry will have to refocus to better enable a company to succeed. Increasing the focus on certain aspects of information and technology will increase the ability of the company to succeed in today’s market.

The CIO will be split into several roles: chief technology officer, chief digital officer, chief cloud officer, chief marketing officer and perhaps even a CComO (chief communications officer). Never before has communication and collaboration (including information partnerships) been so tightly coupled with success.

And so, everyone is talking about his or her digital strategy and digital transformation. So what exactly does it mean?

Let’s get something straight from the get go: Digital transformation means different things to different companies. Digital transformation is a programme of work to deliver the business strategy via technology-based solutions.

I am currently working with several companies that are deep in their digital transformation. They have a variety of business goals that include:

• Creating internal incubators to combat the threat of market eradiation and potential disruption.

• Increasing customer stickiness through a deeper understanding of customer behaviours.

• Linking technology and marketing to increase revenue.

• Gaining a holistic view of potential disruptions to the business from new technologies and competitors.

• Exposing APIs to allow external collaboration on information and systems.

• Diversifying the products and services through the use of technology, sometimes automated processes to reduce cost.

• Increasing the interoperability of internal systems and reducing OPEX to make them hum.

They all have the same fundamental attribute – increasing customer value through better use of information. For example, knowing that a customer has just switched to a pre-pay monthly cell phone account could indicate he/she is looking to move providers. This activity could trigger a notification to marketing that can offer a simple six-month free Internet-based streaming subscription service to reduce the flight risk. The cost could be counter balanced by sharing demographic/usage information with the streaming provider to help improve their service. This would be a very small investment for the telco and deliver customer stickiness.

I have noticed a number of common mistakes from companies that are discussing “going digital”.

1. Not having a clearly defined, agreed strategy based on a solid business case to include:

• Goals, focused activities, to keep the company on track. You would be surprised at the number of companies that are “wandering” into a digital transformation.

• Research to fully understand the customer/competitor relationship. This will allow you to increase value in the quickest time.

• Measureable benefits allow you to monitor and know where and when to exert more energy to succeed.

• Exit strategies. When a predefined fiscal envelope has been expelled without the realising the benefits. After all, not all ideas are successful.

2. Trying to do too much. It is important to start small and potentially fail fast than go big and fail spectacularly.

3. Misunderstanding the importance of cultural change. Some people do not want to change and can derail your efforts completely and eradicate any value that was initially thought to be achievable.

4. Thinking that a digital strategy will make a company unique in the market (ie.“Everyone is taking about it”).

5. Not truly understanding the benefits to sharing information with other companies and other digital channels that are available to the company.

So if you have completed your business case and concluded that you need to increase the use of technology/information across your organisation to increase customer value, what is next?

Without an internal incubator, you run the risk of being blindsided by someone who will disrupt your business models.

David Kennedy

Read more: 2016 CIO100 research commences

Creating a good digital strategy takes three main phases.

Phase one: Enlightenment

First we need to understand our business strategy and how a digital strategy will better enable the delivery of the business strategy. Identify the business goals and the barriers to their success. Can improved information usage and technology improve the potential to succeed in delivering the business goals? If so, then you need a digital strategy.

List out the business goals and what technologies enable each one of them.

Phase two: Smelling the coffee

• Take a moment to stop, look and listen to your competition. Understanding the competition will better equip you for the journey.

• Look for potential partners to enable both your strategies. The future holds many more “information partnerships” to increase customer value.

Read more: Where is technology leading us?

• Spend time with customers to understand what they really want. Create a customer engagement feedback loop to continually assess your progress.

• Review the linkage between the technology and marketing roadmaps.

• Internally champion how new products and services align to the business goals.

• Understand the company’s ability to assimilate change. Do we need to make strategic hires or make organisational changes in order to empower the company to change?

Create a timeline for delivery of the digital enhancements.

Phase three: The doing

Create a set of short processes to:

• Identify an improvement opportunity. This could be a new product, system/information enhancement or new capability or partnership.

• Quantify the opportunity.

• Provide the ability to quickly resource the opportunity.

• Ensure progress reporting is in place to manage the benefits realisation.

• Test the cultural change impact.

• Create a channel to go public with the ideas that work and fail fast those that are not delivering.

Blindside defence

The best digital strategies, in my opinion, are realised outside of the normal business processes. This entails creating an internal incubator to disrupt your own business models.

Without an internal incubator, you run the risk of being blindsided by someone who will disrupt your business models.

Some benefits of internal incubators are they are usually cheap and easy to set up, they are able to find and deliver real value in a fraction of the time and cost of full size projects, and they can be a great motivational tool to include staff in real innovation outside their daily tasks.

Disruption, just as change, is constant. To survive, companies must embrace continuous change/improvement concepts and integrate their own internal disruptions to meet the changing market conditions.

One last piece of advice: Do not forget decommissioning costs. These can seriously erode your financial benefits that are described in the business case and make you look silly if you overlook them.

David Kennedy (David.Kennedy.NZ@Gmail.com) has embarked on his own career transformation. For more than 20 years, he worked as a CIO/CISO in public and private sector organisations across the globe before working as an independent business strategy consultant. These days, he works with management teams and board members on their strategies regarding “going digital”. He has an MBA from The University of Edinburgh and is on the faculty of the CIO Executive Program at the University of Auckland. The latter, he says, allows him to mentor the next generation of business technology leaders.

Read more on the topic:

Fostering a culture of digital DNA is important in order to succeed in the digital age, but who should lead this task?

How New Zealand Enterprises can ensure they are the disruptors – and not the disrupted - in the fast-paced digital environment

Gartner survey shows digital business leaders are pulling ahead of the pack

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