Digital transformation isn’t just a technology strategy; it’s a strategy to leverage technology to enable new business models, new products and services, and new strategies — and drive business growth.
But to capture the opportunities, business leaders in general and CIOs in particular must look at and beyond technology and data to propel their organizations into the digital vanguard. Executives need to spot the business potential in emerging technologies and formulate winning strategies accordingly, and they also need the capabilities to lead digital transformation and innovation initiatives effectively.
A panel, including Gartner Distinguished VP Analysts Whit Andrews and Gene Phifer, participated in a virtual discussion of the issues in mid-2019.
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This article recaps the key points, edited for brevity and clarity.
Challenges of digital transformation
Digital transformation is a convenient way to put a term on a whole set of things that are changing. The Gartner perspective is that digital transformation certainly includes a lot of technology change, but also cultural changes and other ways in which we use the digital tools that are available.
When looking at digital transformation, we talk a lot about how business models are affected and internal operating models, and it’s clear that you need to be creating new products and services to compete in today’s chaotic and complex environments.
- What does that mean for how you make money?
- What is the operating model?
- What are the processes?
- How do you implement the business model?
All of those things are changing at different paces, in different geographies, for different types of products and services.
That is what digital transformation is about.
Technology’s role in digital transformation
Technology is one of those areas where it's incredibly difficult to stay current with what's going on. The pace of technology change is incredibly fast — and accelerating — and CIOs need to have a good handle on where technology lies.
Think of the technologies we're talking about right now. Blockchain has shifted in terms of what people are asking and how they're understanding it. It's going very swiftly through our Hype Cycle. Artificial intelligence continues to grow in interest and excitement. The Internet of Things (IoT) and edge computing are almost acting in parallel in the opposite direction.
Technology is in flux
There’s digital twins, the advent of analytics, augmented reality, virtual reality, mixed reality. Some of these “bright shiny objects” are absolutely valuable, but there's a lot that aren't maybe quite so bright but are still critical.
All of these things have business impact. Once you've learned those things as a technologist, it’s only worthwhile if you can bring leadership to the table.
Proximity is key. You have to place people with IT skills in the business units and you need to place people with business skills in IT units.
If you can then show people that you understand the impact and understand the technology itself, you can help the business move that forward.
Developing a digital transformation strategy
Many companies are still focused on cost optimization of processes that they're using to operate. In many cases, it's really not about best practices, because best practices are for well-known environments. When we think about digital business and leadership, there are examples that we were all aware of, whether it's the Amazons or other digital giant kinds of ideas and new business models.
In some of those environments, good practices are evident. In other markets, where our clients are investigating, piloting, assessing new markets and operations for future larger investments, they're making up the practices.
It's important to understand the environment clients need to look at: where they're trying to play, what is required, what are the new digital competencies and where do they need to invest? Many uncertainties still exist.
Specifically, with new strategic plans, old processes may not work. You may need to do more planning more frequently. You may need to have longer time horizons, change what you're planning for and what you're piloting, or find the proofs of concept that are important for driving change in the business or internal operating models.
Leadership’s calculated risk for digital transformation
Fortunately, CIOs have proven to be remarkably adaptable and agile in dealing with these significant changes. For example, one of the largest changes is that the role of the CIO has shifted radically from eliminating all risks from the enterprise to helping the organization take strategic calculated risks in the digital era.
Digital is really all about taking risks. It's about experimentation, using technologies which when combined have unintended consequences, but frequently have great benefits for customers. They can create revenue, but may also have ethical issues or unintended consequences.
Incorporating digital has become all about helping the organization to take good risks in a calculated fashion rather than having 99.99% reliability on all systems, consistency and zero failure, with failure not being an option.
Right now, failure has become a mandate in terms of how to embrace taking risk, but this is one of the most difficult things for any enterprise to do. For example, virtually all boards of directors say they want to explore digital opportunities. However, virtually no board is really happy making significant change and no organization finds it easy.
We are past that moment of experimentation and are moving to how to actually deliver value. More and more CIOs are playing a very forward role in revenue generation, which is a significant shift in the role.
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Design thinking is all about the need to accept risks. Traditionally, IT has been risk-averse: If you fail, you get fired or you suffer consequences. Leaders have to accept risks to the point where failure is accepted.
Two critical aspects of failure we’ve learned from design thinking are to fail early and learn from the failure. If you don't fail in many design thinking exercises, you're not being aggressive enough, you're playing it too safe.
The idea is to start with a large set of potential opportunities and then narrow that down to ideation, through experimentation, through the construction of prototypes, in a very intuitive manner. If some of those prototypes fail, that's fine. Again, learn why they failed, go to the next prototype and make sure you don’t repeat that mistake again. Once you get to a prototype, you take it into the next phase, where you might advance to trial creation and deployment.
Role of IT in business outcomes
Organizations have to avoid the temptation of technology first, business second. It has to be the other way around. Fortunately, most of our clients have come to realize that they have to start with the business first and that the technology is an enabler of the business and business processes — and that is the only way we can be successful in an IT world.
One of the things we're seeing in digital businesses is you need to invest in business outcomes. That means making the right technology choices and understanding that the pace is accelerating. These decisions are getting harder and harder.
IT as a digital transformation investment, not a cost
You don't want to lead with limiting spending on IT. Instead, consider how to apply IT using a new set of digital technologies and processes and digital leadership techniques to achieve the business outcomes. It's not about cost; it's about investing in business outcomes.
IT has to be a strategic advisor to the business. IT can work with business leaders and bring up use cases about new technologies, how they work in the real world, how they potentially work in your industry and the potential applications for that organization.
IT isn't sitting back and waiting, instead being very proactive and very aggressive in working with the business, highlighting this realm of the possible and helping business leaders come up with ideas around how to bring these technologies to bear for their organization.
Innovation and digital product development
A huge amount of innovation and digital product development is actually happening. Hopefully, IT is involved — as a trusted advisor at a minimum. How does IT enable and empower the business to do what it needs to do to deliver on a new set of digital products and services?
- Technologies like robotic process automation (RPA) and low-code, no-code environments
- The implications of edge computing and IoT, and how they work together
- The establishment of a digital business platform that the business can build on
These are other areas of digital transformation that we see and definitely where IT needs to understand its changing role in working with the business as the overall organization transforms into a digital business.