What is Digital Transformation? Finally, a definition

What the HECK is Digital Transformation? Finally, a definition anyone can understand!

I have been involved in enterprise transformations involving Technology since 1998. I started out with a company called Druid Systems, a management consultancy specialising in Business Transformation and Enterprise Applications.

I actually had 3 job offers after I left University – EDS, British Airways and Druid. It was a tough decision but even back then, I could see the potential of Druid against the other much bigger corporate giants. Druid were specialists in implementing complex Enterprise Resource Planning systems (ERP), which allowed the integrated management of core business processes, mediated by software and technology. This was something I had learned about on my Integrated Manufacturing Systems course at Aston. Druid also had a great relationship with an emerging German software company called SAP, who were beginning to see a huge amount of growth at the time. They later extended their capabilities to include Customer Relationship Management systems, Business Intelligence and Oracle ERP.

Druid experienced tremendous growth while I was there. Their share price rose 700% and it was later bought out by a bigger outsourcing and technology company called Xansa in 2002. Xansa was subsequently bought out in 2007 by Sopra Steria, who are now one of the world’s leaders in digital transformation with over 40,000 employees.

Back then there was no Digital. It was just Business Transformation.

Fast forward to July 2011 and another one of my previous employers, Cap Gemini Consulting, came up with the idea of the “Digital Transformation Review” and a whole new idea was born. Cap Gemini are known as the pioneers of Digital Transformation, having helped clients to transform their businesses with the help of technology for over 50 years.

You can read the very first edition of their Digital Transformation Review here:

All well and good.

However, since then, the term Digital Transformation appears to have morphed into a bit of a beast. A “catch all” banner for the marketing of any IT related products and services. If you type “Digital Transformation” into your favourite search engine you will see what I mean.

This includes:

  • Strategic Consulting
  • Software as a Service implementation
  • Data Centre Virtualization
  • Business Process Automation and the elimination of paper
  • Agile and DevOps transformation and coaching
  • Big Data and Analytics
  • Updating Websites and Mobile Apps
  • Talking new technologies and envisioning newer ones

I am not surprised that people are confused. When MIT and my old colleagues at Cap Gemini Consulting got together to invent the term “Digital Transformation” in 2011 the definition was pretty clear. Now everybody has their own definition.

It is now clear that the term has been moulded to fit all types of offerings. This has created a huge amount of complexity around what was a relatively simple concept. It has become this huge bucket for anything that involves the Business and IT. I have no interest in making things more complicated than they really are. So let’s get back to basics, and a simple definition.

Let’s start by breaking down the three words we see all the time when we talk about this area – Digital, Strategy and Transformation. As these words are not very well defined to start with, this results in a lot of the confusion. So let’s give them a definition right here in layman’s terms.

Digital

Digital is really about communication between electronic devices. The reason why it’s called Digital is because the devices talk to each other using binary code, and binary means using ones and zeros. And that’s what Digital is of course, ones and zeros. So Digital is another way of talking about Information and Communications Technology. Phones, Computers, Printers, Tablets….you get the picture now.

Strategy

I have lost count of the debates I have had about this over the years. I still see them all the time on LinkedIn.

Strategy can mean anything from a plan of action to a mission statement to a set of actions to a set of objectives, depending on who you are talking to. It means different things to different people. Is it really that complicated? You’d be forgiven for thinking that people just trying to make a meal out of it, literally speaking…

After reading Good Strategy, Bad Strategy by Richard Rumelt, I tend to stick to the following definition:

Strategy is basically the accumulation of three things:

1) Taking a stance, a market-view

2) Backing up it up with some objectives

3) Taking some actions

And you need all three, otherwise it’s not a strategy.

Transformation

Transformation is not just a change, it is on a much bigger scale. It is a much more profound and radical process, which orients an organization in a new direction and takes it to an entirely different level of effectiveness. It is a complete makeover where the end result bears no resemblance to the starting point. It will touch all parts of your organization encompassing a business model shift and changes to people, process and the technology.

Defining Digital Transformation

OK. So now we have unpacked the 3 terms, let’s put them back together again.

I have always started my change initiatives by agreeing a shared vision with my stakeholders, in words that they can understand.

My layman’s definition is as follows:

“Using technology to create differentiating ways of doing business with the aim of driving growth in new and existing markets”

I think Brian Solis’ definition is also very good:

“The realignment of, or new investment in, technology, business models, and processes to drive new value for customers and employees and more effectively compete in an ever-changing digital economy.”

Sounds simple enough. It’s about updating the business models. This of course, is a CEO level responsibility.

So where is the confusion?

It is all about perspective. Not all Digital Transformation initiatives are run by the CEO, although they should be. Lindsay Herbert alludes to this in her book on “Digital Transformation” when she talks about the C-level perspectives, referred to here by Roland Rust.

D

According to Ian Patterson there are over 300 versions of Digital Transformation out there. Obviously this is a little too complicated for the average person to comprehend so I tend to put them into 5 big buckets for ease of understanding:

Version 1 – Customer Experience (CX) led Digital Transformation (CMO perspective)

CX led digital transformation is about digitising the shop window and how companies reach customers.

Due to the ubiquity of mobile devices, the customer is shifting preferences from using physical (retail stores) to digital channels. This is leading to a lot of work on websites, mobile applications, social media and the intersection between Customer Relationship Management Systems, Content Management Systems, Digital Asset Management Systems and the proliferation of MarTech tools (Marketing Technologies).

It is also leading to opportunities to leverage Data to find new customers and retain existing ones. This has led to initiatives such as Big Data, Analytics, AI, Machine Learning and building of APIs to enable customers and partners to access data easily.

Version 2 – Operational Digital Transformation (COO/CIO perspective)

This level of transformation is about using technological advancements to drive operational efficiency. Using the latest technologies to break down departmental silos, enabling cross-functional, process based ways of working, promoting a better communications and culture using the latest tools.

Technologies that fall under this umbrella include: Agile, DevOps, Collaborative platforms like SharePoint, Business Process Management Suites, Service Management Suites.

Version 3 – Cost-centric Digital Transformation (CFO perspective)

Some organizations see Digital Transformation as a vehicle for stripping out cost and reducing overheads such as buildings, headcount and on-premise IT equipment, hardware and software.

In this realm, you will hear about ideas such as Virtualization of data centres, Cloud computing, Remote working tools and methods, Software as a Service (SaaS), Platform as a Service (PaaS) and Infrastructure as a Service (IaaS) even Artifical Intelligence.

Version 4 – Business Model Digital Transformation (CEO perspective)

This is what I would call the REAL DEAL. This is my own understanding of Digital Transformation and one that aligns with Cap Gemini’s original vision in 2011. This version is a profound business model shift which permeates every living cell of the company, resulting in changes to structure, capabilities, policies, processes, people, technologies and culture.

This approach encompasses versions 1,2,3 but uses a creative element to blend them all together into a coherent vision and business strategy, which allows the company to take market share from competitors, enter new markets and open up a range of new possibilities, providing a firm foundation for differentiation and growth.

Most importantly, this is being driven by the CEO with the backing of the board.

Version 5 – Digital Transformation as a World View (Everyone perspective)

There is also what I call the macro view of Digital Transformation as opposed to the micro (the view of the firm). When looked at from the lens of the average person, Digital Transformation refers to the change associated with the application of digital technologies in all aspects of human society.

In this sense, it is about much more than just business, it is about change and how technology will change habits, behaviour, lives. It transcends all boundaries, political, economic, social, technological, theological, psychological, legal, environment to name a few. It’s affect will be profound for the last generation, this and the next.

To be continued….

If this all sounds very complicated, you are far from alone. This is why it is important to hire experienced people to help you to break down the complexity and describe it in a language that your stakeholders can understand. Independent consultants have years of experience in doing this. By bringing them in alongside your existing staff, clients can benefit from the coaching and facilitation skills, problem solving capabilities and deep expertise of people, who have led and succeeded in many transformations.

In my next article, I will talk about what I have learned from multiple transformations and the key ingredients that are required for success.

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