What is 'digital transformation'?
Occasional guest poster Ian Apperley has been absent from the scene for a while but now he's back with some reckons.
Over the past two years, there has been a noticeable upswing in global technology companies along with the big consulting houses to repackage old technology methodologies in shiny new wrappers labelled "Digital Transformation." This is not only confusing companies that need to transform, it is also trapping them in the same cul-de-sacs of the last decade.
It is my opinion that the current climate is still being led by us, the technologists, rather than by the business leaders that we are engaged to support. Often, the technical solution is the be-all and end-all, locking an organisation into unintended consequences. But I'm jumping ahead of myself.
Generally, it's my opinion that most organisations are facing several challenges in the new world. That new world is being disrupted by the rapid deployment of new services powered by technology. To remain competitive or relevant if we are a government agency, then we must adapt fast.
New Zealand in general, from SME's to large companies and government agencies are lagging the technology wave. We've got a little bit trapped somewhere around 2013, caught with legacy systems and not brave enough to jump to new models. This is probably one of the reasons that productivity in New Zealand is so poor, that, and archaic management practices that haven't left the 1960's in some cases.
Underlying the issue is the fact that our business models are no longer fit for purpose, and before we start looking at technological solutions, we need to get them right. Throwing a new system at a company or trying to go 100% cloud in isolation of changing the business model, and the people will always fail.
Large players understand the dilemma that organisations have and in some cases have adopted a Digital Snake Oil Salesperson persona that suits their sales pipeline at the expense of their customers business. Often, Digital Transformation is nothing more than upgrading existing infrastructure, wherever it may be, and legacy systems at a very high cost.
Selling systems upgrades and hardware replacements is still a lucrative business, it's also not solving the issue, which is how to survive in a rapidly changing world. That version of Digital Transformation puts IT at the centre of the business's world, and often their promises are fluffy. Running benefit analysis over solutions they are trying to pitch often finds a lot of "intangible" benefits. Savings with wide variability, pages of caveats, assumptions galore, and no link between the offering and actual business outcomes other than avoidance of poorly defined risk.
So, what is Digital Transformation?
There is no accepted definition, and a quick search will tell show you that a) each large technology company has their version of the truth and b) from an academic perspective there are multiple variations and no consensus. That is a clear warning sign that the practice of Digital Transformation is highly unpredictable.
I think there are some trends that we can look at that give us some insight on what it could be. I also think that we need to change our thinking from one of technology upfront to one of business modelling up front.
In this world, adaptation and markets change quickly, the government is under increasing pressure to become more agile around policy change, customers require instant gratification, and costs must be on a downward vector.
So; drivers to your business model could look like this:
- Little or no capital investment in anything, moving to a services-based model that is human-centric, so you can expand and collapse as demand needs, with an operational cost model.
- Product consolidation. The most successful companies right now are those that have a single product only. Do some research on the neo-banks that are starting to rise for some good examples.
- Co-operating with competitors where it makes sense to do so. This goes against all traditional thinking, which says you should run a closed shop rather than hunt in a pack; however, we are seeing some good examples of collaboration that are paying dividends.
- Contracts should be extremely adaptable and very thin. Yes, you need legal protection, no you don't need to sign up to a seven-hundred-page, five-year contract, that will require an army of lawyers to maintain.
- IT moves from an operational department to a services provider.
Now you can start to consider what Digital Transformation would look like. So, we could create some broad technology goals and principles as a result of those requirements on our business model above.
- Transform the IT department to an IT services market for the organisation, or, buy that service from somewhere else, migrating over time.
- No capital investment means that you need to be 100% cloud-based, which comes in different varieties. Anything that is not already Cloud-based will either need to be ported or created new. Continuing to pour money into archaic legacy systems will eventually cripple your business.
- Create working relationships with competitors. It gives you rich intelligence and knowledge. It also lets you back away from competing where it's going to be overly costly, allowing you to prune your product set.
- Kill every project that doesn't fit with your business model and reinvest that time and resource into things that do. We do not like to shut down projects, it's seen as failure, when often projects won't do what we need them to do in a changing world.
There are a lot of other micro-strategies, these are just examples, that can transform your business or agency.
For me, Digital Transformation, at its core, is starting from scratch. If you had to start your business today, or build your government agency, then how would you do that in the current digital climate? I'll guarantee that it wouldn't look anything like it does today.
There are some very good examples around the country and the world of this approach working well. Organisations and government create a "think tank" of sorts that starts building the entire model from zero, migrating the old organisation as time goes by, allowing the old model to die on the vine slowly.
In the meantime, it's a good rule of thumb to reject any Digital Transformation expert who comes to you trying to fix or upgrade your current model. At the very least, you should be suspicious. Just like an older car, there is a time where it is better to buy brand new rather than keep taking the beloved old beast back to the mechanic.
I'm very interested in your thoughts on Digital Transformation, and I'd love you to comment on case studies, examples, and your own experiences in this area.
Ian Apperley is well known to many in the ICT industry as both participant and commentator and craft beer apologist.
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