Digital Transformation has taken off as a topic out on the InterWebs this past year. While there is a lot of good stuff being discussed, I’m starting to think that what should be an obvious point, and ultimately, the crux of the matter, has gotten lost in the shuffle. That Business Transformation is the point of digital transformation. This means opening up entirely new business models, ways to serve customers, and introduction of new products and capabilities. It requires thinking about your organization and how it is organized in entirely new ways and then leveraging digital technology to enable and power these changes. It means, well, transforming.
Yet, there so many non-transformative things out in the digital world being pitched as “digital transformation” that I decided to put on a Cerebral Enhance-O-Tron and use a Transmogrifier on the digital transformation topic with the dial set to an all new setting I made up, “auto-transmogrify” (It uses AI, naturally).
It turns out that there are “digital transformation” projects being done within businesses that while not truly transformative, are essential to remain competitive in this digital age. These (no less important) projects can be classified as modernization and optimization rather than transformation. If a “digital transformation” project makes you a little (or even a lot) better at what you are currently doing, it’s not really transformation, is it? That’s optimization. Not that optimization is not important, it is, but it’s equally important to know explicitly which activity you are doing and what the goals are. What and why.
Based on this idea, I created this handy matrix to classify the different types of projects based on the opportunity they represent and the capabilities they yield. It’s loosely based on the Ansoff Matrix, a tool for strategic planning.
Examples of optimization projects include adopting agile practices or building a continuous integration/delivery capability. These types of projects make you better or more efficient at what you already do; they also set the stage for an ability to transform, but they don’t inherently transform the business.
It’s also important to understand the distinction of Modernization and the role that plays. The easy example here is moving compute workloads into the cloud to get off antiquated infrastructure and technology architectures. While modernization is not transformation by default, the need to modernize can be used to find opportunities for, and execute transformation.
|Modernization||Addresses some deficiency or weakness, creating the capabilities you need to compete in the current market landscape and technology environment.||Without doing these, the race will be lost. Take a hard look and see if there are opportunities to leap-frog from your current situation directly to transformation.|
|Optimization||Addresses opportunities or neutralizes threats by creating the ability to operate more efficiently, with less cost, or react to changes more readily.||You need to take advantage of opportunities here to stay reasonably competitive. Doing these will lay the ground-work for the ability to transform and adapt more easily.|
|Transformation||Allows you to seize a point in time market opportunity by creating new abilities that alter the market landscape for everyone else.||Look for ways to do things differently that will create a market advantage for your organization. True transformation creates disruption for others.|
Ten, maybe even five years ago, today’s modernization and optimization initiatives could have been considered as digital transformation projects because the industry leaders adopting these then new agendas and practices were innovating on the go, inventing new ways of doing things to unlock the ability for business innovation. These organizations transformed how they did things and thus realized the ability to change what they do. Many (if not all) of these businesses also transformed their very organizational principles and structures as a result.
Today, these kinds of capabilities are the cost of entry to be truly competitive in a technological market place. No end to end automated delivery pipeline in place? Good luck innovating your product in reaction to customer and market demand in time for it to matter, and forget about proactively leap frogging the industry. Your teams will be too busy trying to figure out how switch from the committed plan to the opportunity at hand, and value will be lost. You can count on it.
I think a lot of confusion on what digital transformation actually is, is because it is a moving target, with ever increasing demands for entry. At least on the current path. In years past, building a new product or providing a new enterprise service in a cloud-native architecture was transformative, now, it’s the entrance requirement. If you are not doing things this way, you’re already behind the curve. It’s important to remember that we live and operate in a dynamic environment, today’s Digital Transformation becomes tomorrow’s legacy.
Even further back in time, using an online accounting system was once a game changer for businesses. Today, nobody would consider using physical books to keep financial records. In fact, we can think of Digital Transformation as a long tail initiative- it’s been going on in business for a solid 50 years. Airlines completely changed how air travel worked with the introduction of computerized route planning, the advent of the hub and spoke model, and then interconnected reservations systems. Airlines have continued to transform their businesses using digital technologies, and continue to do so today.
So when someone pitches you with digital transformation technology or projects, ask yourself- is it something that will transform your business, optimize some aspect of it, or move you onto the modern playing field? These are all important things to do depending on what your current capabilities and market position are, but knowing which one you are doing, what you can expect from it in terms of ROI, and why you are doing it are critical to a successful outcome.
And there you have it, digital transformation transmogrified.