IT managers can be forgiven for feeling under pressure these days to digitally transform their organizations.
Academics, research firms and, yes, even this very publication are promoting the idea that organizations can radically improve their performance and identify new areas of business by strategically applying digital technologies to their organizational and operational processes.
Yet for all the hype, and despite decades of investments in IT infrastructure, very few companies say they’re hitting the mark.
Of the 196 IT managers, directors and executives responding to Computerworld’s Tech Forecast 2017 survey, only 11% said they’re 100% digital, with some 40% saying they were “well on their way,” meaning more than half of their organization was digital.
More telling: 49% said they’re “less than halfway there.” And when asked to give a letter grade to their organization’s efforts toward digital transformation, more than half of survey respondents gave themselves a C or lower.
Analysts and the executive suite alike have been touting the idea that all companies must transform to be digital companies to remain competitive. But determining what digital transformation means for any given organization, laying out a roadmap to get there and then achieving a meaningful level of transformation is no small feat.
Companies and their IT leadership are likely to encounter a range of challenges – from budgets that restrict how much they can achieve, to a lack of IT skills needed for tech-driven initiatives, to pushback on the organizational change that transformation requires.
And they will encounter numerous misconceptions about what digital transformation – or DX – is, and what it requires. To clear up that confusion and reset expectations, Computerworld asked several experienced CIOs and industry analysts to dispel the five most common myths surrounding digital transformation.
Myth 1: Transformation means completely recasting the business.
“Digital transformation doesn’t mean you have to become an online company,” says Larry Wolff, president and chief operating officer of Ouellette & Associates Consulting and a former CIO. Rather, he says, DX means “leveraging technology not just for efficiency and effectiveness, but to transform the business and enable new business opportunities. It’s not fundamentally changing the business you’re in.”
O.C. Tanner is a case in point. The 90-year-old company started out manufacturing class rings, then expanded to manufacturing and distributing employee awards for milestone anniversaries and other notable achievements. Today, in addition to those physical items, the company provides multiple software products to help companies manage their recognition programs, engage with employees, and recruit and retain workers.
“When we ask ourselves what differentiates us from a product perspective, it’s two real things: making sure the employee recognition [we provide] is meaningful and that what we do is employee-centric, that it changes the interactions of people in an organization,” says CTO Niel Nickolaisen.
Despite its heavy focus on delivering software, O.C. Tanner still delivers the employee-recognition services and products it built its reputation on, he says. Now, it leverages technology to better deliver on its niche offerings and develop new lines of revenue.
Wolff says true digital transformation isn’t necessarily about becoming an entirely different company but rather using technology to improve and expand the company’s core strengths. “It’s an offensive play to create a competitive advantage and a defensive play that will keep you from becoming obsolete,” he adds.
Myth 2: Digital transformation is a specific project or single initiative.
Most so-called “overnight sensations” spend years working toward their success. The same is true here, experts say. In fact, IT leaders say they don’t define “transformation” by completing a particular technology implementation or hitting a strategic milestone; it’s a continuum of having put in all the right pieces, continuing to remove legacy technologies, exploring what’s new and investing in the right evolving technologies to stay competitive.
Take the banking industry, which has undergone a digital transformation by moving from a paper-based system of cash and checks to a nearly ubiquitous digital experience where people can move money via smartphones.
That journey might seem revolutionary, but Paul Willmott, the global co-leader of Digital McKinsey, points out that the transformation happened via multiple incremental steps over nearly two decades.
“These changes take time; none of this happens overnight,” Willmott says.
Hitachi Data Systems CIO Renée McKaskle says her company’s transformation from a computer hardware company to a broader IT solutions firm is ongoing. She says the change meant taking advantage of cloud computing, building out the company’s internet of things capabilities and, now, layering on artificial intelligence and robotics. Those new technologies will help the various teams within the company access the data they need to drive smart decisions.
Given the rapid development of new technologies, McKaskle says the pace at which her team must move has picked up dramatically, and their work is never done.
“I’ve always said there’s a plateau you might rest upon, but you never stop. And the time we rest on that plateau is much shorter,” she says.
Myth 3: IT can do it alone.
That’s a simple one: IT can’t do it alone.
“Digital transformation is often driven by the IT organization. But there still must be a level of receptiveness in the business [leadership]. That’s where IT has to build credibility and respect to get the business, and board and leadership level, to go along,” Wolff says. “IT leaders need to educate and inform.”
Ouellette & Associates, which developed the IT Maturity Curve based on a yearlong study with Babson College, lists four stages of maturity – from delivering basic services and reliable solutions as stages 1 and 2 through delivering business value as a strategic partner at Stage 3 to being an “innovative anticipator” at Stage 4.
Wolff says those at Stage 4 are the ones capable of transforming their organizations because they have the strategic insight, visibility into their organization, and the ability to sell their visions for what their organizations can be. They aren’t the ones invited to the first meeting – they’re calling that meeting.
“IT is the business today,” says David L. Stevens, the CIO of Maricopa County in Arizona. “I don’t mean that sort of arrogantly. They’re inseparable.”
He says he and his tech team are transforming county government by providing services and access at any time, from anywhere, in the context meaningful to users.
Case in point: A local CEO told him that his company was accessing and leveraging county data, which was made available via the county IT department, to develop new products, and those new products were generating a few million dollars in new revenue.
Bill Briggs, Deloitte’s U.S. and Global CTO and the inaugural leader of the firm’s digital practice, says corporate leaders in many industries long viewed technology investments as a means to an end.
“The last few decades it was a focus on what do we have to do to eliminate waste, make things more predictable, make things more repeatable,” he says. “It’s not to say the investments made didn’t have returns and value, they did. But in most companies, the idea of technology was a supporting function, it was behind the scenes.”
Today, however, Briggs says leading CIOs and their C-suite colleagues understand that technology and business are completely intertwined and need to be treated as such.
“You can’t separate business strategy from technology strategy,” he says. “The technology is actually the center of what growth is built on. The technology implications are driving the future of the business itself.”
Myth 4: Your IT shop is up to the task.
CIOs who want to transform their organizations need to have vision, but grand ideas won’t go far if you don’t have the needed IT infrastructure and the right skill sets to implement your strategy.
Larry Freed, CIO at Overhead Door in Louisville, Texas, says over his six-year tenure he has witnessed legacy systems and outdated approaches hindering the company in its abilities to improve the customer experience and deliver quality using the integrated technologies that are critical in this digital era.
“Technology is the enabler for us, and it’s how do you leverage technology to improve what you’re doing,” he says.
Starting with planning and design in 2012, he says his IT team started to move from a number of old, disparate systems to a new Oracle E-Business Suite. The goal is for the business to have a single operating system for its complex environment, which includes manufacturing, distributing, installation and service. Freed explains that this move will streamline how the business operates and better measure performance (revenue, profitability and everything in between).
The upgrade enables customers, who are primarily business partners such as dealers, distributors and retailers but also individual consumers, to interact with the company in a more seamless manner through a customer portal. It also allows the organization to use data to create efficiencies, such as reducing inventory.
Freed says the initial phases of the technology transformation are about driving process improvements and increasing efficiency and productivity. But investing in the right technology will also allow the company to collect and analyze data needed to drive business opportunities, such as identifying customers who might be ready for upgrades or need maintenance services.
Freed is emphatic that building a better foundation over the past few years was critical to moving forward, to creating better customer experiences and opening new opportunities to transform the 96-year-old company.
“We’re in a very competitive environment, and if we’re not making investments to improve, then our competition will,” he says.
Analysts, advisers and CIOs who have helped transform their organizations all concur that organizations need to have the right building blocks in place to power change. They need to be moving out of legacy; adopting newer technologies such as cloud and analytics capabilities; employing tech workers who can think creatively about business solutions; and developing a culture that moves as fast as business and is capable of taking risks via DevOps and similar organizational principles.
Many IT shops aren’t there yet, analysts say.
“‘Digital transformation’ implies a focus on the technology itself, and I think that’s where people can get hung up,” says Seth Robinson, senior director for technology analysis at industry group CompTIA. “Those questions are pertinent, but it’s also the ability to think beyond the technology acquisition. Part of the way you get there is ensuring you have some good technology literacy so when the new technology comes in, you have people who are asking, ‘What does this mean for security and for data privacy? What does this mean to us for a new way of doing things? That thinking is the real point.”
Most organizations give themselves low marks in this area. When asked about their organizations’ efforts toward digital transformation, only 6% of respondents in Computerworld’s Forecast survey gave themselves an A, noting that they’re ahead of the curve. Some 39% gave themselves a B, for well into the process; 39% rated themselves at C, for keeping pace, despite some roadblocks; 11% listed D for the process not going well; and 5% earned an F for making no progress at all.
Myth 5: The CIO role is safe because digital transformation relies on technology.
Yes, technology drives DX. However, Deloitte found that many CIOs aren’t ready for that role. Deloitte’s Briggs says his firm puts CIOs in three categories: first, trusted operator, where the CIO drives a traditional efficiency play; second, business co-creator, where the CIO is more of a strategist with the business and aligns with the leadership; and third, change instigator, where the CIO is the one leading the charge. “A significant percentage of CIOs are still in that first category,” he says, adding that IT leaders, however, should be aiming for the third category.
CIOs need to be visionaries, otherwise they’ll be tasked with handling the technology plumbing while their companies carve out new positions (notably the chief digital officer role) to handle the more exciting areas around transformation.
Don’t let that happen, says Scott Strickland, Global CIO at Denon + Marantz Electronics, maker of audio and video equipment.
“If you’re sitting with the business, product development, marketing and sales, and you’re bringing to them the art of the possible, ‘here’s how we can use technology to do things differently,’ then it’s exciting. Then you won’t be passed by or marginalized,” he says.
Like other CIOs, Strickland says his IT shop has transformed over time by implementing a range of cutting-edge technologies. These ongoing investments, he says, have been instrumental in radically changing customer service and product development.
He points specifically to the rise of the internet of things. He says most of his company’s products are now IoT-enabled, so when consumers buy them and boot them up at home, they’re also able to easily register them. Because of that, Strickland says, the company now has a connection to that customer – a relationship that wasn’t easily made in the past when customers dealt only with retailers selling the equipment.
Strickland outlines how IT, and IoT in particular, has transformed what his company can offer, pointing to a recent issue with a consumer product. One of its HEOS speakers developed a memory issue. Taking advantage of the IoT capabilities built into the speakers, the company was able to push a test out to all its products in that line – even those that were already sold and in customers’ homes. This test identified some 300 speakers that needed to be replaced. Strickland says the company contacted the customers, alerting them to the issue and sending them replacements before the customers themselves ever experienced a problem.
In another example, Denon + Marantz analyzed data coming from its IoT-connected devices. Customers, when booting up their products and connecting with the company, have the option to name their speakers. D+M noticed that many customers were naming their speakers “bathroom speaker.” Strickland says the company took that insight and developed a new wireless, compact waterproof and humidity-resistant speaker with that market in mind. Moreover, he adds, the company through its IoT platform could reach out to existing customers – all those people who had clued in the company on where they were placing their speakers when they registered the products – with the news.
“You take all of that together and it feels transformative. It feels like our business will be different, and it is different and it will continue to be different,” he says. “There’s the key. CIOs have to be able to say here’s the new technology and here’s how we can apply it to the business. You could be wrong, but you have to get the conversation going.”
In fact, PwC’s 2017 Global Digital IQ Survey, released in February, found that, of 2,216 IT and business leaders from 53 countries, only 52% of companies rated their Digital IQ as strong.
That’s down from the past two years; 67% rated their Digital IQ as strong in 2016 and 66% the year prior.
PwC, which defines Digital IQ as “an organization’s abilities to harness and profit from technology,” acknowledges that that’s no easy task.
“Enterprises aren’t so much falling behind as struggling to keep up with accelerating standards,” the report states. “And looking ahead, it is clear most are not ready for what comes next – and after that – as technologies continue to combine and advance, and new ways of doing business go from inception to disruption seemingly overnight.”