Digital transformation has become one of the most widely-heard buzzwords of the IT and business community in the past decade, yet remains something many are still failing to understand and execute.
As the business world continues to exponentially generate more data, transforming legacy systems into modern, digitally capable environments has become critical for Australian organisations. Yet, according to a recent study by McKinsey, organisations globally pumped US$1.3 trillion into transformation initiatives — 70 per cent of which was wasted on failed programs. To give that a number, it’s around US$900 billion
Despite the gusto and frequency with which organisations and leaders tout their digital strategies, it has become evident that even some of the world's most innovative companies are either flailing or failing in their transformation efforts.
It is easy to pin these failings onto the technological challenges at stake: changing old legacy systems to a technology environment that changes gear every season isn’t something every business is either ready for.
However, these are symptomatic of more than just technological grapplings: at the heart of this is a cultural disconnect within organisations and no clear drive or vision for change from the top-down. And this change-led culture can no longer come from the chief information officer anymore, but right from the very top, as outlined by Sachin Kulkarni, assistant vice president at Cognizant Australia and New Zealand.
“You can't transform a business if the chief executive officer doesn't want to transform the business,” he said. You can be pushing from IT or the business, but the CEO needs to say: ‘Let’s do this’. And then you've got the flip side, where the business tries to go in one direction at the leadership level but the people below just don't want to go on that journey. There is a clear disconnect.”
Yet even the concept of change is a barrier in itself. If businesses are under daily operational pressure and largely working towards making it through the next quarter, it leaves little room for radical, long-term strategies.
“If you look at it in the chief executive officer’s mind, what's the most important thing? It's not really the profits or the general efficiency, it's the worker's safety,” said Coenraad Bekker, general manager of Wipro Asia Pacific and Japan.
“If there is a directorial relation and the new platform aligns with their own KPIs, that's how that level matches and then it just flows down from there. ‘What’s there actually a need for it? Is their world going to change? Or is it really just a passing phase that they can survive in?”
For Kevin McIsaac, business value consultant at Domo, a key starting point is imagining the kind of culture you as a leader want to bring, and an acknowledgement that not all change is a guaranteed headache. “Most of us don't like change; we’re uncomfortable with it,” he admits “But once we change everything, so as everything's changing, we enjoy it and embrace it so it's got to be led by the actual leaders of this.”
Often, one of the biggest hurdles in convincing customers to invest in their digital capabilities is the proliferation of the words ‘digital transformation’ across the IT industry. And, as with any overused terminology, the more you hear it, the less the message gets home.
As Angus Mansfield, managing director of XCentral argued, the language around digital transformation is lacking clear definition. In light of this, even though customers may be investing in digitisation efforts, education is still a big component for them from the outset.
“Not only do [the leaders] want the transformation piece around lifeforms, but the people that work for them want to too. So, that transformation is kind of useless without training.”
According to JDS GM for AppDynamics David Steed nobody has “a really good definition” of digital transformation despite its prevalence in the market. If partners are able to grapple that themselves, then comes the conversation about what’s its value for customers.
“For me, what your transformation is largely about, is using digital technologies to change the way you deliver value to your customers. The first part of digital transformation is to ask the leadership: ‘What is your vision?’ What's your vision about how digital technology will transform how you deliver customer value?’ The value is really the value that the client gets from the transformation.”
As he reiterates, there are “thousands of initiatives” that can be undertaken by organisations and it doesn’t necessarily “have to be one big thing” -- which can be a daunting task for customers.
Domo Asia Pacific senior vice president and general manager Paul Harapin likens the “one big thing approach” to approaching climate change by cleaning the entire ocean. “It's an overwhelming task. You wouldn't have a clue where to start and so people will go: ‘Forget it, I'm going to move on’.
“But you can make a start by cleaning a beach. What I see, consistently, across the region, it's rapid time-to-value projects that deliver value quickly and then do the next one and the next one, learning each time along the way. They're the organisations that, at the end of those three years, have added value consistently and deliver change and transformation that does change the course of the business.”
Taking charge of this value though presents its own challenges, as Bekker highlighted. For one thing, measuring any kind of “value” is a grey area in itself and will naturally mean different things to different organisations.
Smaller projects can be measured in terms of business productivity or customer satisfaction around eight months down the line. However, when the change spans across an entire organisation, for example, the likes of Woolworths and Commonwealth Bank, that measurement becomes much harder, he said.
“These are the customers that are doing enterprise-wide transforming and it's going to be incredibly hard for them to actually measure what impact it's going to have because you are developing this problem in a thousand little squads,” he said. “You would get to this point where ninety-nine per cent of the squad is doing what they want to do but what did they achieve?”
There also is a sense of caution around data protection and security, especially amid a heightened regulation both in Australia and globally. On 25 May 2018, the European Union’s General Data Protection Regulation (GDPR) came into force, the same year that Australia updated its own data privacy regulations, which forced organisations to tighten up their compliance strategies significantly.
This is causing a headache for customers, according to Gerardo D’Angelo, chief operating officer at Mind Tattoo.
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