For Solis, a Principal Analyst with Altimeter, this is the fifth annual digital transformation report. Though I share Solis' passion for transformation, the "digital transformation" term itself has become bloated. Fellow travelers employing the term aren't necessarily headed in the right direction.
So what did Solis learn from this year's report? Well, first off, that digital transformation has become an "an enterprise-wide movement," driven by CX (customer experience) but spanning to include employee experience and organizational culture as a whole:
- A successful digital transformation is an enterprise-wide effort that is best served by a leader with broad organizational purview. For the second year in a row, CIOs are reported as most often owning or sponsoring digital transformation initiatives (28%), with CEOs increasingly playing a leadership role (23%).
"Digital transformation has reached eye-roll status"
During a back-and-forth email debate with Solis, we hashed out these findings - starting with the term itself. At the end of 2018, The Wall Street Journal published a critique of digital transformation that became something of an enterprise meme.
I asked Solis: what is sticking to the wall when we peel back the digital transformation hype? What is different this time around? Or is this just change management in a different garb? He responded:
I’m the first to say that “digital transformation” as a buzzword has reached eye-roll status. It is indeed a catch-all term that’s overused, even in instances that have no resemblance to trends that shape my research. At the same time, after researching it for six years and studying companies that are truly digitally transforming, I am also in great respect of it as a movement and a beacon for what it takes to compete for the future.
Solis says that the "digital" part of digital transformation is becoming more and less important:
While Box Inc.’s CIO Paul Chapman rightly points out that “digital is just a way to compare the modern way of doing things” and “kids do not consider themselves ‘digital natives,’” that don’t say “I am transforming into an adult and look at my digital pictures” he’s absolutely right. They don’t say that.
But Solis believes that companies miss or underestimate the disruption in front of them:
There is also a significant percentage of influential executives who do not understand how and why digital affected customer and employee behaviors, preferences and expectations and why digital continues to disrupt markets.
Is digital transformation more than just change management?
So when companies dig in on digital transformation, what motivates them to do so? This year's Altimeter Group survey of 500 professionals across the U.S., Europe and China found that market pressures and changing regulations spark these initiatives:
- Market pressures are the leading drivers of digital transformation as most efforts are spurred by growth opportunities (51%) and increased competitive pressure (41%). With high-profile data breach scandals making daily headlines, new regulatory standards like GDPR are also providing impetus for organizations to transform (38%).
Solis pushed back on my assertion that digital transformation (DT) is just spit-polish on change management.
To your point, is this change management? Yes, in definition. It is about organizational change. The difference, for now, is that digital, when used as a searchlight, is quite revealing.
What's the difference then?
DT highlights areas of opportunity, weakness and urgency to compete as a technology company would.
There is a common thread between the two concepts: change remains hard.
They also share similarities in their limitations and foundering. In these cases, investments in transformation are hindered by cognitive biases, incomplete views and understanding of market shifts and direction, and lack of leadership necessary to iterate and innovate forward.
Solis pointed to an interesting convergence: digital change agents and change management specialists need each other.
In a special report I published last year, “The Digital Change Agent’s Manifesto,” I observed that those pushing for digital transformation offered valuable expertise and perspectives not always inherent among change management leaders.
But the reverse is also true. Solis thinks we need a "hybrid" of the two disciplines, focused on culture change:
At the same time, these digital change agents often lacked the skills and experience necessary to lead change management. I see a hybrid of two with a focus on the human side of change, which is heavily influenced by digital, driving successful transformation.
Learning from five years of digital transformation data
Given that Solis has been updating this data for five years, what's really changed? What findings stand out to him?
This year, the statistic that jumped out me in a good way, was the rise in current efforts in studying digital customers. Year after year, CX was constantly cited as a leading catalyst for digital transformation investments, yet only a minority of companies had recently studied the digital customer journey (35% in 2017 and 54% in 2017).
But this year, CX has crossed into the mainstream:
The majority of businesses report that modernizing CX touchpoints is a priority of digital transformation efforts (54%), and a majority of companies are finally doing so by researching customer journeys (59%). This presents a significant opportunity for companies advancing their digital transformation efforts through real world (physical, digital and mobile) customer experiences.
Solis says companies are digging into the specifics of CX across touch points:
This is also encouraging, as it demonstrates a rising level of maturity (the “elite”) among companies that are progressing across the six stages of digital transformation. For example, 35% have completely mapped out the customer journey within the last year and have used that data to define and prioritize their digital transformation roadmap. An additional 24% are also actively studying the mobile customer journey and real-time “micro-moments.”
However, not all companies are doing their CX homework properly:
Many organizations are not doing their due diligence when it comes to understanding their customers, with 41% of companies making investments in digital transformation without the guidance of thorough customer research.
So far, we've glossed over the two most important points: what's the goal of digital transformation, and how do you get started? I'll pick that up in a follow-on piece, but for now, Solis warns that whatever motivates a company to get started down a digital transformation path (analog systems upgrades, regulatory changes), is not enough to guarantee a broader success.
My take - digital transformation is not a point solution
That's the big takeaway I see from this year's report. Digital transformation is not a point solution; solving for one issue isn't going to prepare companies for what lies ahead. Therefore, an enterprise-wide strategy must take center stage. As Solis puts it:
Digital transformation may have started as a migration to new digital platforms and systems. And, some of the most oft-cited case studies say that they did so because new technologies forced the updating of still pervasive analog processes and governances.
But what I truly respect about digital transformation, is that its forcing business to look at the world through a digital lens, from the outside-in, inside-out, and at an enterprise-wide level. In many ways, the most promising work I see is the complete modernization of businesses in the name of digital.
That leaves the not inconsiderable problem of the business case. It's easy to call for company-wide change, but without the proper leadership/funding/skills, such an effort will just lead to a bigger fail on a bigger canvas. Altimeter's own research supports my assertion:
- Organizational buy-in remains a top challenge for those leading digital transformation. The companies we studied report digital transformation is still often perceived as a cost center (28%), and data to prove ROI is hard to come by (29%). Cultural issues also pose notable difficulty, with entrenched viewpoints, resistance to change (26%), and legal and compliance concerns (26%) stymieing progress.
That leaves plenty of obstacles to overcome, which I'll explore further in part two.
End note: Solis has now released another book, Lifescale: How to Live a More Creative, Productive, and Happy Life.