HfS Research has published a report in conjunction with Cognizant that discovers the best and worst practices surrounding the topic of 'digital.' I don't know about you but I am thoroughly bored with most of the hype I see on this topic and especially when the word 'digital' is coupled to 'transformation.' Every vendor on the planet has its take on this nebulous term and very few seem to think beyond marketing.
To me, 'digital transformation' means one thing - if you can't explain it in a way that can be characterized as the lifecycle of a butterfly then it ain't transformation. It's incremental betterment.
As this report discusses (caveats about vendor tie-in and bias aside), the pace of advances and choice of technologies available mean there is really no excuse for not embarking on a journey that seeks first to automate end-to-end processes using digital means.
The key findings are useful, delivered with HfS trademark edgy choice of language. I like that. It starts with:
Digital is the business (not just IT). Switched-on leaders recognize that digital has left the Corporate IT department. 65% of respondents noted that digital is about far more than simply throwing investment at the latest technology (for example: Blockchain; AI; 3-D printing), it’s about lower costs, higher productivity, and outstanding customer experiences.
This is important yet problematic. Some of the more advanced customers view this as a business-wide imperative. But equally many don't know where to start. When consultants stand in a C-Suite presso with their 'elephant graphs' and buzzword bingo compliant 40+ slide decks that deliver the 'You need to do EVERYTHING' punchline (along with a consulting price tag to match) I am not surprised that eyes glaze over. For myself, I have that vision from the film Leon where Gary Oldman's crack head addicted persona screams: "BRING EVERYBODY!" in response to the main character's apparent invincibility.
Another key finding:
Winners have a sense of urgency and vigilance for digital. Digital disruption is not only in the headlines. Nearly 30% of companies have already seen their top two competitors change in just the past three years. That number will rise.
Amen brother. As we watch in awe as the likes of Facebook, Uber and Amazon ream out entire industries, I am constantly amazed at the number of companies that continue to believe their accounting processes are golden differentiators. They're not. Or that their pool table and free food halls are the killer attraction to prospective employees. They're not.
I have learned through painful experience that our millennial colleagues have much to teach us older folk about purpose and value as differentiators that color their view of WHO they will do business with. A bunch of gnarly 50 and 60-year-old C-Suiters sitting in an entitled and pensioned up the Wazzoo office no longer cuts it.
HfS has a more poignant moniker for this type of situation: corporate narcissism which it describes as 'epidemic.' Ouch!
Renaissance IT and a data-driven mindset deliver premium growth. IT organizations that show they can help business to adapt to digital disruptors are driving revenue growth, 46% higher than average. Conversely, organizations turning away from data-driven insights have 75% lower than average growth. Even for legacy enterprises, the digital economy is “winner takes most.”
I am skeptical about the data element of this fiding. It's not clear to me whether the surveyed companies have achieved better than average results coming from a lower success threshold or whether they are seeing a genuine uplift from already good results.
I am a huge fan of being data-driven (I spend a good quarter of my time fretting over data) but as we have seen, slavery to the numbers, and especially where those numbers or findings are enhanced by AI techniques is fraught with risk. The value of human judgment should never be under-estimated although I don't believe we're even close to getting reliable information, enriched by external data sources, or so-called Big Data.
The finding that:
IT organizations that are excellent at helping business to change and deal with digital disruptors have a highly positive effect on revenue growth; 46% higher than average. IT functions that help their businesses succeed in modifying their work cultures to stay ahead of changing industry dynamics lead to 35% higher growth than average. Enterprises with such “Renaissance IT” functions within their organizations now really are in a strong position.
...is encouraging but rare. Here's a drinking game - how many years have elapsed since those of us who attempt to straddle business and IT have been engaged in the 'geeks v suits' argument? Here's a clue. e-Week described it as a boardroom schism in 2006. I recall staring at blank faces in 1983 when explaining networks to business people. (Yes - I once was a callow youth.)
I understand the disgruntlement IT experiences when seen as plumbers or glorified errand boys and girls. Especially when the C-Suite suddenly dumps 25 instances of Salesforce or 40 instances of SAP and says 'Go fix that' as though it can be done by waving a magic wand. But then I am equally understanding of the business people who think IT is a hindrance.
I've come to the conclusion that business people who don't, can't or won't spend quality time with IT will fail. You don't have to become a rock star Java programmer or DevOps guru but having some understanding of the way these folks think is vital. Trust me, that part of the journey is very instructive.
The same goes the other way. Among the most successful people in IT I know are those who went out of their way to understand what users really want - from the get-go. Some vendors now see this as a key ingredient for their success. The most successful business people I know are those who went out of their way to have intelligent conversations with IT. What happens? They breed much respect, an absolute pre-requisite for success that cuts down the corporate narcissism that HfS describes.
Culture eats digital strategy for breakfast (and lunch)
That was a shoo-in if I ever saw one and few have figured this MOFO out. But more important is this observation:
Enterprises that are constantly in fear that their culture is holding back their transformation and investments in digital business models achieve a 36% higher-than-average revenue growth, compared to the organizations that feel their culture has less negative impact on progress or feel the culture promotes and fosters digital.
Culture change is the Big Buggaboo in this story. Corporate cultures serve to bind people together. We've seen this work successfully across numerous industries and examples. Until it doesn't.
There are plenty of people scratching their heads to figure out how to instantiate culture change but... Bringing an army of McKinsey (or name your favorite consulting group here) consultants on board is NOT the answer. It may end up as part of the answer but the C-Suite cannot abrogate responsibility for this essential issue.
Where I think most people have missed the point is in understanding the very human - as in biological - inhibitors to change that all of us possess. We were hardwired for stability and sameness so even though the nature of work has changed such that a 'career for life' is a rarity, it is a big part of what we crave.
My best guess is that it will take another 5-10 years of development before the generation of those who live with constant change are the ones leading most businesses. They will have figured out how we, as humans, cope with the constant upheaval we see today. Me? I just know it is all around us but am finding myself increasingly asking questions of that next generation of leadership. How did you do this? Why did you do that? What do I need to know to understand your process?
Your back office just became your customer experience. Back-office processes have traditionally been viewed with some derision – a necessary evil, expensive, a cost to be cut, and so on – but in the journey to become digital there is no back office: everything touches the customer. There is only one office that matters anymore.
The One Office thing is HfS's schtick. They argue that:
“Becoming digital” requires linking consumer experiences to modernized business processes. We define this as the Digital OneOffice – the framework for the touchless digital customer experience and the creation of an intelligent, single office to enable it.
OK - so let's pick this apart a bit. HfS believes that modernizing the back office is a critical element in this journey. They are correct because it matters not how much glitz and glamor you slap onto the customer experience; if you can't ship, record and get paid or pay then you're out of business.
Whether that remediation is a lift and shift to the cloud, a hybrid cloud strategy makes no difference. Now is the time to be understanding where the process gaps are, where automation can be useful and quickly deployed and where processes can be streamlined. Adherence to processes that are the equivalent of tablets writ in stone won't get you anywhere.
In HfS worldview, the Digital OneOffice is broken down as to:
“Digital” describes the design and usage of interactive channels that drive customer engagement with the enterprise, namely mobile, social, text and chat.
“OneOffice” describes the enabling technologies, such as unified analytics and cognitive automation, that drive real-time predictive capabilities and an engaging digital experience that unifies all the stakeholders across the organization: the customers, partners and employees.
The Digital OneOffice is where the organization’s people, intelligence, processes and infrastructure come together as one integrated unit, with one set of unified business outcomes tied to exceeding customer expectations.
The report tops out with the to-be-expected bashing of laggard services companies (Cognizant implicitly excepted - naturally) and to provide you with a checklist of to-do items. You'll have to register for the report to get that take.
While representing a firm start, there is one crucial element missed in this report and HfS approach.
HfS definition doesn't state the purpose under which this journey takes place. Talking about Amazon, Uber (pick your favorite bete noire here) is not enough.
This is important because so far, much of what I've seen, successful though it may be, is incremental and not transformative in the sense that companies have only become more efficient or effective at what they do.
They haven't deviated from a mindset that is solely driven by current economic imperatives. You can argue that in a post-Milton Friedman world, the primacy of value extraction for the few is the business model driver. I'm not convinced that is sustainable.
There are far too many indicators that sustainable business is ignored for the sake of satisfying a clutch of financial masters. More to the point, the purpose and values that the next generation of leaders will bring do not point to an unsustainable future. If you agree then it follows that current thinking around digital transformation ends up in a dead end.
Endnote: for companion reading on this topic please consider subscribing for: Transform your business with the XaaS effect.