The transformative power of cloud computing, generative artificial intelligence (AI), robotic process automation (RPA) and ever more intelligent bots, has made the digital transformation of organisations in the digital age imperative.
The problem is that many organisations are struggling to navigate a world where digital and AI technology are fundamentally reshaping how we live and work. Organisations find it difficult to make digital transformation work and achieve a sustainable competitive advantage over their competitors. In this process some organisations have wasted an enormous amount of resources on digital transformation.
But simultaneously there are immense potential for those organisations that get it right. Let us thus look at some of the factors that are important to get digital transformation right.
Unfortunately “digital transformation” has become a popular and panoptic term used by numerous organisations. But with the current game-changing developments in AI and other digital technologies, digital transformation is more than just technology. It changes how an organisation operates. It also implements technology at scale to create a competitive advantage by improving the customer experience and lowering the costs. Many organisations will find that digital transformation has become imperative, not only to compete, but to survive in this fast changing digital era.
Successful organisations do not just use digital (technology), they become digital. To become digital, certain preconditions need to be in place such as: 1) a distinct strategy focused on creating business value. 2) A team of talented in-house digital engineers, since no organisation can outsource its way to digital excellence. 3) A scalable operating model to accommodate cross-functional teams. 4) Easy access to quality data via Application Programming Interfaces (APIs) and the cloud. 5) Following an iterative instead of a linear technology adoption cycle.
It is, therefore, self-evident that due to the constant evolvement of technology, digital transformation in an organisation is a continuous and long-term process.
When speaking about digital transformation today, it is almost impossible not to speak about AI and its ability to generate organisational insights and enable decision-making. AI, and more specifically generative AI, is currently changing how organisations operate and create value.
Now wonder that most digital transformations today include AI transformations. Leaders of organisations will therefore have to consider AI as an important component of the digital transformation of their organisation.
A successful digital transformation deploying AI, enables organisations to attain a competitive advantage through improved customer experience and cost effectiveness.
However, organisations should be careful not to be side-tracked by impressive and smart technology or numerous pilot projects across the organisation where everybody is testing one or other form of AI.
The old technology adoption lesson still applies that to create value, the organisation should always have a clear understanding of their strategy and goals and how technology could support them. In order to get real value from digital transformation, organisation leaders need to have a clear view of where the value lies, as well as a road map of how that value will be realised.
It is, however, a fact that many successful digital transformations and creation of significant value have shown that AI is a sure way of obtaining a faster return on technology investments.
Important organisational shifts
If organisations want digital transformation to be successful, it has to be enterprise-wide and preferably in a specific domain such as the customer journey. Pockets of digital transformation may provide some value, but does not realise the fundamental goal of a digital-first organisation that continuously innovates and improves to greatly please customers and lower costs.
After studying the digital transformation journey of several companies and analysing their strategies and actions over many years, McKinsey came up with certain important shifts that are needed organisation-wide to ensure they attain the full value of their transformative endeavour. Some of these necessary shifts according to McKinsey are, for example:
– From a focus on digital initiatives to an overarching and in-depth focus on the customer. Data and data analysis are used extensively to improve the journey of the customer. The commitment to the customer must be evident from every level of the business.
– From hiring digital talent to developing digital talent throughout the organisation. Since talent is the most important asset, organisations should be committed to develop comprehensive in-house talent. This can be done through creating a “talent factory” by constantly developing highly-valued and technical skills, creating career path options, and providing opportunities to work on leading-edge technology. Some companies often rotate developers to create new opportunities to learn and grow. Others let technology people teach business people and vice versa to ensure improved collaboration. Certain companies offer employees money to study anything as long as they teach it to others in the company. This led to the transition of employees to new roles and the learning of new skills.
– From dozens of centrally managed agile teams to a distributed, scalable operating model of products (specific solutions or services) and platforms (capabilities that enable product teams). This model entails that business and IT closely collaborates and also eliminates traditional bottlenecks such as approval processes and budget requests.
– From technology as a central capability to distributed engineering excellence. The IT stack should be decomposed systematically into micro-services allowing teams to work without having to depend on other systems. However, every micro-service should adhere to modularity and engineering standards to be easily reusable. Modern cloud services and machine learning operations (MLOs) could be used to speed up code deployment.
– From centralised data analytics to democratised data embedded across the organisation in every working team and process, but available to everyone in the company. This requires a sound underlying data architecture to ensure good excellent data flow and access such as a data warehouse, data lake or repository.
– From a concentration on short-term gains to a concentration on long-term continuous growth. A culture of continuous growth can be built by a culture of “learning leaders” leading the change. This culture shift starts with the C-suite owning the digital transformation.
A lifelong journey of creating value
Digital transformation can create real business value since it enables digital leaders to improve shareholder returns and the returns on tangible equity, as well as enables them to outperform the competition.
But organisational leadership should realise that the work of digital transformation is never completed – it is a lifelong journey; the constant evolving of the organisation. The fast pace of the development of new and innovative technologies necessitates continuous research and the systematic augmentation of digital transformation. Digital transformation requires organisational transformation and not just the implementation of smart technology. This ongoing journey starts with learning a new language – a common digital language.
All this is only possible if organisational leaders are also technology leaders. Technology proficient leaders in the C-suite increases the success rate of digital transformation. Success can never depend on the chief information officer or the chief digital officer alone. It is after all about being digital rather than merely doing digital.
The purpose of digital transformation is not to become digital as such, but to generate value for the organisation.
Professor Louis C H Fourie is an Extraordinary Professor in Information Systems of UWC.