Continuous Transformation: Stop Stopping
We hear a lot of talk these days about digital transformation. Enterprises see that they need to take advantage of new digital technologies and management techniques to become nimbler and to deepen their relationships with customers. Their technology now looks antiquated compared to the digital services they use every day; their processes seem slow compared to the speed at which the digital world moves; and they want to increase innovation in their own organizations as they see it happening all around them. In order to find new sources of revenue, survive disruption, and provide customers with the level of service they increasingly demand, enterprise leaders know that they need to engage in a broad and deep transformation.
There is a danger here: enterprises must not think of transformation as something that they do once, at considerable expense and risk, to bring them up to date—today’s date, that is. The digital age, on the contrary, is an age of continuous transformation. It requires us to acknowledge that we now live in a world that changes fast and that we will need to continue adjusting and adapting to it, from now until the universe collapses on itself. The transformation we are talking about is not a transformation to an end state; instead, it is a transformation to a nimbler and more agile way of operating that will support continuous and unexpected change.
Digital transformation is not a matter of modernizing from 1980’s technology to 2019’s technology. An enterprise that merely upgrades itself to 2019 technology will be out of date in 2020. Its technology capabilities will increasingly diverge from its needs (remember, change in the business and technology landscape is constant!). The enterprise will continue to be held back by its IT systems.
Digital transformation is a departure from the old mental model of buying or building an IT system, finishing with it, and then just “maintaining” it like a car. It is rather a shift to a mental model based on making small investments—frequently examining their results and adjusting course—and continuing to make them indefinitely as the business context changes.
If this need to continuously invest and upgrade sounds troubling, it shouldn’t. The idea is to embrace continual change and make small, incremental investments rather than periodically making large, risky investments. This is good for the company because it spreads out cash outflows, lowers risk, allows for change, and avoids the opportunity costs it would incur if its IT capabilities diverged (even temporarily) from what it needs. Constant change lets you remain ahead of your competitors and disruptive new startups.
In the digital age, your technology costs will be determined by your agility, which we can define as your ability to make those constant changes at low cost and low risk. Agility is an asset that affects your future costs and revenues. It follows that there is value in investing in agility. How can you do so? You can streamline your processes for delivering IT capabilities and—importantly—for deciding what IT capabilities you need and for financing them, your governance and investment management processes. You make sure that your IT systems stay up to date, secure, resilient, and high quality.
You can also invest in flexible technologies rather than just trying to meet your needs of the day. If you buy computer hardware and put it in your datacenter, you have bought something you cannot change. If, instead, you provision your infrastructure in the cloud, you can change it at any time you want, instantaneously making it bigger, smaller, or entirely different. Hardware cannot morph into different hardware, but cloud infrastructure can morph into different cloud infrastructure as your needs change or new technology becomes available.
In an era of continuous change, you need access to the technologies that will make a difference to your business, and you need access to them before your competitors use them to threaten your business. For example, today machine learning technology is becoming widely available. If there is a good application of machine learning to your industry, then your competitors are already beginning to take advantage of it. The fastest, cheapest, and least risky way to get access to a new technology is to buy it on a pay-per-use basis from a cloud provider. To ensure that you have access to the newest technologies in the future and thereby maintain your agility, you can deploy your IT capabilities in AWS, which pioneered the cloud and continues to lead in innovation, introducing a major new feature approximately every five hours.
In any case, your digital transformation must prepare you for continuous change in the future by making change inexpensive, fast, and low risk. That is agility, and it is the hallmark of companies that are successful and sustainable in the digital age. It must be complemented by agile skill sets from your employees and agile decision-making and governance processes from leaders. Employees must commit to learning new skills constantly, and management must support them in doing so. And the entire enterprise must commit to streamlining processes and having a bias for action. It is this willingness to acknowledge the need for constant transformation in a constantly changing environment that makes a true digital transformation.