Mapping Your Digital Transformation
Article | 10 min read
Across the C-suite, executives rank digital transformation as their top priority. It may be surprising to learn then that despite holding that top spot, almost 70% of investments spent on digital transformation are estimated to go to waste. There are a number of reasons why transformation efforts may not succeed, but one of the most significant is an executive team’s failure to clearly define their organization's digital transformation objectives from the outset. As Albert Einstein famously said, “If I were given one hour to save the planet, I would spend 59 minutes defining the problem and one minute resolving it.”
Digital transformation is not only about technology. It’s about continually evolving a company’s culture and engagement with customers. Technology is just one piece. Established enterprises can harness digital transformation to reinvent legacy operating and business models, improve existing capabilities, or develop new ones. In doing so they can continually renew sustainable competitive advantages and enter new markets or industries. Public sector organizations can use digital transformation to improve citizens’ experience of government services and the ways they’re delivered. And digitally native businesses can use transformation to continuously increase their pace of innovation. All of these require more than just technological transformation; they demand operational and strategic transformations also in order to effect the broad cultural changes needed.
The three aspects of transformation
Once their objectives are clear, organizations can map out more specific objectives across these three interdependent aspects of digital transformation: technological, operational, and strategic.
1: Technological transformation
Particularly for established enterprises, the first step of a digital transformation journey is likely to focus on adopting new technologies and technical approaches, and possibly retiring existing technical debt. It often involves migrating workloads to the cloud and modernizing legacy technologies. While this is largely a technology-focused effort, it also requires changes to existing IT capabilities and operating models. Almost immediately organizations migrating to the cloud are likely to see returns on their efforts, including reduced cost of ownership, improved IT staff productivity, improved operational resilience, and greater technical agility. Recent studies of AWS customers revealed 50% lower cost of operations over five years, 47% more efficient IT infrastructure management, more than twice as many features delivered per year, a 69% reduction in unplanned downtime, and 45% fewer security incidents per year.
For instance, travel company Expedia Group, who shifted the majority of its mission critical applications and nearly 20 years of data from its on-premises data centers to the cloud, sped up vendor payments, saved millions of dollars, and was able to scale to handle hundreds of million website visitors each month. Global media company Discovery retired its on-premises data centers used for playout of content to broadcast, cable and satellite channels, moving those capabilities to the cloud to decrease costs, improve reliability, and accelerate their ability to deploy channels. And GE Aviation moved its development and production environments to the cloud, enabling new ways to share data across the two environments that wasn’t possible in their on-premise setup. In doing so GE accelerated innovation while being mindful of security and compliance, and shifted the IT teams focus from IT tactics to value creation.
2: Operational transformation
With the right technical platform in place, attention shifts to optimizing the organization’s operating model in an effort to become more data-driven. Data helps organizations quickly validate strategic directions while minimizing risk, and accelerate time to market for their new innovations through better decision-making and the ability to predict business outcomes. Changes to operating models may include using new data and analytics platforms to derive actionable insights and improve customer experience, or using machine learning to automate business processes. This aspect of transformation is likely to be more complex than technological transformation as it involves enterprise-wide changes. However, the resulting benefits of improved operational efficiency, effectiveness, and agility will likely lead to outsized business outcomes. AWS customers have realized 35% more productive application development teams, and a 29% increase in time devoted to innovation.
3: Strategic transformation
The third aspect of digital transformation to consider is strategic transformation: reinventing business models. Business model reinvention involves reconsidering how organizations create customer value and capture the resulting profits. For those organizations whose current business models are threatened or have become unsustainable, this may include using digital technologies to enter new markets or industries. For those not threatened, business models can still be evolved to drive greater customer value, and to innovate new products and solutions that drive differentiation, competitive advantage, and long-term value while deepening customer engagement. These changes are likely to require new or improved business capabilities, which in turn drives the need for further operational and technological transformation.
Design, engineering, and entertainment software maker Autodesk realized entirely new lines of business from its technological and operational evolution. Moving to the cloud enabled Autodesk to deliver its software as a subscription-based service, with high availability and the ability to push out regular updates and new features. Over time Autodesk realized the power of the cloud to augment their customers’ work, and rolled out new capabilities using machine learning models including one that helps designers organize and sort through thousands of generative design options, and another that can help recognize models based on visual similarity. Financial services firm Goldman Sachs also took advantage of the cloud to create entirely new lines of business, including a consumer banking business with $110B in retail deposits, a cloud-native transaction banking platform, and Goldman Sachs Financial Cloud for Data, a new suite of cloud-based data and analytics solutions for financial institutions.
While the description of these three transformational aspects may sound linear, the reality is that they are done iteratively and in time with business needs and constraints. It’s rare that an organization will be able to address one aspect in its entirety before moving onto the next. For example, competitive market pressures may force a company to urgently reinvent its business model in a strategic transformation, requiring new operating models which in turn forces the adoption of new technology.
Where to start: having a bias for action
Mapping out digital transformation across each of the three aspects may feel overwhelming, particularly when viewed alongside other demands of the business that need to be managed in tandem. For many organizations, the benefits of a digital transformation are clear, yet taking that first step can be daunting. Even with a clear vision of the future and plan to get there, there are likely to be a variety of unknowns. The important thing is to begin the effort. Ishit Vachhrajani, former CTO at A&E Networks and now Enterprise Strategist at AWS put it best when he said, “It was very important to not let the audacity of our vision and scale of the effort overwhelm us. We needed to take the first step, however tentative or imperfect it was.”
Bias for action
Amazon makes use of 16 Leadership Principles to maintain our culture of innovation, guide how we approach business decisions, and keep the customer at the center of every decision we make.
One of those principles is having a bias for action. We believe that speed matters in business. Many decisions and actions are reversible and do not need extensive study. We value calculated risk-taking that enables progress. Combined with other principles such as ‘thinking big’ and being able to ‘disagree and commit’, having a bias for action has enabled Amazon to deliver large-scale innovations that benefit our customers. People can disagree, but once a decision is made, everyone must commit to it. This saves time versus trying to convince each other.
Here are some ways to get started:
Start with a vertical slice of a business area or application
If you’re beginning your journey with technological transformation, start with shifting a vertical slice of a business area or an application to production in the cloud. Doing so is likely to quickly reveal learnings that will benefit other areas. A low-stakes example is moving a company intranet to the cloud as a starting point. If things don’t go as plan, the impacts are limited, otherwise it’s a quick win. Remember to embrace a bias for action. Even if the future state is unclear, or there are gaps in processes or toolsets, push through as doing so will help accelerate learning and build momentum.
Go for new capabilities that would have been prohibitive otherwise
While executing on approved roadmaps, CIOs and CTOs are constantly looking for ways to allow for experimentation and innovation – an opportunity to introduce new products and services that could catapult the business. These capabilities are often too costly or time-consuming to be built on-premises and therefore make ideal candidates to begin a technological transformation journey. Building a data analytics platform to support a more data-driven organization is a good example of a new capability well-suited to modern cloud technology. Using the cloud, organizations can roll out new analytics capabilities with relative ease, enabling rapid experimentation, better decision-making, and importantly, demonstrating the business value of transformation efforts.
Treat unknowns as options
The term “analysis paralysis” is an apt one when it comes to digital transformation. Traditional enterprise initiatives tend to require rigorous analysis, evaluation, and definition of structure, tools, and processes upfront to minimize the risk associated with unknowns. However, throughout a transformation journey organizations will almost certainly encounter situations where reality doesn’t line up with best-laid plans, and initial decisions will have to change. In these situations the cloud provides a lot of flexibility and may present opportunities that hadn’t been considered. Rather than waiting to define every variable in the process, treat unknowns as an opportunity to experiment, evolve, and “try before you buy.” The resulting solution is likely to be more aligned to real-world requirements than the theoretical approaches initially planned.
Beginning to begin
The value of digital transformation is undeniable. With an empowered organization, data made accessible by technology can be turned into action, experimentation, insights and results. It can foster organizational agility and resilience in the face of changing customer needs and competitive landscapes. And it creates ways for businesses to pivot more seamlessly based on learnings, mitigating the need to perfectly predict the future.
Every digital transformation is different. Clearly defining your digital transformation's objectives and mapping your transformation efforts across technological, operational and strategic aspects can help keep your organization aligned and on track. As daunting as the big picture may seem, digital transformations are a journey made up of a multitude of small steps that represent incremental progress. Taking the first step can be hard, but the important part is to begin somewhere, ideally with something small and low-risk. More often than not, getting a first win under your belt serves to motivate teams and supercharge transformation efforts.
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