By now you’ve probably heard of the Digital Transformation, or Digitalization, that is taking place across all industries and business verticals. This refers to how firms are updating their business models to handle their Digital Assets, Digital Usage and Digital Workforce. It is an absolutely crucial undertaking for any enterprise’s survival.
Start-Ups are more agile and can more easily adopt new technologies in the beginning stages. Large organizations are dedicating more and more resources to digitalize retroactively, but it is unclear if these resources are allocated properly. Mid-sized companies are stuck with the difficult task of determining when to modernize and, more importantly, how to modernize. You can read more about this here.
Goals of Digitalization
Retroactive Digitalization for organizations with legacy systems in place is no small task. It requires careful planning and implementation. We know that the factors Firm Size, Complexity of Operations, Knowledge Intensity and Threat of Competition push organizations toward Digitalization1; but what are the goals of Digitalization?
According to the MuleSoft Connectivity Benchmark Report, these are the main goals of Digitalization:
- Increase IT’s operational efficiency
- Improve customer experience
- Increase business efficiency
The motivations to modernize may vary from industry to industry, but generally the objective is to automate redundant tasks and lower costs of operations. The MuleSoft report can be downloaded in its entirety here.
What Holds Organizations Back?
There are eight major obstacles that prevent Digitalization:
- Time Constraints
- Business & IT Misalignment
- Legacy Infrastructure & Systems
- Integrating Siloed Apps & Data
- Lack of Skillset and Experience within existing IT teams
- Risk Management Compliance and/or Legal Implications
- Company Culture & Mindset
- Hiring and retaining the IT team2
These problems may seem like separate issues at first glance, but they are all symptoms of the same fundamental problem which is the lack of a holistic approach to business models and technological operations.
Uh-oh… the “H” word. When you hear the word “holistic” you may think of spirit crystals, chimes, incense, and new age cure-alls. If this is the case, please withhold your skepticism momentarily.
Modern Business Characteristics
Holistic is the simple way of saying that all companies are now tech companies. Can you think of a single successful organization that doesn’t rely heavily on modern technological breakthroughs for their day-to-day to operations? This is why it is important to think of IT and business procedures as inseparable. If you conceptualize a business as the human body, Information Technology is like the central nervous system – it is that important for getting from A to B.
Hierarchical separation is still necessary in the modern holistic business approach. In order to operate effectively, the division of labor based on skillset is also necessary – managers manage, sellers sell, etc. – but the old idea of divide and conquer is no longer sustainable. In fact, modernized business approaches will allow employers to place their employees in the best positions, thereby maximizing their talents and accurately measuring their productivity. It is important for mangers to understand the macro technological concepts they are leveraging, but the IT Department should still handle the nuts and bolts. Open communication channels are more important than ever because of the ever-increasing speed of operations and the rate of digital disruption occurring within industries. The idea that departments should be separated and have limited interaction is going away, which can be seen with the widespread adoption of open workspaces by start-ups.
Limited interaction is also disappearing externally, with Omni-Channel customer experience. This refers to the sales & marketing approach which gives customers different product entry points (mobile, desktop, tablet, in-store) to provide a single engagement experience across all levels of a brand3. It has entirely changed how customers interact with a brand, thus changing distribution channels. Merely by interacting with the brands, consumers are imparting valuable buying behaviors and preferential data. This imparted data can enhance the buying experience and create a totally customized web experience, one with targeted messaging and unique individual offers based on a myriad of measurables. The idea is to make the buying of a product as seamless as possible for the user. Think Seamless.
Connectivity and communication are key. A modern organization should have all its lines of business working together. This means that a business should work in sync with the industry at large, have fluid and agile internal operations, as well as coordinating with adjacent business categories. On top of that, they should have active relationships with their customers.
Modern Businesses should adopt these characteristics:
- Reactive and Decisive
- Open and Communicative
- Disruptive and Aggressive
Bend but Don’t Break
Sports analogies are always helpful when explaining attitudes and strategies. Football fans will know that the game today seems to be more skewed toward offense than it has been in the past. High-scoring offenses that can maximize their possessions have had the most success in recent years. For instance, there were 1,151 yards of total offense in the Super Bowl last year, more than 200 yards more than any previous Super Bowl game4. Defense has become something of an afterthought.
By nature, offense in football is very structured. Even offensive schemes can be extremely creative, it’s really all about execution. Offenses often start the game with all the plays of the first series being scripted. On any given play the quarterback goes through his progressions, “If the first option is covered, I’ll go here. If the second option is also covered, I’ll check down to here, etc.” The line and backs have their protections laid out, and receivers have their routes mapped. There is not much wiggle room for anyone unless a play breaks down, but in general the more organized and buttoned up an offense is the better.
Conversely, defense is all about observation and opportunity. Players on the field need to coordinate with one another at all times, passing off responsibilities from player to player. Any lapse in communication could lead to a breakdown and a big play for the offense. Decisiveness is key, and a split second of doubt or uncertainty will cost the defenders dearly. The players have to make their reads and go. There’s no time for second-guessing.
There needs to be a steady, controlled aggression. If a player is too frenzied, he’ll over pursue. If he’s too cautious, he’ll be left in the dust. “When should I contain, when should I drop back, when should I press, when should I blitz?” These things all vary from play to play and need to become intuitive, just like executing tackles or pursuit angles. Most defenses have a Bend but Don’t Break mentality, meaning they will not crumble if the opponent advances on them because they are constantly adjusting to what the offense is trying to do.
What does this have to do with modernization? Modern organizations must operate like a hard-minded defense. Although modern organizations need to be reactive, they must never be on their heels. Like a defense in football, if an institution is tentative, it’ll get run over. They need to always be aggressive and disruptive. Quite simply, organizations need to take on the attitude of the hitter, not the hittee.
Futurist Alvin Toffer famously said in the early 1990s, “The illiterate of the 21st century will not be those who cannot read and write, but those who cannot learn, unlearn and relearn.”5 This prediction seems to be becoming more and more true by the day. Even established colossal institutions are going to have to take on an agile, holistic, entrepreneurial, Bend but Don’t Break mindset in the coming decades.
What to Invest In?
75% of IT Decisionmakers in large organizations are currently executing digital transformation initiatives. The last 25% have plans to Digitalize in the next 3 years6.
The first thing organizations need to do is modernize by bringing all their legacy systems up to date. This means the conversion and destruction of physical records, setting up Application Programming Interfaces (APIs) to connect siloed groups and information, improvement of workflows by utilizing Customer Relationship Management (CRM) tools and Enterprise Resource Planning (ERP) software, updating employee training to bring workers up to speed, and taking advantage of machine learning capabilities.
What should organizations invest in when they are ready to take the next step towards digital transformation? The answer varies from institution to institution, but here are the top 3 investments IT Decisionmakers from 650 different large companies with over 1,000 employees are going to be making in the coming years:
- Reusable Software Assets
- More Efficient Software Development Methods[vii]
We’ll dive more deeply into each of these investments in a future blogpost while addressing the major stumbling blocks large institutions face when trying to Digitalize.