Don’t Forget the “Transformation” Part of Digital Transformation

Too often, technology leaders focus on the “Digital” and forget the “Transformation” aspect of Digital Transformation.
December 16, 2021
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For most technology leaders, the recent prominence of Digital Transformation as an executive-level topic has been exciting and perhaps a combination of frustrating and amusing. Most of us have been around technology for the preponderance of our careers, and have often felt like lonely voices advocating technology as a means to achieve, accelerate, and enable broad business and strategic transformations. Suddenly, we find ourselves surrounded by colleagues, board members, and other new “tech evangelists” shouting from the rooftops about the power and potential of Digital Transformation. 

Oddly, one of the biggest challenges most companies face when contemplating their Digital Transformation strategy is an overemphasis on technology. Unfortunately, this is an easy mistake to make. Many seasoned technology leaders embrace exciting programs focused on interesting technologies, ultimately ignoring the concern that they’re being applied to incrementally improve today’s business rather than transforming or creating new products, markets, or business models. In short, they’re focused on the “digital” at the expense of the “transformation.” 

Transforming Today’s Business versus Tomorrow’s 

Historically, much of our work as tech leaders has been incrementally improving our current business. Complex and powerful systems might streamline and speed business processes and ultimately allow our company to scale well beyond what would be possible without technology. 

In the past decade, the time for an emerging technology to reach market acceptance and maturity has shrunk. Technologies from VR, to drones, to AI that were wildly expensive and complex become children’s holiday gifts in months rather than decades. Computing power that only a handful of governments could once access can now be purchased by anyone with a credit card over a coffee break, perform some task and then be shut down at the end of the workday. 

It’s easy to become caught up in the breadth of technologies that can be acquired and employed by companies of all sizes and the similar innovations in acquiring and sourcing development and technical talent from around the world. Where things go awry is in applying these technologies solely for incremental improvements to today’s business, rather than determining where and if they could create tomorrow’s business. 

Applying transformative technology to a current business has just as much chance of sparking true transformation as acquiring a sewing machine would make your humble author the next powerhouse fashion designer. 

This might seem like a semantic game of trying to determine what is “real” transformation, but there’s a very legitimate concern. Many companies that initially embrace Digital Transformation with a great deal of fanfare and investment quickly grow frustrated when all the “cool” technology fails to produce meaningful business results. In most cases, this lack of results wasn’t due to poor management or failed technology, but an application of the technology to incremental improvements. 

When your peers expect transformation, and all you give them is some flashy new toys and efficiency improvements, Digital Transformation will quickly become another failed technology investment and handicap your advancement as a strategic leader. 

This begs the question: how do you differentiate today’s business from tomorrow’s? 

A Simple Model for Transformation 

There are dozens of models and rubrics for separating current business from future, potentially transformative business. As is often the case, a simple view can be the most helpful, and most companies can be decomposed into 3 building blocks: 

  1. Customers/Market 
  2. Products and Assets 
  3. Business Model(s) 

Transformation usually requires something new in at least one of these areas. Consider a few common examples: 

  • Adobe transformed its business model from selling its design software on a “one and done” basis where customers purchased a license for a single version of its products, to a subscription business model where customers pay a monthly fee for access to the latest version of dozens of products. Digital distribution eliminated complex supply chains and production cycles. 
  • Nestle and Keurig created new assets for distributing single servings of coffee, as well as licensing and distribution agreements that spread the concept of “single-serving coffee” to the world’s homes and offices. 
  • Analogic, a medical imaging company, used its existing assets to enter the airport security market, applying core technology that essentially could “look inside” a human to allow security personnel to inspect luggage. 

When considering technology investments, ask yourself if the investment under consideration allows you to innovate or create a net-new asset in one or more of these 3 areas. For example: 

  • Cloud-based computing resources might allow you to service a new market that was previously too complex or expensive to serve or allow you to rapidly experiment with new business models without the risk of acquiring expensive new data centers. 
  • An interesting combination of drones and AI-based image recognition that you develop for internal use might create an entirely new asset that can be sold to an untapped customer segment on a cost-effective subscription model. 
  • Remote working technologies and new collaboration models might allow you to spin up an external team from a partner organization for short “innovation sprints” focused on creating new digital products, all without investing in in-house resources. 

If you can identify investments that impact all 3 areas, you may have found a significant opportunity that can truly transform your company’s business. 

Strive to speak about Digital Transformation in the context of true business transformation by linking it to creating new markets, products and assets, or new business models. When you do this, the connection between the digital and the business transformation will become increasingly apparent. You will also be able to more accurately articulate and discuss how the technology could generate results without resorting to mercurial and contrived ROI discussions.

 Many technology leaders discover the happy surprise of underestimating the impact of a truly transformative initiative and find their funding requests are not only approved but funded at a 2-5X multiple to speed the transformation to market. 

Even more importantly, you’ll focus your organization’s discussion on the impacts of transformative technologies on your business. With this mindset, many companies discover that they’re underinvesting in true transformation. Too often, they assume that huge technology budgets and interesting tech have allowed them to check the transformation box on their to-do list and move on. However, this is a recipe for investment that is focused on incrementally improving today’s business rather than transforming for tomorrow. 

Your peers are increasingly able to speak the language of technology. If you rise to the occasion and can articulate a compelling transformation story, you may find that you’re leading your company into the future, rather than optimizing it for the past.

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