Digital transformation and the CIO: Everything you need to know today

What is the real impact of digital transformation on IT and the Chief Information Officer? This summary goes in-depth on what you need to know.
Written by Michael Krigsman, Contributor

Although the concept of digital transformation is not new, many IT organizations still struggle with the impact these changes will have on them.

This week, I hosted a CIO Summit at the Digital Enterprise Show in Madrid. The focus was digital transformation and participating CIOs shared several concerns:

  • The modern CIO role is more about business more than technology - you can hire tech skills, but creating business value requires judgment and experience
  • Technology and automation are keys to doing more with less - simultaneously reducing cost while increasing the impact of IT on corporate innovation
  • Speed and agility are table stakes expectations today - long projects with dubious paybacks are no longer acceptable, and IT must respond rapidly and accurately to business needs
  • Customer expectations have changed - the CIO and IT must play a role in delivering satisfaction across every touchpoint in the customer journey
  • Infrastructure is more than just speeds, feeds, and systems - infrastructure today includes the applications and platforms with which users interact

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Digital transformation is a broad umbrella term that covers all these shifts, so it is worth taking a deeper dive. Oracle interviewed me on this topic, so edited the responses and include them here.

What are the drivers of digital transformation

Digital transformation refers to the way an organization responds to changes in its environment. Consumer expectations have changed. Competition has changed. Startups with new business models are challenging established companies in significant ways. And so, digital transformation is an organization's response to what is going on in and around its environment, including the internal changes the company must make.

For established organizations, these changes can mean dismantling departmental silos and transforming how staff communicate and share information. The goal is developing a new relationship with customers and enabling the organization to speak with a single voice. We see varying degrees of digital transformation by industry and company size.

In some industries, like retail, external circumstances have forced them to make dramatic changes. A number of retailers have done it successfully, but others have been slow to respond and, therefore, are really suffering. Look at Toys R Us as an example of a large retailer going out of business.

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What about AI and digital transformation?

I recently discussed this question with Paul Daugherty, Chief Innovation and Technology Officer at Accenture. I asked him what's different about AI today.

Paul said that you need three things to take full advantage of AI: computing power, lots of data, and meaningful algorithms. As processing speeds increase and the amount of data we collect increases exponentially, the algorithms we create will produce increasingly rich predictions.

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So, as we digitally transform and collect more data, we accelerate the impact of AI. For example, in marketing, we see personalized offers all the time, such as when an eCommerce site suggests product recommendations. If AI is done right, the offer makes sense and you say, "Oh, that's interesting. I should look at that."

In another dramatic example, we see important uses of AI in medicine. I recently interviewed one of the pioneers of augmented and virtual reality, who is using these new technologies in surgery and telemedicine to provide access to healthcare and medical education in parts of the world that have traditionally been underserved due to their location and economics.

How does digital transformation affect IT infrastructure?

The obvious answer is that there's a set of enabling technologies. But the real question is: Does this technology live on-premise or in the cloud? Depending on where that data lives, it's going to require different skill sets. If you're building these resources in-house, then you're going to need infrastructure people to build it, manage it, and run it.

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However, we know that the broader trend is for companies to outsource significant parts of their computing to the cloud, and fewer database administrators are needed in-house. This development leads to an important question for somebody that works in this area of IT: "What should I do?"

To answer this question, we need to remember that digital transformation is driven by a relentless focus on the customer; so that's a great place to start. To align more closely with both internal and external customers, IT must become more agile and adaptable than ever before. The bottom line is that IT folks need to develop an entirely new mentality, and that's difficult for many people.

How can people in IT transition to the digital world?

There's no magic bullet. There are going to be people who can't do that--they just don't have the emotional flexibility. Change is both an emotional and psychological response to the world: I do things one way today, but I need to do things differently tomorrow.

The best companies will help guide, mentor, and provide training.

For example, I've been looking at "citizen development" lately, which is a set of development tools that experienced end users can use to do basic automation. It's great because it pushes the workload for basic application functions onto the users, which frees up IT's time, and the users get exactly what they want.

You could use folks who already have a technology background to support users' citizen development projects. That's just one example of repurposing skills to a higher-value function. Instead of doing system or database administration, they're now supporting people. Anytime you have somebody helping business users achieve their goals more directly, that's going to be a higher-value activity.

See: Citizen development is your 'most important' tool

What are the risks to IT from digital transformation?

Relevancy is the real risk to IT. If users are going around IT and buying all kinds of solutions, what does that say about IT? There's a big message that IT isn't giving users what they need. The risk is that if IT is not sufficiently agile, or they don't involve users in the decision-making process, then users may not get what they want. That's how IT becomes marginalized.

Then how is the role of IT evolving? When end users buy and use their own tools and systems, things like data integration and security remain the ultimate province of IT. A departmental user who's buying a SaaS tool most likely won't have the skills or permissions to integrate corporate data into the platform successfully. So, data integration is certainly one of the key roles that IT needs to retain as its own.

As I see it, IT is under pressure because it must simultaneously innovate, sustain operational excellence, and save money--that's what they're being told to do. "We need you to keep the lights on, keep the systems running. We want you to innovate and, at the same time, cut your budget and do all this magic with less money than you did before."

These three goals are in conflict and almost mutually exclusive, but the modern CIO mandate involves them all.

Do companies need external help with digital transformation?

To begin with, digital transformation projects are really business transformation projects and we should think about them that way. These projects relate to business models and customer experience. The solution that enables all these things.

The right infrastructure to support these cloud, mobile, AI, and data initiatives can help us give a more personalized service and a better quality experience for our customers.

So, get help if you need it, and you probably will. Sometimes companies hire chief digital officers to take responsibility. Just be aware that the goal of the Chief Digital Officer (CDO) should be to eventually make her or his role obsolete. You don't have born-in-the-cloud companies with CDOs because they're already digital from the ground up. Once a company is sufficiently down the digital path, it should no longer need a CDO.

See: Data, AI, IoT--The future of retail (ZDNet special report) | Download the report as a PDF (TechRepublic)

As markets and consumers continue to change, companies may reach a point of conflict between established operational processes and new business models needed to satisfy evolving consumer expectations.

Being committed to digital transformation means making investments that may have low ROI in the short term but will pay off nicely in the future. Many companies find that form of innovation to be hard even though these investments are essential.

Thumbnail image from Pixabay under Creative Commons.

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