Digital transformation in 2019: Lessons learned the hard way
Many organizations have embarked on the journey of digital transformation over the past several years to sustainably reinvent themselves. The first lessons learned have been challenging to isolate and capture -- until recently. Here's what we know so far.
Perhaps the biggest surprise of all about digital transformation isn't that large scale change is hard. It's safe to say that is now well established and widely known. It's how to do it repeatably and sustainably that appears to be the key.
We've also learned along the way that digital change is often more about the people involved and affected by it than it is about the technology.
Yet we've witnessed a growing number of challenges with technological change as well, with the rule of thumb being the larger, older, and more distant the organization originally was from the technology industry, the more significant the technical challenges have been.
First, the good news: The majority of organizations have now embarked on some form of digital transformation in the past several years. This may just be in a certain function, like marketing or supply chain, or it might be more coordinated transformation across functions like customer experience or digitization of products and services. Whatever focus it takes, the challenges and top issues have increasingly begun to form a pattern across types of transformation as well as industries and geographies as a whole.
Digital transformation: A top business priority for 2019
We'll get to those patterns shortly. First, let's take a brief look at the current motivations for engaging in what is otherwise a difficult, expensive, disruptive, and distracting activity in the first place.
On reason for all the attention: On average, most organizations believe that half of their revenue will come from digital channels by 2020. Furthermore, the World Economic Forum estimates that the overall economic value of digital transformation to business and society will top $100 trillion by 2025. Other similar data are easy to find. These represent vital macroeconomic trends that are the most significant attainable new business potential for the typical enterprise. Any way you look at it, the largest growth opportunities that most organizations can access now is to better seize the white space in these rapidly expanding digital markets.
The latest trends in digital transformation for next year reflect some particularly hard won lessons from the past few years, on both the business and technology sides. It's worthwhile taking the time to understand how these insights came about, as organizations earlier in the journey can avoid making many of the same painful, expensive, and time-consuming realizations along the way. As they say, one useful definition of 'smart' is not making all the mistakes oneself. Wise organizations can potentially cut years off their efforts by understanding what those ahead of them on the journey ultimately learned.
Here's how the business and technology trends for digital transformation (DT) are shaping up for 2019:
Digital transformation in 2019: The business trends
The CEO drives digital transformation
For many years, the chief information officer (CIO) -- and then also the emerging chief digital officer (CDO) role -- had the clear leadership role in digital transformation. The data now shows that more digitally mature organizations now definitively have the CEO leading it (41 percent, up from 22 percent) versus the CIO (now just 16 percent, down from 23 percent), according to the latest data from the MIT Sloan Management Review. This is a dramatic turnaround from years past. The reasons behind the shift are complex and nuanced, but mostly have to do with digital transformation now being one of the top priorities of the business as a whole.
The CEO's ability and natural role to marshal the board to get them properly behind the effort, as well as having the ability to commit the full attention and resources of the entire organization behind the journey, are key factors as well. The reality is that the CIO and CDO have purviews much more centered around technology capability itself than around changing the people, culture, and business models of the organization. In the end, sufficient leadership has long been the issue with digital transformation. The CEO has ultimate responsibility for and power over it all, and perhaps as importantly, is able to bring sufficient budgets to the table like no other single role. Consequently, expect the CEO to take the reins for overarching digital initiatives even more in 2019.
Increasing education, skill building, and culture change for DT
Because of the focus on the technology components, the people-side of the changes required for digital transformation often go under-addressed, yet arguably are the key success factors. That's because the people in the organization have to carry out the digital transformation, yet are often inadequately equipped to do so from a skill, culture, mindset, inclination, and talent perspective. Many organizations have had their digital change initiatives crash upon the shoals of insufficient human capability to carry them out or an inadequately enabling environment. Currently, lack of appropriately skilled personnel ranks in the top five obstacles to digital transformation and is reported by 39 percent of orgs. The good news is that improved organizational focus and improved techniques for upskilling workers to support digital transformation have been arriving. Expect to see both more in 2019. The smart digital leader will use the resources of HR's L&D department to help drive them.
The fragmented and piecemeal efforts at digital transformation of years' past are slowly becoming part of a portfolio of more integrated digital initiatives. That's very much not to say they are becoming one digital transformation program. The high failure rates of large technology and business initiatives remains as true today as ever (about 70 percent of all change efforts, not just digital.) Experienced executives now avoid them studiously. Yet with data showing as many as 85 percent of all enterprise decision makers believe they have about two years to better integrate their initiatives, there's little question that coordinated efforts across the enterprise to deliver on consistency, shared planning, economies of scale, and a common data model are key to moving faster and producing better results. I've argued the key lesson so far is that loosely coupled enabling capabilities like Centers of Excellence (CoEs) and beyond are better suited to create rich but loosely-coupled collaboration among digital efforts. This increases speed and impact individually through coordinated smaller, lower risk efforts that aren't very dependent on each other. Expect more top-level but lightweight integration of digital projects and programs in 2019.
New regulation of digital markets becomes a headwind to be actively managed
Freshly arrived digital regulations like GDPR are adding considerable complexity to many digital transformation efforts, especially global ones. While some organizations may decide simply to ignore or abandon for now those regions with expensive and/or cumbersome regulations, it's not possible for larger organizations with commitment to customers and partners around the world. Expect more focus on digital regulation in 2019 and to be ready to deal with it proactively to head off slowing down of digital projects and initiatives. One additional bright light is that many of the large cloud stack providers, including Amazon and Azure, are already putting much of the needed the GDPR compliance capabilities right into their offerings to build upon.
Ironically, given the leadership focus on digital transformation these days, the majority of workers currently still do not know what their organization's plans are. Top-down communication has been identified as a stubborn gap in ensuring that workers are aware, coordinated, and able to actively support digital change efforts at each level of the organization. In fact, while it's long been known that good communication improves the success rate of business initiatives, we've learned it remains a leading challenge given the velocity, foreign nature, and complexity of digital efforts. We've also learned this is relatively easy-to-fix missed opportunity. Digital transformation is a team sport that requires everyone interested and able to execute on the vision of a more digitally responsive and engaged organization surrounded by its rich and growing digital ecosystem. Need data for proof? One respected study found that transformation was 5.8 times more likely to be successful when the CEO communicated a "compelling, high-level change story." From these lessons learned, expect executives to do better in 2019 with their communications efforts with growing help from their corporate comms, though digital leaders on the ground can greatly help as well through bottom-up education and reverse mentoring.
Making digital transformation scale better yet be more sustainable
One key lesson is that the fastest way to get change to happen is to work with those more interested and motivated in doing so. The change agents discussion in digital transformation has been a consistent one with the many CIOs and other digital leaders I've spoken with over the last year. Cultivating and tapping into them at scale is one way to avoid the well-known project burn-out of overly centralized efforts, that tend to peak and valley. And they don't scale nearly as well. Other emerging techniques for scale and sustainability include self-service partner onboarding and developer networks with APIs, external hackathons to trigger open innovation, and new and improved low-code platforms for citizen developers and data scientists.
Better strategic organization and posture of enterprise data
One of the major issues holding back many initiatives, and some may even call it a form of technical debt, is the inconsistent, fragmented, duplicated, and siloed data landscape in the typical enterprise. I've long argued that organizations must build a stronger data foundation to compete going forward, taking time up front to prepare, in order to be able to go fast later. Digital transformation successes such as the one at Nordstrom that focused on loosening parochial data ownership and encourage enterprise data from anywhere to improve the customer experience underscores this. While master data management and other enterprise-wide efforts tend to boil the ocean, I believe it's now easier than ever to incrementally create a trusted and secure data foundation for digital initiatives to build upon and execute against, with approaches like open enterprise microservices offering one of the most viable long-term strategies at the moment. I expect to see this become a much larger trend in 2019.
Prioritizing and investing in reducing technical debt
IT budgets have been concealing growing amounts of technical debt in recent years, and the overall accumulation is hindering digital transformation in most organizations through a well-meaning but misguided legacy patchwork of shortcuts, neglected system upgrades, and expedient solutions that wind up as technology dead ends. I've gone as far as to say such digital off-balance sheet liabilities are one of the leading obstacles for the CIO when it comes to digital transformation. The true size of the debt should be assessed and understood, and the CEO and board should pay it down to ensure better success with digital transformation.
Upon some combination of cloud services is where virtually all digital transformation efforts will have to flourish. Yet, despite a half-decade or more of investing in various cloud capabilities, from private to hybrid to multicloud, enterprise are often no closer to a clear future strategy today than when they started. This is partially no fault of their own and is due to the rapidly evolving public cloud landscape, turning into a bruising three way competitive battle between Amazon, Microsoft, and Google, with new players likely to make it exciting along the way. With up to 80 percent of enterprise already multicloud, figuring out what to transform upon is more complex and challenging than ever. Enterprises will be grappling with much more complex and dynamic, even in real-time, multicloud environments in 2019, which some including myself, have called the future of IT. The reality is that organizations are often looking for a single vendor to make it all work, even though that's no longer a possibility. For 2019, organizations will increasingly look to what I call digital transformation target platforms to provide a primary cloud vendor that has a business and technical blueprint to considerably accelerate digital change, along with multicloud management tools to deal with the rest.
Delivering on digital customer experience faster and better
Systematic experimentation and adoption of disruptive emerging tech
In 2019, the promise of 5G will become a new leading priority, followed by artificial intelligence (AI), machine learning, and IoT, as well as blockchain and distributed ledger technologies. New technologies will emerge in 2019 to augment the vast and growing list of emerging tech that the enterprise must somehow absorb to stay relevant. Organizations are finally learning to experiment quickly, often with partners and startups and using a powerful array of emerging techniques, begin pilots and deploy promising technologies rapidly to enable the business. This trend will be pronounced in 2019 as organizations get systematically better and faster at fielding emerging technology, especially by addressing many of the items elsewhere on this list.
For many organizations, it's also now budget season for 2019. This means it's time to ensure your organization is focusing on funding for the key items and strategies above that will deliver lasting improvement to your digital transformation efforts.
Finally, I often comment on how much we don't learn from others' journeys in the digital space. To better succeed, digital leaders should share their lessons learned and take lessons from others. It's certainly an era fraught with tremendous opportunity and vast challenges, yet by pooling our knowledge, I believe 2019 will be the best year yet for digital change, transformation, and modernization efforts. Let's hope we largely address most of the issues above for 2020.
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