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What is Digital Transformation?

When you google the term you can find many explanations and attempts to articulate it, but obviously there is no commonly agreed definition. It is not my intent to come up with one, likely considered as yet another one, but try to isolate a couple of characteristics that are important for IT.

Obviously it has a relationship to existing and emerging technologies, such as cloud, big data, analytics, IOT, block chain etc. but it would be too easy to reduce digital transformation to these technologies as such, which are catalysers of a paradigm shift, though.

It also does not seem to be a new discipline or capability, but rather applies to all capabilities and evolves them towards a new approaches, such as DevOps, analytics based decision making and governance, preventive operations or architecture.

When looking at the terms, digital indicates that information is processed electronically and transformation is a fundamental change in the nature of something. Based on that, in my opinion, digital transformation is

• A fundamental change how to apply information technology
• Triggered by the fact that essentially all information is digitally created, consumable and analysable everywhere
• With the purpose to inspire innovative value

What are the consequences?

As with every fundamental change, dramatic consequences can be assumed. One driver of the gravity is the penetration throughout the society at large. It is not just happening in big companies, it I not just happening in a certain industry, it is not just happening in modern economies, it is essentially happening everywhere. Examples are financial services, smart homes, smart cars, cybercrime, renewable energy, or simply the way we learn.

So, it is not just new things, but it changes the way we do things. This is an essential and important conclusions, as it has not only an impact on information technology, but more importantly an impact on people, behaviours, expectations, and culture, the mushy stuff. It changes how we ask for, consume and appreciate digital value, regardless whether we are in a company or end-user role, inside or outside IT. Some key common expectations are: instant, always on, intuitive, collaborative, value oriented.

What does it mean to IT?

Technologically it means to manager and deliver all the related technologies mentioned earlier, which is a challenge, but nothing fundamentally different. Over the past decades IT was always successful to get the technologies of respective paradigm shifts under control, client server, internet, service mgmt etc. The real difference and issue seems to be the changing expectations how services need to be delivered:

• Optimizing the end value of the service
• Focusing on the consumption experience rather than the delivery quality
• Agile and collaborative in a partnership model
• Sharing the risk of the consumer rather than hiding behind service levels

For most IT organizations this is a dramatic change as it impacts their operating model:

• From providing technology or IT goods to providing consumable value
• From process automation (ITIL) to data insight
• From IT silos to collaboration across the IT value chain
• From vertical sub-optimization to horizontal end-to-end value optimization

The majority of IT organizations are in the process to evolve from technology to service providers, however, in many cases a service is treated as a thing that gets built and delivered independently, pretty much like a technology stack. Hence, there is no real impact on the operating model, no reason to leave the comfort zone of established silos.

In essence digital transformation requires the same fundamental change that any holistic end-to-end value chain methodology requires, e.g. DevOps/SAFe (2), IT4IT or Zero Outage, which is that people and organizations collaborative work towards the same consumable outcome, integrating their capabilities to form an integrated, transparent and predictable service value chain.

What is often mentioned as a fundamental issue in that context is the proverbial IT-business gap, which seems to pretend that business people by definition have no clue about the challenges in IT, and vice versa, IT people have neither knowledge nor interest in what the business truly does and needs. In my opinion, backed by personal experience working with many large companies around the world, this is by and large a myth and an excuse to hide leadership problems on both sides of the fence causing misalignment. Again, it comes down to behaviour of leadership people who are even more driven by sub-optimizing measures than the practitioners.

Why is it so hard then?

On paper it sounds easy and straightforward asking people to change, but in reality it is very complex to trigger a fundamental and sustainable behavioural change, which essentially goes back to the underlying values and culture that has been cemented over the last decades. This is neither easy nor can it be done fast.

Operating model is not really a popular topic in IT. IT grew over decades along technology innovations and paradigm shifts mostly by creating a new technology stack in a silo at the side, chartered to deliver their product, and measured upon the success criteria of such product.

With an integrated, transparent value chain approach IT needs to evolve a new culture towards a consumption paradigm shift. A the same time IT needs to catch up with disruptive technologies that are overpassing IT on the fast lane, e.g. IOT, AI, analytics, which open new alternatives for consumer value, e.g. cloud business models.

Bottom Line

Demystifying the digital transformation hype down to the required fundamental change is a prerequisite to make it actionable for both business and IT. Worth noting and somewhat comforting is the revelation that the fundamental change is in-line with the goals of other value chain approaches, hence we don’t contradict but can work together.

And we need to work together to develop a reference model for an IT operating model that encompasses the changing consumption expectations and new technologies. It needs to articulate the means to stimulate the desired behaviour and control, the limiting behaviour, effectively integrating vertical capability and horizontal outcome metrics.

As mentioned earlier, this is neither easy nor fast, there is no slam dunk and silver bullet, so a dedicated transformation process with the appropriate management of change and governance model needs to underpin the effort.