Decoding digital transformation - 5: The Big Trends

In the last four days, we have presented various importance points of debate in digital transformation as it is panning out in India, especially in the core sectors of Indian business. We have discussed, based on our research, the following questions? (Please click on each question to go to the respective stories)

1. Why digital transformation?
2. What are the specific outcomes that businesses are looking for from digital transformation?
3. What are the various approaches of carrying it out?
4. What is the position of technology in the entire digital transformation journey?

Finally, it is time to highlight the topline findings; the big trends.

Some of them may have been discussed in the earlier parts but have been listed here again because we believe they are important trends that meaningfully define a contour of digital transformation in India, circa 2018.

1. Digital transformation is essentially an organizational change. In all organizations, digital transformation is a mandate from the top and aims to transform the entire organization. If it does not, it is not digital transformation. You may find people holding Chief Digital Officer designation who focus only on customer facing aspect (i.e digital marketing, customer service etc) or technology (process automation). They do not drive digital transformation of an organization. They just drive one digital initiative. Summary: not all CDOs drive digital transformation. How is that for a beginning?

2. Digital transformation rolls back into basic business metrics. All outcomes (often integrated into a mission statement) must have a direct path into one of the basic business metric—growth, profit, sustainability—and hence are measurable. Of course, there may be intermediate measures to track progress, but they are more of milestones than the destination. For example, in Sterlite Tech, one of the objectives is to “free up the minds of every leader to focus on value addition rather than getting stuck in the business as usual in the day to day basis”—and the objective is faster growth.

3. Digital transformation typically follows a cycle. Typically, digital transformation components follow a sequential pattern:

1. significant (often disruptive) efficiency improvement
2. better customer experience
3. newer products/services and
4. better business decision making leading to agility and scalability.
5. Creating new business models/platforms and ecosystems

Often (b) is a direct result of (a) and sometimes, they are independent initiatives. In many services firms and newer companies, the first is already achieved by it and hence the journey begins at (b). Usually, (c) and (d) follow (a) and (b). For large companies—and not just in India—(e) is often a distant goalpost. Few have even gone to a stage where they can start planning for it seriously.

4. A top-level dedicated person must drive digital transformation. That is the current thinking. A digitalization initiative which delivers significant value to the company may be driven by a non-C-level person but a transformation cannot be achieved that way. Some argue that the role of CDO or head of transformation is temporary. The jury is out on that one. But that debate can wait. The current thinking is you need a dedicated person. That is about it. It cannot be an added KRA for someone.

5. Shifting to the decentralized model. In most large conglomerates, the digital transformation initiatives are at the individual company level. (See Choosing the Right Model)

6. It is a culture shift. 60-70% of digital transformation is actually bringing a culture shift,say some heads of transformation. “Shifting the mindset without replacing everyone,” is how it is explained. In Tata Steel, for example, it involved reverse mentoring, where some 16 senior executives got reverse mentored by new generation employees in digital!

7. At the end, it is a change management. People, Process, Technology—any change management has these three leavers and so has digital transformation. The prefix digital just emphasizes the fact that it has been initiated by a fundamental change in technology’s capability.

8. It is not enough to do good work; one must talk about it. That is a mantra that iconic chairman of American ICT regulator FCC Reed Hundt often repeated. Communications is an important aspect of any transformation journey and digital transformation is no exception. Branded programs do help. Tata Steel had every aspect of it branded, including the key program and even filters.

9. Technology’s impact this time is beyond processes. Technology has been applied to achieve dramatic gains in efficiency. This time, it is impacting changes to all the three layers, strategy, process and product.

10. Some technologies are more equal than others. Thanks to the buzz around sensing (IoT) in the context of the Fourth Industrial Revolution and the sci-fi kind of stories around AI/Machine Learning, they may be getting all the limelight as far as tech is concerned, but it is the good old cloud model that started this change becoming a reality in many ways. 

11. It is essentially a game of data. Take out data out of it—it will look like another automation exercise. In manufacturing, for example, SCADA and other ICT-based systems in an isolated manner have been there since long, delivering great functionality. But now, they feed data into the enterprise systems and that makes all the difference. From customer experience to new efficiency, from better planning to risk management…it is data that is crucial to a digital transformation. Without a solid data and analytics strategy, digital change is tactical. 

12. Design thinking is the emerging catch phrase. In the context of digital transformation, design thinking is emerging as an essential requirement. Most of the digital leaders we spoke to mentioned it either in the context of organizational requirement or as one of the essential capabilities of an executive driving digital transformation.

13. Culture change top challenge, tech is the easiest. Almost everyone agrees that culture shift is the biggest challenge; technology is the easiest one to tame.

14. Use-case, not application of tech: the shift to Outside-in. Traditionally, tech has been applied to solve an existing business problem/requirement. In the digital era, where the transformation is essentially digital leveraged, it is the other way around. Look for new tech, quickly gauge if it has a scope to make big changes to your business, articulate that and convince the top management of the value that it can add to your business. ‘How’ has a fancy name: use case. So, in that sense, it is technology first. You can call it an outside-in regime. What it also means is tech becomes one more thing that any senior executive (not just one person) must follow in a transformed organization and continuously think of how it can improve the company, the function, the business unit.

15. The role of enterprise IT is important but rarely doesit drive transformation. Why do so few CIOs drive digital transformation? This question often is interpreted as: What do CIOs lack? While the second question can be answered, that is a smaller reason, if at all. For example, their way of looking inside-out: too much focus on problem solving (the problem must be stated by someone else) than the ability to draw on blank canvas. That may be true to some extent but the big reason is something else.

That is the unwillingness of the CIOs themselves. Sounds strange. Here is how it pans out. Most CIOs, who are otherwise quite capable of driving digital transformation are denied that opportunity are keen to do so without giving up their CIO’s role, which includes everything from infrastructure (the big-budget technology) to applications.

That is a clear no-no for any organization serious about digital transformation. Digital transformation is not a KRA. It is the single-most important initiative for an organization choosing that path. It cannot be handled along with datacenter rollout.

In some organizations, CIOs are given this designation. They are either just fancy designation or are in tech-mature organizations like IT-ITES or other B2B services where transformation is around a specific aspect. More importantly, culture change is not part of the transformation journey.

In many organizations (like most Vedanta companies), the CDOs are techies but do not directly look after traditional IT. In Sterlite Copper, for example, Head of IT reports to the CDO.

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