What is Digital Transformation (and Why Should Your Company Care)?
Digital transformation—sometimes synonymous with digital innovation—has often been defined over the last few years with little to show for it. We know because at Savvy, we've been in the trenches with companies helping them through their digital transformations. We continually have course-corrected digital transformations gone wrong while re-educating our customers—and the market—on what it actually is. Fundamentally, it represents businesses and organizations taking a step back to revisit how work gets done in all parts of their business and organization.
Digital transformation may address the parts of the organization that already are digital. For example, a monolithic web application that is hosted on-premises. It also includes the parts that may not be digital. For example, a manual process that still may rely on physical paper.
Not all digital projects are digital transformation projects. But all digital transformation projects need to be digital in the newest sense of the word. Fast. Flexible. Innovative. Iterative. Nimble. Collaborative.
That's easy to write but much harder to execute, especially within the enterprise. Within the context of large corporations and organizations, change, let alone transformation, is hard. Established conventions and processes are in place to ensure quality and standards are met. Legacy systems that are slow and frustrating to use can power significant parts of the organization. Business units may operate independently with no shared vision or communication with each other. These and other similar elements of the enterprise push against transformation, sometimes purposefully, sometimes unknowingly.
Within the context of large corporations and organizations, change, let alone digital transformation, is hard.
Digital Transformation Began with the Cloud & Apps
Before going deeper into what digital transformation is, it's important to put digital and, the last ten years in particular, into more context.
Back in the late 1990s and early 2000s, the word "digital" took on a new meaning when it became part of the business world. It typically signified the web, websites, and e-commerce in particular. Digital quickly moved from technology consumers used to new career opportunities within the workplace.
For those in the industry back then, it was a term we also somewhat fought against. Digital created friction within the organization back then because it wasn't clear where it should live, who should run it, and most importantly, what significance it should have. At that time, "digital" often meant it was an experiment and improperly capitalized and staffed. In short, digital was not ready to be fully embraced.
Because of that, until 2015 or so, the word "digital" seemed to disappear from business vernacular almost overnight.
There were two primary drivers for this change: the cloud and apps. While Apple is often properly credited with making the word "app" accessible globally, Salesforce first introduced both concepts in the business world. They focused on a much less fun way to describe apps calling them "software as a service" or SaaS (which is a rare used term today). Salesforce introduced a simple way to deploy their app—or "service"—with the application itself and all of your data hosted in their own infrastructure, the "cloud."
Both the cloud and apps dominated the conversation over the last decade or so, causing the word “digital” to fall by the wayside. Apple's consumer-oriented, "There's an app for that", went from a clever marketing slogan to businesses asking, "Where's that app for our organization?" People wanted well-designed, easy to use applications they could access anywhere and at anytime, not just at home, but in the workplace.
Yet, "apps" and "the cloud" were overly specific. They didn't represent the totality of possibilities. While they themselves helped with strategy, they weren't strategic. Instead, they were just tools in a broader shift, a transformation, that began those 20+ years ago.
Digital Transformation Requires a Change in Mindset
From R&D to Innovation Labs and Acquisitions
Large companies and enterprises realized early on the seemingly impossible task of digital transformation. In fact, they realized it before the phrase "digital transformation" even formally existed. Their solution to combat these difficulties within the enterprise became innovation labs.
The most popular moniker to represent these centers of innovation is the "labs" label, such as Capital One Labs, Walmart Labs, and Amazon Lab126, as well as more stealth names like Google X. These groups focused on experimentation, R&D, and validation. Amongst other functions, their goals were to go faster, reduce risk, and more efficiently help bring vetted ideas to the market. They may not be responsible for rolling out their innovations. Instead, when vetted, they handed them off to their counterparts back within the "enterprise proper" to scale to a full production capacity.
A sometimes complementary effort to this structure was through acquisition of IP or "acqui-hiring" talent. These approaches focused on advancing digital capabilities directly and indirectly. Like standalone innovation labs though, they can fall short of creating an enterprise-wide culture of digital transformation.
To be clear, innovation labs work well and need to continue to exist to discover the future and "next big thing." They don't necessarily ensure though that organizations embrace digital transformation across the entire enterprise.
Digital Transformation Needs Data Unlocked & Unblocked
Organizations, seeing the benefits of innovation labs, have more fully begun to move towards pushing digital transformation across the enterprise in the last 5 years. Those models showed them that ideas could be driven forward more quickly because they weren't mired down by existing approaches and technology. Technology encompasses both the stacks and platforms being used, as well as the data that flowed through those systems.
Over the past years, "big data" has been a big theme in the business world. Even small companies can have a "data problem". Firms were drowning in information and not making their data actionable. Worse, data could be siloed or inaccessible with no way to push and pull it out or share it between systems.
Amazon, Microsoft, Google, Salesforce, and many others decided to be the answer for these data problems. Not only do they offer the cloud storage solutions such as AWS, Azure, and Google Cloud, they also provide options to do the “big data” crunching and analysis. Salesforce more recently acquired Tableau, a leading provider in analytics and business intelligence to hone in just on the analysis piece.
The key point is the precondition for speed and agility is unlocked and unblocked data. Data must be unblocked and available across systems via APIs, web services, and microservices. Data must also be unlocked and actionable through automated and manual analysis alike. Without those in place, digital transformation cannot be put into action across the entire organization.
Digital Transformation needs data unblocked and available across systems via APIs, web services, and microservices.
Digital Transformation Demands Enterprise Tooling
GitHub, now owned by Microsoft, began as the preferred way for independent developers to host and share code. It was faster to use than running a local or self-hosted code repository. It was better designed than other apps and tools. It also allowed code to be available anywhere. And because of that, GitHub allowed people's code to become social.
Open source software existed before, but GitHub and comparable tools allowed code to get better quicker because of network effects. With code being much more accessible and available from anywhere, now a fellow developer could more quickly comment on or contribute new code.
With the power of these collaborative tools, the simplicity of apps in people's personal lives, and data that was everywhere (i.e., in the cloud), those within the enterprise demanded more. Knowing a tool like GitHub existed for their personal use, they didn't want to use something inferior inside the enterprise.
Ironically, it was the popularity of these amazing, beautifully designed consumer applications that drove their enterprise counterparts. Cloud providers began realizing that the enterprise had specialized requirements as it related to security and access control in particular. They increasingly began focusing on larger companies and the enterprise itself.
It was the popularity of amazing, beautifully designed consumer applications that drove the enterprise tooling needed for digital transformation.
As one example, GitHub went from a popular code repository tool for developers to a legitimate option for large organizations with GitHub Enterprise and GitHub Enterprise Cloud. Beyond GitHub, Trello, a well-known project management tool, similarly rolled out Trello Enterprise with advanced security, SSO, and organization-wide permissions. Many other tools and cloud-based platforms today have these "enterprise" options such as Heroku Enterprise or Docker Enterprise. There are also often enterprise-level support and SLA options.
This evolution is another enabler of digital transformation. Digital transformation requires better tooling to support it. It needs tooling that the enterprise can easily deploy, that help data to live in more places, and that people actually like to use to increase adoption rates. This enterprise-grade tooling, along with the convenience and simplicity of the original consumer versions, allows people and teams to collaborate more closely internally and externally. They reduce the complexities of intranets and VPNs, as well as the inefficiencies of siloed information and disparate workflows all without sacrificing security and other internal governance policies.
Digital Transformation Must Break Down the Walls of the Organization
People who use an application need to be brought together with the people who will build the application. That’s why digital transformation starts and ends with people, breaking down the historical walls between these two groups.
Organizations have become more of aware of bringing these two groups of people closer together. They realize that instead of just debating internally what should be built, they should be more customer, user-centric, and data-centric. Thankfully, as noted above, the tooling helps that happen better, too.
With these groups working more closely together, giving them the right tools, the proper processes, and unlocking the data they need, digital transformation is truly possible. When that occurs, development lifecycles are shortened, costs can be reduced, and better products ultimately get built.
Is digital transformation just a fad? Like the golden age of apps, there are plenty of companies that are trying to capitalize on it. You can find thousands of "digital transformation experts" now on LinkedIn, the web, or you may just bump into one at your local grocery store (if that's still your thing).
No one company, firm, or solution has the market cornered on digital transformation at this point. And there's not one way to do it. Each organization's approach to digital transformation will be different. But the principles that guide and power it should be the same.
An enterprise-wide mindset embracing digital transformation along with better processes, better design, better data, and better tools allow people inside the enterprise to work smarter, happier, and more efficiently. And with each of those components, there's a much greater possibility of creating something amazing.
Stay tuned as we continue to provide more practical and actionable insights on how best to approach digital transformation inside your organization.
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