What is digital transformation?
Digital transformation is about delivering core competencies in a digital, automated, and user-centric manner. Driven by data and powered by tech (e.g. cloud, cloud native stack, AI, machine learning, and deep learning), it increases business agility, competitiveness, and enhances customer value.
Digital transformation is difficult to grasp, because, in essence, it is about innovating and reinventing your core product or service. While innovation itself is rather intangible and different for each company, there are concrete requirements you must fulfill to be able to digitally transform. For example, leverage cloud native technologies and adopt a DevOps approach.
Here's a little nugget: “DevOps elite performers” deploy updates or new features 208 times more frequently and 106 times faster than low performers and recover from incidents 2,604 faster. By leveraging DesignOps tools you'll reduce time per design interaction by 20%. With that speed, innovation becomes a lot more feasible.
Such a nimble development process, allows organizations to develop applications that leverage data generated via digital touchpoints to improve the user experience even further. AI, machine learning, deep learning all streamlined through a DataOps approach lead to valuable insights. You can predict customer behavior and take corrective action or even rely on an algorithm to hire your next patent lawyer.
What is the difference between digital transformation and digitization?
Not to be confused with digital transformation (as Wikipedia does), digitization is about translating analog processes into digital form. Whereas digital transformation is about leveraging new technology developments to transform your core business.
Digitization is a prerequisite for digital transformation. To digitally transform your organization you first need to translate analog processes into digital form. This means giving your employees the tools they need to be able to work from anywhere - that's the essence of digitization. It also means delivering your product or service digitally.
This isn't touching your core business yet. You are simply enabling your workforce and customer base to transact business digitally. Digital transformation goes one step further and extends your service or product digitally creating additional opportunities to deliver value. Our thought experiments with WeWork and Marriott exemplify what digital transformation can achieve.
How to transform a business digitally?
Digital transformation is driven by data and powered by technology, but fundamentally it is about reimagining your business. It starts by digitizing your processes and how your product or service is delivered then extending your offering digitally.
While technology plays a key role, it's only an enabler. To truly digitally transform your business, not only digitize it, you must take innovation seriously enough to create a Center of Excellence or Innovation Lab. These are composed of technologists, data scientists, business analysts, and cross-functional business leaders.
This group of experts is then tasked to innovate. While there is no formula for innovation, there are key technologies (elasticity of the cloud and AI) and methodologies ( DevOps, Agile, and DataOps) they must leverage to deliver new, digital experiences.
Why is digital transformation needed?
We are witnessing Digital Darwinism. Driven by a confluence of technology developments, namely the cloud, AI, and DevOps, businesses that transform digitally gain an unprecedented competitive advantage. It really is about survival.
While you’re still thinking about whether digital transformation can benefit your business, your competitors are already realizing results. Competitor A, for instance, has adopted a lean, elastic system architecture and is able to scale services up and down, dramatically reducing infrastructure costs. Competitor B is using sensors on their mission-critical machinery with AI algorithms that predict when something is about to fail so they can intervene before it happens.
Those who have adopted a DevOps approach push out new, exciting product updates quickly, increasing the speed of innovation. Now imagine you do nothing. Where will you be in three years?
What are the main elements of digital transformation?
From a technology perspective, digital transformation calls for 1) product and design thinking, 2) quality engineering, 3) data-centricity, and 4) production readiness. New technologies and approaches are the foundation to extract value from data to better serve your customers.
Product and design thinking
Product and design thinking evolves around product experimentation with fast user feedback loops which are in turn integrated into the next iteration. Tools used include persona definitions, ethnography, and empathy mapping. The ultimate goal is to build a product that your customers really want, not what you think they want.
Quality engineering
Build a cloud-based liquid architecture that adapts to your organization's needs. Enabled by a DevOps approach numerous manual tasks are automated, allowing for a more agile and rapid engineering process and providing fast feedback loops.
Data-centricity
Data, your most valuable asset, should drive all decisions and AI will help drive insights even further.
Production readiness
By leveraging approaches such as CI/CD, you'll ensure code is always in a deployable state to minimize rework and risk.
Is digital transformation a hype?
Digital transformation has become a buzzword. Yet despite the hype, it’s perhaps the most critical activity organizations must engage in to remain relevant and competitive. It's about survival and defying Digital Darwinism.
Truth is, there seems to be a lack of understanding of what digital transformation really is. As mentioned above, some confuse it with digitization while others think it's "simply" adopting new technologies. But it really is about reinventing your core business (see above).
What do you need for digital transformation?
First, you need leadership buy-in. Technology developments such as AI are coming at warp speed disrupting every industry. Everyone, especially leadership, must share a sense of urgency. Yet the adoption of modern technologies is only a means to an end, namely, reinventing your core business.
Once there is global agreement on the need to leverage new technologies to rethink your core value proposition, you'll need to modularize mission-critical parts of your system. Containerizing key applications and adopting a DevOps approach will allow you to quickly update and extend your system to take advantage of new technologies as they hit the market -- this flexibility is key in a rapidly changing business environment.
A modular, flexible architecture will allow you to transform your value proposition (the digital transformation part) by leveraging technologies such as AI to gain a better understanding of your customers and further increase efficiency and convenience all while reducing costs. How exactly will differ for each organization. That's where so-called Innovation Labs or Centers of Excellence come into play (see above). It's up to this group of people to explore what that means for your organization.