The expert view: Digital transformation – what does it mean for your organisation?
3 April 2018 |
Digital transformation is a boardroom issue, not an IT issue, John Owen, Group CEO of Mastek, told an audience of business leaders at a Business Reporter breakfast at the Goring Hotel in London. He emphasised the need for the entire business to buy-in to a digital transformation project if it is to succeed.
Mr. Owen said that, among businesses he speaks to, everyone agrees digital transformation is a necessity and they are planning to start soon, if they haven’t begun it already. He said budgets are shifting towards digital as the recognition spreads through the business that these are vital projects.
One attendee, from a luxury retailer, said his company had been in a “do or die” situation when it embarked upon its digital transformation project and, in retrospect, this was “a blessing”. He said it left them with little choice. Another attendee, from a major bank, agreed that businesses that embark on a digital transformation journey are most likely to be in a do or die situation or “within sight of one”.
Attendees said that one of the biggest challenges to a digital transformation project is striking a balance between moving at speed and staying within regulatory frameworks or corporate governance processes. Digital transformation often relies on an agile process involving constant testing, launching and iterating, and this does not always sit well with established frameworks.
Secondly, it is important to choose the right partners. One attendee gave an example of when he was working on a digitization project at a chicken producer. The technology firm brought in didn’t listen to the concerns of staff and attempted to implement a broken system. The scale of production was too large to stop so for weeks, the attendee said, chickens were coming off the production line even though there was no system in place to process them.
Businesses need to find a partner that will listen and understand their needs. Sometimes, attendees said, that can be a smaller company because they will be more likely to provide a personal service. “You want to be able to get the CEO on the phone,” said one.
Third, no company can outsource risk. Several attendees said they had worked in organisations where managers believed that, when their servers moved to the cloud, their risk followed. This is a dangerous mistake to make. On the other hand, some organisations become so risk-averse that they avoid digital transformation altogether. One attendee, from the financial services industry, said he had seen this happen following stricter regulations brought in after the financial crash of 2008. This is not an appropriate solution either. Instead, an organization must seriously assess its risks and risk appetite, and proceed with digitisation accordingly.
How do you know if digital transformation has succeeded? The most obvious measure is the bottom line. The business exists to make a profit, so if profit has increased then the digital transformation has been successful. As one delegate, from the oil and gas sector, pointed out, when the Channel Tunnel first opened it was a triumph of engineering and technology but a financial failure for several years. The bottom line is vital.
There was little disagreement with that but attendees suggested other measures as well. One attendee, from the construction industry, explained that the success of construction projects is judged by health and safety measures, as well as by profitability. This evolved following various regulatory changes, she pointed out. In digital projects, then, one measure of success could be a decrease in the number of data breaches or an increase in the number of attempted cyber-attacks that are detected and stopped.
Some of the companies represented at the briefing are long-established firms that see digital transformation as a way of positioning the brand for the future and attracting a new customer base. With that in mind, one attendee argued that a digital transformation project might be considered a success if it attracted a new, younger customer base to the brand, even if overall profits fell. The hope would be that this would be a short-term drop and that profits would rise again in the future.
Summarising the discussion, Mr. Owen noted that digital transformation projects are usually more complicated than they appear and firms needed to plan for them accordingly. To avoid these projects stalling, or failing entirely, companies would do well to work with a variety of partners – large and small – to ensure each could play to their strengths. Before all of that, however, the company needs to consider an important question: what exactly do we want to achieve?