Digital Transformation is essentially the use of technology to radically improve performance or reach of enterprises. Organizations adapt to changes in their ecosystem by leveraging digital technologies to create digitally enhanced, customer-centric business models. Digital transformation creates new customer experiences, improve operational efficiencies, generate new revenue streams and rapidly respond to a fast-changing environment.
Today Information Technology has become a major factor that drives most businesses, markets, and societies. New digital solutions offer an opportunity to improve how organizations compete and create a foundation for outperforming rivals.
Table of Contents
- Successful Transformation
- Digital Re-mastering of Business
2.1 Digitizing the Customer Experience
2.2 Digitizing Products and Services
2.3 Digitizing Operations
2.4 Digitizing the Organization
- DT Maturity Scape
- Enterprise IT Transformation Maturity Model
4.1 Ad Hoc
- Challenges faced during Digital transformation
5.1 Transformational Challenges
5.2 Innovation Challenges
5.3 Governance Challenges
Digital transformation often begins with the customer. It helps in how to get to know the customers better, improve your service levels and digitize the customer experience. It then extends to three additional areas such as digitizing operations, products, and services. Many companies are starting to transform their businesses successfully through digital technology. Specifically, companies which face common pressures from customers, employees, and competitors, speed up their digital transformation.
Successful digital transformation comes not from implementing new technologies but from transforming your organization to take advantage of the possibilities that new technologies provide.
Successful Digital Transformation does not happen bottom-up. It must be driven from the top.
Focus on the “how” more than the “what.” Successful DT does not come from creating a new organization, but from reshaping the organization. Companies can do much more to gain value from investments made, even as they envision radically new ways of working.
Digital re-mastering of business means reshaping a business through digital transformation. This includes various steps.
Different technologies such as CRM, Digital footprint, Code Halo, new (Omni) channels of interaction, digital marketing, etc help in digitizing the customer experience while doing business.
Digitizing the products and services sell an experience to the customers. It also offers products and services digitally to the market. Other advantages of digitizing the products and services are mass customization, automating, standardizing and globally sourcing processes.
Advanced digital technology, powered by the SMAC Stack and aided by sensors, BPR, artificial intelligence and automated machines, enable employees the flexibility and freedom to work anytime, anywhere and on any device.
To digitize the organization, certain areas such as back-office, ERP, SCM, support value chain, and employees need to work together in a new way. All of them need to learn from each.
As an integral part of overall business strategy, digital transformation is an iterative process encompassing the entire enterprise. Digital leaders understand they need repeatable, scalable capabilities since change is the only constant in the digital economy. Our continuing research in this area shows that, while organizations are all maturing, there is a widening performance gap between thrivers and survivors.
Digital Transformation Maturity Scape is a framework for identifying the stages, critical measures, outcomes, and actions required for IT organizations to effectively evolve to information transformation as a critical enabler of the digital transformation of their enterprise.
It enables an organization to assess its competence and maturity and use a baseline in defining short and long-term goals and plans for improvements. It also enables executives to prioritize and obtain guidance in leveraging and managing their fastest-growing asset, i.e, the information asset.
There are five stages to the Enterprise IT Transformation Maturity model. They are Ad Hoc, Opportunistic, Repeatable, Managed and Optimized. Each stage is inter-dependent on one another.
Ad Hoc is the base stage which establishes an enterprise IT Transformation. It is basically a core IT phase. In this stage, there is no effort made between business and IT to coordinate or incorporate 3rd platform technology.
Opportunistic is the 2nd Platform IT phase. In this stage, uncoordinated efforts are made between Business and IT around 3rd Platform implementations. It also has limited progress toward 3rd Platform adoption.
Repeatable is the 3rd Platform IT phase. In this stage, coordinated efforts between Business and IT around 3rd Platform implementation. This stage allows the organization to keep pace with peers in 3rd Platform adoption.
Managed is the business innovation phase. In this stage, an effective partnership is made between Business and IT around 3rd Platform implementations. It allows an organization to outpace competitors through the use of the 3rd Platform.
Optimized is the final phase in which digital transformation take place. In this stage, there exist a highly orchestrated interaction between Business and IT around 3rd Platform implementations. This enables a world-class organization with lasting competitive advantage driven by 3rd Platform transformation.
There are many challenges faced by an organization during digital transformation. progress on their own areas, but fail to influence the necessary practices across other organizational units.
The lack of coordination of digital initiatives across for example marketing and product innovation or business model innovation and customer interfaces decreases the significance of individual innovations and initiatives.George Westerman
In addition, especially the more traditional industries and organizations face the challenge of coordinating between new and traditional business processes. A to state B. Neither is the framework to be interpreted so that the organization would move from one state to another.
The challenges remain rather constant and individual digital initiatives such as new products, value creation models and business model innovations need to overcome these challenges with appropriate managerial and organizational actions.
- Lack of vision
The first and maybe the most important transformation challenge is the lack of vision or incremental vision concerning digital transformation. Each digital transformation starts with a vision from top management, as the most significant digital transformation benefits are yielded by truly transformative activities, the required vision has to be radical and transformative rather than incremental.
- Lack of momentum and urgency
This challenge is especially affected by previously successful organizations, as the previous high performance both decreases awareness of digital opportunities and diminishes the motivation to pursue those. This results in complacency which is the most common organizational barrier of digital transformation.
- Threatening of current power structures
This challenge is often referred to as resistance to change due to internal politics and defending, for example, traditional technologies, systems, and organizational structure and value creation chains
- Lack of innovation culture
Perhaps the most common challenge is the lack of innovation culture within the organization. Organizational culture is critically important in leveraging digital transformation and that the relationship between organizational culture and digital technologies needs to be right in order to pursue digital opportunities.
The innovation culture issues include several challenges such as risk aversion, competing for organizational priorities and resistance to novel technologies and approaches need to be right in order to pursue digital opportunities. The innovation culture issues include several challenges such as risk aversion, competing for organizational priorities and resistance to novel technologies and approaches.
- Lack of skills, capabilities, and talent
In addition to innovation culture, the lack of skills, capabilities, and talent is a much-cited digital transformation challenge. One of the most common features in organizations pursuing digital opportunities successfully is that they have a digitally talented workforce.
Digital development changes the capability requirements of workforce especially in traditional industries and thus investing significant resources in building the necessary capabilities to support digital transformation initiatives is needed.
This talented workforce may be externally hired or internally developed, but the lack of skills and capabilities is considered to clearly hindrance digital transformation initiatives and innovations. Interesting in the subject of lack of talented workforce is that often the required skills and capabilities, especially in managerial levels, do not concern the deep technical understanding of technologies.
- Siloing and lack of collaboration
Siloing and lack of collaboration is the third common challenge affecting innovation quantity and novelty. As the products and business models become more complex and combine for example different organizational functions and even reform business networks, efficient innovation can rarely be conducted in silos or by individuals, however talented they are, and the organizations succeeding in digital initiatives are likely to use cross-functional teams in developing and implementing those digital initiatives.
- Unclear business case
Not all digital initiatives originally make sense to the company, and direct investment is easiest to reason when the returns are easy to see and quantify and occur in the near future. Business cases are often less clear for truly transformative initiatives, even though these initiatives are exactly what become foundational capabilities, enable creating novel digital products and platforms and drive the digital transformation.
- Limited resources
In addition to coordination issues, limited resources for organizational innovators present a challenge for digital initiatives to pick up traction. These resources include, for example, time for developing digital initiatives and a supportive information technology infrastructure.
Digital initiatives are built on a solid IT foundation providing necessary processes, data, solution delivery, and the capabilities to create and extend digitally operated environments. They also claimed that a strong and collaborative relationship between IT infrastructure and business processes is very helpful in driving digital transformation
- Coordination issues and unclear roles and responsibilities
These coordination issues may appear, for example, between business units that make progress on their own areas but fail to influence the necessary practices across other organizational units.
Lack of coordination of digital initiatives across for example marketing and product innovation or business model innovation and customer interfaces decreases the significance of individual innovations and initiatives. In addition, especially the more traditional industries and organizations face the challenge of coordinating between new and traditional business processes.
- Lack of funding
A key resource worth mentioning as an individual transformation challenge is the lack of funding. Direct monetary investments are often necessary for implementing digital initiatives eventually and the lack of funding is perceived to be the second-largest challenge of digital transformation.
Digital transformation is the profound transformation of business and organizational activities, processes, competencies, and models to fully leverage the changes and opportunities of a mix of digital technologies and their accelerating impact across society in a strategic and prioritized way, with present and future shifts in mind.
The digital transformation maturity scape enables an organization to assess its competence and maturity and use a baseline in defining short and long term goals and plans for improvements. Even though digital transformation faces many challenges during its implementation and governance, it has been booming throughout the business world over the past few years.
Roadmap for digital transformation, Khaltar T;
Fitzgerald et al., 2013;
Westerman et al., 2011;
Kane et al., 2015;
Pralahad & Krishnan, 2002