There are fundamentally two avenues to creating a digital transformation strategy. The first is a bottom-up approach that relies on the initiative of individual business units to modernize the processes they have the most experience working with every day. The advantage of that approach is that it tends to achieve results quickly. The downside is that those efforts are typically uneven and may not result in a meaningful, sustainable competitive advantage because rivals can quickly replicate the same capability.
The second approach relies more on leadership from the top down. That approach typically involves the CEO, along with the board of directors, mandating the adoption of a series of digital business processes that transform how an organization operates at its very core.
Of the two strategies, the most widely employed to date has been a bottom-up approach, driven mainly by line-of-business executives. But as more organizations begin to appreciate the scope of what’s required to remain not just competitive, but also maintain their existence, more digital business initiatives are starting to be led from the top, says Juergen Lindner, senior vice president of SaaS for Oracle.
“It’s becoming a more strategic discussion,” says Lindner.
Vendors Pursuing Digital Transformation Solutions from All Angles
Oracle at the Oracle OpenWorld 2018 conference announced a raft of updates to a cloud application portfolio that now spans every major business function in the enterprise. Oracle is making a case for delivering those applications as a cloud service to both lower operational costs and make it simpler to employ advanced machine and deep learning algorithms to automate most business processes using, among other technologies, blockchain databases and digital assistants.
In fact, Oracle CEO Mark Hurd told conference attendees that Oracle expects 100 percent of all cloud applications will have artificial intelligence (AI) capabilities by 2025 and that 85 percent of all customer interactions will be automated.
Oracle is hardly alone in its efforts to tap into an increased willingness to embrace digital transformation more broadly. SAP has been touting the inevitability of a new Intelligent Enterprise. SAP at the SAP Tech-Ed 2018 conference expanded on that strategy by announcing it has developed machine learning algorithms that can be employed within a set of robotic process automation (RPA) capabilities that it is making available via a SAP Leonardo framework. The goal is to automate tasks such as the processing of invoices by relying on machines to reconcile those invoices with the appropriate statement of work, says Markus Noga, senior vice president for machine learning at SAP.
In general, Noga says that while 2017 was notable for the number of proof-of-concept projects that were launched by customers, this year the intensity of digital transformation occurring across the enterprise has exponentially increased.
“It’s clearly expanding,” says Noga. “It’s happening at a much wider scale.”
Digital Transformation and Competitiveness
Gartner at a Gartner Symposium/IT Expo 2018 conference urged organizations to embrace a ContinuousNEXT strategy spanning everything from their organizational culture to adopting technology frameworks that will enable them to create a digital twin of almost every business process. That more comprehensive approach is required because nearly two-thirds of the CEOs and CFOs surveyed by Gartner expect business model changes that will be driven primarily by digital transformation.
To stay competitive, organizations will need to transform not just their IT environments, but how the business fundamentally operates, says Mike Sutcliff, group chief executive for Accenture Digital, an arm of the business and technology services provider focused specifically on digital business transformation.
“It’s a team sport,” says Sutcliff.
Initially, Sutcliff says, most digital business initiatives tended to focus on customer service and marketing. But as those projects progressed, organizations are coming to realize they need to make fundamental changes to backend systems to take digital transformation to the next level, says Sutcliff. Unfortunately, legacy systems are the single biggest hindrance to digital transformation, adds Sutcliff.
To help organizations overcome that issue, Accenture Digital focuses on helping organizations leverage a range of technologies to first decouple processes from those systems in a way that makes it then simpler to modernize them, says Sutcliff.
Digital Transformation Requires Appetite for Digital Disruption
Ultimately, the degree to which any organization is going to survive and thrive in the era of digital business transformation will come down to their appetite for digital disruption, says Michael Kollar, CTO for North America for Atos, a provider of global system integration services.
Savvier companies realize they need to be the entity that drives digital disruption in the vertical industry before some unexpected new competitor winds up doing it first. Giving existing processes a digital facelift is not enough, says Kollar. Organizations need to be willing to disrupt the processes they have in place today before there’s an existential threat that arrives in the form of an unexpected new rival, says Kollar.
“It comes down to how much an organization is willing to become a digital cannibal,” says Kollar.
Organizations also need to construct their IT services in a way that makes it simpler to adapt by relying less on monolithic applications, adds Kollar. Digital business processes need to be able to adapt to rapidly changing business conditions, which Kollar says will require organizations to deliver IT as a set of more granular microservices that can be more flexibly updated without having to necessarily rewrite an entire application on an end-to-end basis.
In addition, organizations can’t be afraid of failure, notes Danny Estavillo, west regional managing director of Nerdery, a provider of IT services. That fear of failure tends to create paralysis of analysis that results in the organization not doing anything.
“They need to learn how to fail fast,” says Estavillo.
That also means moving beyond trying to modernize one application at a time. Too many organizations think they have a long runway to effect change when external competitive pressures are already mounting, adds Estavillo.
Each organization will, of course, need to tailor its digital transformation strategy to meet its own circumstance. Most of them would be well-advised to implement a series of strategic initiatives while continuing to encourage lines of business to, for example, embrace low-code application development tools to modernize an existing business process or create a new one on their own. Hopefully, at some point, all those efforts will one day converge in the middle.