A No-Nonsense Approach to Digital Transformation

BCG recently published a report saying that only 30% of digital transformation efforts are successful. Billions are poured into digital transformation efforts every quarter across the world, and if the report is any indication, there are billions wasted across all industries.

A digital transformation strategy requires a holistic approach that includes integrating digital technology into various aspects of a business, aiming to optimize processes, enhance collaboration, and ultimately increase delivery speed and customer satisfaction.

So how do you ensure your digital transformation efforts provide a considerable net value-add? Even with all the resources, technologies, and dollars at disposal in large enterprises, digital transformation is still a scary effort, giving CTOs and CIOs sleepless nights.

Defining digital transformation

To begin with, it’s crucial to have a clear understanding of “What is Digital Transformation”.

Sans industry jargon, in its simplest and purest essence, Digital Transformation is just a combination of two things -

Digitization has been in practice for many decades. It simply means to digitize information, or in other words, make data available in a digital format.

Transformation, on the other hand, is not as simple and can potentially be a never-ending process. If you are unsure about where are you on the journey, you can take our digital transformation assessment. How you define transformation is very organization-specific and can be influenced by multiple factors like budget and resources at disposal, technological advancements over time, etc. 

Usually, transformation is a two-step process -

1. Optimization: Making existing processes and systems better. A more fancy term in the market for this is “digitalization”, but we are staying away from jargon and are more focused on simplifying things, so let’s stick to optimization.
2. Value Creation: Creating new business value. Going beyond what is existing and truly transforming as an organization using technology. This is what makes true transformation a never-ending process, the same way customer satisfaction is a never-ending pursuit.

Embarking on a digital transformation journey

Embarking on a journey of digitization, optimization and ultimate transformation can be a daunting task, considering the multitude of technologies on offer and the myriad business operations that fall under the CxO’s purview for transformation.

Peer pressure from competitors in the market, fear of missing out on early adoption of the latest technologies, and other such factors push CIOs and CTOs to invest in large-scale digital transformation projects before they have had a chance to do their groundwork properly.

To be fair to them, “I need to lay out the framework first..” is not an easy conversation that they can have with business leaders who are looking to boost revenue in the upcoming quarter. Management will always need things yesterday — that’s just how it is and CIOs and CTOs are caught between a rock and a hard place more often than not.

     A CTO/CIO juggling multiple responsibilities

Laying the foundation for success

So how does one escape this vicious circle? How can you, as a CTO or as someone heading digital transformation efforts, ensure that you are putting your money to good use and setting yourself up for success?

At the risk of sounding unrelatable and philosophical — look inward! Understand and define the problem clearly before solutions for it. Begin with defining your existing landscape and laying out a framework to operate on — forget the latest technologies, forget market conditions and set aside thoughts about your competitors’ technology eco-system.

Focus on the problem, define and document it, and understand where you want to invest and in what order. I know that sounds like generic advise, but indulge a little longer and I promise to layout a framework that you can put to use in this regard.

Defining the problem also doesn’t involve researching on latest technologies — don’t worry about cloud migration, RPA, ITSM, OCR, Hyper Automation, Analytics, Middleware, and a million other technologies — that come later. We are not coming up with solutions. Our focus is to come up with a framework first to define the problem at hand.

Imagine you are a large bank with 20,000+ employees across 30+ departments offering 100s of financial products to millions of end-customers. The technology ecosystem is a massive mix of legacy mainframes, aging document storage systems, disparate processes, overloaded IT teams, off-the-shelf cutting-edge systems that struggle with user adoption, disjoint and redundant ETL jobs, siloed cloud-hosted core banking applications and an unstable suite of customer-facing digital channels.

How do you condense all this into a whiteboard and layout a digital transformation roadmap? Put on a CTOs hat for a moment and imagine presenting a roadmap to management — where do you even begin?

Digital transformation layers

At the core, technology transformation aimed at digitization, optimization, or value-creation, always operates on a set of finite abstract layers. Let’s call these “the layers of digital transformation”. These layers don’t depend on technological advancement, budget constraints, or existing landscape.

Understanding what each of these layers means, how they are stacked against each other, and what their focus areas are will help you create a problem framework and condense operational transformation needs across various departments into a whiteboard conversation you can then have with your management. Working across these layers will be the holistic digital transformation approach.

The below diagram helps you visualize these layers, how they are stacked against each other, and focusAreas that you will need to consider when investing in digital technology to transform them.

A Framework for a holistic approach to digital transformation 

Once you understand the “layers of digital transformation” — shown in the image above and the “stages of digital transformation” — Digitization, Optimization, and Transformation, you can then carve a framework by marrying the two. Creating this matrix will help you condense a complex transformation project into a whiteboard discussion.

Let’s consider a loan origination process in a bank to illustrate this framework.

An end-to-end loan origination process touches multiple departments like call centers, relationship managers, underwriting, booking, funding, QA and so many others. When you tactically find solutions in a siloed manner and reactively fix this across the different teams, you would typically end up investing in multiple disparate systems — CRM for the call center, an underwriting rules engine, an OCR system for document verification, RPA for the booking team to eliminate manual tasks, and a new core banking system that complies with the latest regulatory needs for the newly launched loan products. To stay away from building this sort of fragmented enterprise, take a more strategic (instead of tactical) digital transformation approach and define your problem across the multiple departments and fit them into a framework first.

Let’s look at how you can whiteboard the problem of transforming a Loan origination process using the framework discussed above.

Please note, the examples of digital transformational use cases listed below are only indicative to illustrate the framework and not exhaustive enough for actual implementation.

Conclusion

For each of the core business functions within your organization, start by documenting use cases into this matrix before you invest in technology to transform them. As a CxO, it is very important to have a vision of these layers across all your core business functions so you can get better ROI from the technologies that you onboard.

This will help ensure that you never address your problems in siloes — for example, you can have one unified platform for digital transformation to tackle the process layer across all your departments instead of buying multiple solutions to address specific use cases within each department.

Digital transformation is no easy task, but having a framework and a set of guidelines will help you begin the journey on the right footing. Analyze the problem at hand and define it clearly before investing in solutions. The greatest minds seem to agree with this holistic digital transformation approach.

P.S. Specifying tools, technologies, and case studies are avoided intentionally in the article to stay away from jargons and focus on laying out a generic framework instead. Details around admin functions, infra, security, and shared services are also not discussed to focus exclusively on business operations transformation.