Wednesday, May 26, 2021

What is a Digital Transformation?

I've recently been asked to describe and define transformation so that organizations, end-users, and vendors can claim transformation. According to the multiple definitions I found on the web, "A transformation is an extreme, radical change" So what do we deem extreme and radical? I would say that while pursuing a digital program, an organization discovers a new or dramatically extends a business model. An example would be an insurance company that became so great at insurance claims that it started a subsidiary to manage other organizations' claims. Another would be if an organization had a significant change in its competencies and skills that it looked and behaved radically different. However, there are incremental ways of sneaking up in these sweeping changes and transformations. So it might take a while to claim a true digital transformation.

While I don’t think that transformation ends, there are points in the transformation process to declare an organization transformed. To that end, I tried to develop a way to measure if the transformation effort is significant. Besides the softer sides of organizations like culture, organization, competencies, and skills that are harder to measure, there are five dimensions of change that I was able to noodle out to describe here. I'm sure this will morph over time, but this is my first stake in the ground, and I'll go from here. See Figure 1 for a spider diagram (aka Kiviat diagram) of the dimensions of transformation where I showed a typical traditional process or application measured on the diagram. The idea is to move the measurements to the edge as depicted by the red arrows. The five dimensions are described below. While the shape will vary by organization, a transformation would occur with an average of a "4" for each measure.

                                       Figure 1 Transformational Dimensions

Innovation: You can find many business leaders and business GURUs saying that innovation is the new area for competitive differentiation. I find this hard to argue with as many new digital technologies are emerging as business climates are changing and new/non-traditional competitors are entering many industries. So organizations that can match the many moving parts of customer need with the emergent set of digital technologies at the right time will be pretty innovative. Like it or not, change is accelerating, and how organizations deal with it will make the difference in the survive, thrive, and capitalize continuum. If you are reacting to table-stakes change, you might survive. If you are collaborating or ideating on better solutions, you can go beyond survival. If you are "built for change" and practice agile approaches, you are more likely to thrive. If you practice "Out of the Box thinking and implement it before others, you are likely to capitalize. Pushing this dimension to the edge requires a stomach for risk. Take the risk to become innovative.

Personalization: Today, if you know your customer and have much of the data accessible in one spot or as few as many, you have a good chance for survival. However, this is the minimum. You need to know more about your customer, which notably includes their overall goals and the goals of each interaction with your organization. Organizational goals will often be at odds with customer goals, so striking a balance between your organization's goals and your customers' goals will be essential. This goal confusion is where digital assistance and real-time analytics can help sharpen focus on what the customer really wants. Listening to the customer sentiment emerging in their voice and moving images can tell you a lot at the moment or over time. Customers do not just want standard transactions aimed at organizational outcomes; they want better practices aimed at their whole journey. This process includes transactions outside of your organization's scope at times. This process applies to employees, partners, and vendors as well. Pushing this dimension to the edge will imply more short-term costs, but the outcomes will be more profitable overall in terms of satisfaction and loyalty. Invest in your constituents.

Scope of Impact: Often, short-term costs and timing can be wrung out of departmental processes and workflows to the delight of the accountants and the department heads. However, cross-organizational methods that consider the goals conflicts between organizational units have proven to deliver more benefits over the long haul. The short-term benefits for any department may not be optimized, but the overall outcome will be better for all. Savvy organizations will look at their internal processes and consider comprehensive strategies that include external organizations. Some organizations have outsourced tasks and functions to make them cheaper at the cost of the end-to-end process. When something goes wrong in this case, the "finger-pointing starts."  More progressive organizations will look at complete value chains, entire supply chains, along customer/employee journeys. Pushing this dimension to the edge takes longer and costs more, but the overall solutions are better. Journeys constitute an important principle included in Industry 4.0 that pushes this dimension to the edge. Break down the walls inside or outside your organization.

Automation: Hyper-automation is a popular term today that combines the automation benefits of many digital tech streams. There are many benefits in this particular dimension that have driven BPM, RPA, and Mining. While this is a good direction, this automation needs to become intelligent and learn to become better over time. The collaboration of man and machine starts to emerge to augment the humans involved in the processes. These and future automation will be free to sense, decide, and act independently as they learn over time. However, automation will need to be driven by goals and guided by constraint guard rails. As more business conditions, events and patterns become emergent and changing; this dimension will travel to the edge over time. Free your automation to seek goals and be guided by constraints.

Secure Digital Tech: Digital technology will need to emerge and mature. Organization's experiences with each technology stack, such as iBPMS, RPA, Machine Learning, Mining, Data Mesh, Hybrid Cloud, Deep Learning, Distributed Database, Chatbots, Knowledge-bots and Bots/Agents on the Edge will play an essential role in the future. These unique digital technologies have started to converge in profitable pairings and end up Digital Business and Technology Platforms that work well together. Over time they will become competent and help organizations self-adapt. Combine digital technologies into platforms for better leverage.

Net; Net:

There are no universally accepted transformation definitions that guide organizations today. This writing is my attempt to start one, and I hope it evolves. You will see me use the above dimensions to rate example implementations to show if a transformation is impactful enough to be declared a transformation. Until then, each vendor will claim transformation victory, and organizations will make changes incrementally. Remember that closer to the edge means real transformation. Also, remember to give your organization credit for softer progress implied by skill-building that leads to competencies.





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  2. Importance of Digital Transformation greater than the Auto Industry in general, and the car buying process in particular. Companies like Apple, Google, and Tesla are changing car buyers’ expectations of the car driving experience. Disruptors like Uber and Zipcar have reshaped the boundaries of the mobility business model and shifted the paradigm from vehicle ownership to vehicle access. As traditional auto finance lenders are stepping up their online game, along come Digital Consumer Lenders like Avant, Earnest, and SoFi to compete on alternative playing fields.

    In order to achieve full Digital Transformation, an organization must be focused and aligned on five key elements: Vision, Organization, Customer, Insight, and Technology.

    1. Talk about radical shifts along with the movement to an electric world. Right on!!

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  5. digital transformation
    Personalize products, offers, pricing and loyalty programs; prevent revenue leakage and ensure regulatory compliance with a billing solution.