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Driving digital transformation

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Information Technology is driving the digital change agenda. But businesses need to look wider than IT departments if they are to use technology to transform.

Senior leaders from within the multinational telecommunications company Verizon recently gathered at a lunch in central London to discuss the changes brought on by digital technology and the transformational effects that this is having on businesses.

There is nothing new about IT being used to reduce operational costs within business. But increasingly there is a move away from IT being seen as a driver of cost reduction. Instead it is recognised that IT can be used to drive up value for external customers and internal end users.

In some ways this seems problematic. Cost reduction is simple to understand and with the right resources simple to achieve. But it is far more difficult to understand how increases in value can be achieved from new technologies.

And this difficulty is made worse because of the accelerating rate of change in technology. This means that new potential opportunities to increase value are constantly presenting themselves.

Prioritising technological opportunity

With this “embarrassment of riches”, there is a need for organisations to encourage a particular set of cultural elements. Focus is one such element. With so many opportunities arising from technology it is important to identify the best ones and filter out the rest.

And those best opportunities need to be worked through thoroughly, rather than abandoned as other, superficially better (newer anyway), opportunities appear. Without this discipline nothing will be achieved.

And as Tony Judd, Verizon’s MD for UK, Ireland and Benelux pointed out, there is also a need for a “fast fail” culture. In some ways this is the reverse of a culture of “focus”. That might sound counter intuitive: so achieving a balance between “focus” and “fast fail” is very necessary.

Organisations that wish to transform must accept that not all their technology experiments will work. They must be prepared to abandon them at an appropriate stage rather than persisting with them beyond reason.

This is because, even with the best methods of filtering and prioritising opportunities, some technologies that are chosen for development will fail, perhaps because in reality they didn’t suit the organisation trying them, or perhaps because they simply were not all that revolutionary in the first place.

It is important to accept this. If there is a blame culture within an organisation, where an unsuccessful trial of technology is seen as a failure rather than as useful learning, significant digital transformation is unlikely to happen. Unfortunately, all too many managers seem afraid of change and are therefore reluctant to embrace experimental failure, preferring to avoid the taking of risks.

The need for agile transformation

Organisations also need agility. If opportunities are to be explored and developed, then organisations need to be able to flex around them. Maintaining existing work practises in the face of new ways of doing things dooms technology-driven change to failure.

So, having the right culture is key for digital transformation. But organisational culture is notoriously hard to change.

And it is not just culture that can get in the way of digital transformation. It is also process within procurement departments. Selecting opportunities based on the potential to increase value can cause problems for procurement departments who are often focussed on cost, as Tony Judd pointed out. Cost is simple to evaluate. Value less so.

And because potential value is harder to analyse, decisions about technology often need to move up the organisational “food chain” to more senior levels, where longer term and strategic considerations can be included alongside short-term cost factors.

Sadly, many technology vendors often don’t have the skill sets to sell these wider benefits. And equally sadly their clients often don’t have the vision or the knowledge to see those wider benefits.

One example of this was given by Ali Neil, director of international security solutions at Verizon. The company’s SDP (software defined perimeter) is, superficially at least, seen as a very powerful cyber security solution. But it is much more than that: employing the SDP can ease the integration of two organisations’ IT systems and thus it has a strategic significance if a merger or acquisition is being considered.

Pessimists may fear that the lack of knowledge within senior decision makers will hold back digital change. Optimists however feel that the very speed of change will force top management to engage with technology and understand that the proper identification and governance of digital opportunities is an essential part of their role.

Some industries are already very strong in this respect. Shipping, for instance, where investments in digital technology may be driven by cyber security concerns but where strategic technology investment is strongly supported from the top.

Technological ecosystems

Digital technology demands wider thinking because it allows organisations, and groups of organisations, to work more closely together. The ability of digital technology to connect organisations into “ecosystems” is changing business models.

Take something as ordinary at petrol forecourts. No longer are these simply about filling your car or van with fuel. (Petrol today, electricity tomorrow.) Digital technology, and the ability to collect, manipulate and share data, mean that the commercial opportunities on forecourts are changing.

They are becoming places that you can collect and deliver parcels, places where you shop for products that you can examine and then have delivered to your final destination, places where you want to relax, socialising or playing games as well as eating curly sandwiches and drinking warm cola.

Technological change is constant and accelerating. The exploration of opportunities must become pervasive across organisations. The days of large digital “programmes” are fading and instead we are seeing more and more ad hoc projects which deliver iterative learning to organisations, and the promise of higher success rates in the future.

But as always, this change comes with a problem. In this case too many ad hoc projects can mean that no one in an organisation has authority to control digital investments. Counter intuitive again: but there is a need for someone to gather and distribute the learnings, someone to act as an arbiter between departments differently affected by technological opportunities, someone to act an umpire if failing experiments are maintained for too long.

Communication within organisations is also essential if digital transformation is to succeed. Happily, digital technology facilitates communication. But it must be the right communication. As Ali Neil pointed out, there is a need for simple and relevant metrics that senior managers can use to support decision making. This can be problematic. For instance, a cyber security manager may know that a particular threat was averted. But it is far harder for them to know whether this successful outcome happened because they were lucky, because they did a good job, or because the threat never actually existed. The data they have may not in fact help them understand this.

And the problem of inadequate (or irrelevant) data is made worse by move away from products with that are defined by KPIs to platforms comprised of numerous products and services where benefits are wider, more strategic, and harder to collect analyse and visualise.

Culture, procurement processes, project management, and measurement: all these are essential for the successful achievement of digital transformation. But without effective leadership, the benefits of digital technology can easily be lost and replaced with a futile rush to adopt the next trendy technology.

Technological change is accelerating. And the skills and capabilities of top management need to change with it.

Verizon is a multinational telecommunications conglomerate who provide communications and digital transformation services.

Image under licence from iStock Photo, credit metamorworks

© Business Reporter 2021

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