3. Digital transformation maturity: from internal operations to external limitations

Digital transformation is still seen too much as a matter of soloed and ad hoc projects with digital transformation maturity remaining quite low. The main focus of many organizations de facto is on internal goals such as automation, process improvement, cost savings, enhanced productivity and fixing gaps in legacy systems and processes.

If organizations want to remain relevant they will have to look beyond the urgencies and pure technology and automation picture

Many to most digital transformation projects focus on customer-facing goals as well: customer experience and customer service continue to be cited as main goals every now and then as is the case since several years now. Yet, here too it is often a matter of fixes and of soloed efforts to do better on the front-end business level whereby gaps with the back office remain.

Digital transformation maturity requires the ability to take a step back at all times and look at what is going on a bit everywhere at the same time in the organization, wondering if it makes sense from the holistic perspective, if it leads to real change across the board (including culture, ways of working and most of all the longer-term goals) and if it helps achieving the digital transformation strategy on top of fixing immediate needs and issues, generating quick returns with low-hanging fruit or experimenting with customer experience optimization tools and processes to later see that customers do want people to help them, depending on context, as well and that empowering customer service reps matters a lot.

A digital transformation strategy should enable organizations to have a plan with a journey towards innovation, new business models and processes (which becomes more and more urgent in several industries and across several processes) and the organizational agility, capabilities and cultural readiness to keep enhancing both internal (now a key focus) and external operations, adjust strategies and, indeed, innovate in fast changing market realities (which can be related to new regulations, new types of competitors, changing customer expectations, the list is long), what digital transformation maturity journeys in the end are as well.

The low levels of digital transformation maturity – the challenges in real life

People remain at the center of it all in their capacities as consumers, workers, patients, citizens and so forth. They are connected and like using digital platforms.

However, as mentioned and really depending on context, also want human interactions when push comes to shovel. There is a reason why some banks open branches again, why contact centers focus on the empowered agent on top of all those digital tools and why FinTechs innovators in areas such as robo-advisers started offering the traditional forms and channels of the industry they were said to ‘disrupt’.

The low levels of digital transformation maturity overall (read: focus on internal goals and customer experience) are normal. We know it’s a journey, we know there are many hurdles, we know it’s hard and we know that no business is the same. And we do know and realize that some regulatory challenges and several uncertainties are tough and that experimenting does matter.

It’s easy to talk about strategies, roadmaps, innovation, cultural change and so forth when you have ample legacy systems, there is too little interaction between the business and IT, C-level executives come and go and come with different approaches (often reversing what the previous one started, if they show leadership in making digital transformation possible at all) and there seems to be work on all levels at the same time.

Moreover, it isn’t exactly easy to at the same time serve those internal goals and demands for cost savings, efficiency improvement and optimization of processes executives want to see, the request for immediate and short-term benefits with all the new tools decision makers discover and want IT to leverage asap and what the front-end business people, who often operate without IT, see as being key in digital transformation. And then you need to be compliant and look at security, train the workforce, make sure new solutions get properly integrated, upgrade essential infrastructure, keep everything running and the lights on, see that change management isn’t forgotten, does it ever stop?

Technology is and should be the enabler of benefits for people, organizations, the ecosystems in which they operate and society or, in one word: people

It isn’t all bad regarding digital transformation maturity either: convergence and integration is happening (albeit too often still on the technology level whereby processes and people are forgotten, which is a recipe for failure), innovation is happening too, some organizations do build ecosystems in the as-a-service economy which are key to tap into new business models or simply new revenue opportunities, there are organizations working hard to enhance customer service and employee satisfaction, etc.

However, there is a real and genuine risk in many organizations that they get stuck in somewhat of a “digital business as usual” approach.

They digitize, they automate, they fix gaps, they reduce costs and increase profit, they are compliant, they enhance customer service and enable better experiences and they have a more or less mature way of unlocking some of the value in their “own” and external data and information flows, repositories, silos and lakes, with more so-called unstructured data and IoT adding even more data whereby artificial intelligence becomes inevitable.

Digital transformation maturity and the shift in focus in a technology-overloaded world

The risk is that it stops there, if organizations even get there because of all the mentioned and more reasons. Over the past few years we’ve seen the focus in digital transformation shift away from the strategy, business model, innovation and ‘true’ people aspect to the IT, technology and automation dimension.

A clear vision is essential in digital transformation and requires leadership in not just formulating it but also in seeing the innovative visions of others, regardless of their position in the organization or in relationship with the organization

That seems normal too. After all, you can’t digitally transform without technologies of course. Moreover, there are so many “new” and emerging technologies in areas ranging from artificial intelligence, new cloud approaches on the way to this as-a-service economy (e.g. fog computing and edge computing), the IoT, digital twins, blockchain, robotic process automation and advanced analytics to “new” areas of transformations such as manufacturing/industry (Industry 4.0) and logistics (Logistics 4.0). All of them are about data, information, automation, hyper-connectivity, innovation and people at the core but for now also often remain stuck in ad hoc, internally oriented fast gain projects, if any. For digital transformation maturity in manufacturing check out our article (with research data) on the state of Industry 4.0 innovation in manufacturing.

With so much attention for the technologies the risk of forgetting what digital transformation is all about in the end is real and even higher. IT companies and analysts dominate the digital transformation narrative. Whereas digital transformation research mainly used to look at benefits, hurdles, people, staged approaches and both the short term and long term, today it’s more and more about the technologies driving digital transformation.

All of that is, again, fine and normal in the current stages and against the backdrop of the reality in organizations and the interests of IT companies wanting to sell their solutions with the immediate gains they promise to offer taking center stage.

You can’t really blame them either as they know that buyers also look at fast gains and internal goals such as cost reductions. A typical area where we see this once again happening is robotic process automation (RPA). Highly promising, hyped, not exactly “sold” in the most transparent way (there is more to it than some software) and de facto really responding to needs of fixing gaps and often approached as simply a way to have to pay less salaries, let’s just be honest.

Remaining stuck in internal operations and in meeting the needs of the now leaves little room for the development of capabilities to tackle important challenges and unexpected changes

Yet, if we forget to look at essential aspects such as people (customers, partners and the internal teams needed to make, for example, the integration of IT and OT or RPA happen who often still work in silos too, whereby that part is highly overlooked), innovation, society, saving on natural resources, environment, the ways people work and live, the need of managing change and not just letting technologies converge, collaborative ecosystems of real value generation, etc. we miss the essence. And that is exactly what we often see.

Technology is and should be the enabler of benefits for people, organizations (people), the ecosystems in which they operate in the broadest sense (essentially people) and society (people) in a time of hyper-connectivity and a mix of human (people) and automated interactions and transactions between people and between devices to generate data for the sake of benefits for people, through getting the right people, information and priorities in the right ecosystems of collaboration and thus, by definition, people. If that dimension is overlooked all else fails, plain and simple.

The dangers of getting stuck in the first digital transformation maturity stages

Remaining stuck in internal-facing pilots and experiments, in that ‘digital business as usual’ and in meeting the needs of the now in our digital transformation maturity puzzle, doesn’t’ leave room for when important issues and changes, which disrupt markets, hit us.

And we don’t even need to talk about all those so-called disruptive companies and business models here. Just look at how disruptive GDPR was and still is and how we didn’t get compliant or at other regulations. It certainly is true that some regulations have halted investments in transformation and innovation and sometimes have demands that are close to impossible to achieve once you really get to them in the deepest possible ways. It’s certainly also true that regulators in many cases sit in silos of specialization as well whereby one regulation leads to contradictions with another and the overall goals of boosting innovation in the end become so contradictory that regulators shoot themselves in the own foot (and a bunch of companies along with it).

However, if organizations want to remain relevant they’ll have to look beyond all these and other urgencies and beyond the pure technology picture. Because technologies are not what should fascinate us.

What they enable in truly transforming should. And that inevitably brings people (and leadership, collaboration and vision), processes, a holistic perspective, the key role of customers and ecosystems (essentially collaborations between people and leaders with vision), innovation, society, value, the longer term and so on in the picture again. So, take a step back and ask yourself where you want to get, even if it is highly tempting to just keep automating and cutting costs with all the tools you now have.

The fascination should not be about technologies but about what they enable if long-term success truly matters

And when it boils down to those technologies and integrations (such as IT and OT convergence) or the inherent need to integrate within technological areas (such as the mentioned RPA and AI where you need the business, IT, the business process folks, etc.), look people and processes first and even question if fixing processes or leveraging new technologies now – except for experimentation – is the best way forward as the very area of digital process models will change and it doesn’t make sense to implement whatever technology if it isn’t connected with other technologies and with essential organizational conditions to make it work with customer and so forth in mind. Without doing that no transformation and no technology will lead to success.

In fact, not doing this is one of the key reasons why digital transformation fails, why Industry 4.0 doesn’t really pick up beyond those early digital transformation maturity journeys of internal goals and why the implementations of “technologies” such as RPA often still fails. It is nothing new, it plays everywhere and it needs attention.

It feels like ages ago since we first mentioned “The Digital Advantage: How digital leaders outperform their peers in every industry”. Perhaps now is a good time to look at it again and read about vision, employees, customers and the role of leadership and of collaboration between IT and the business (and do expand this to IT and OT, the relationship between different departments across the business and so on).

Revisiting the extended enterprise

In the paper the authors also emphasized that, although there are common traits in digital maturity ‘leaders’, you can’t fully plan a transformation in advance.

Digital transformation maturity requires a strategic approach for a time of hyper-connectivity with a mix of human and automated interactions and transactions between people, between systems and between devices to generate actionable intelligence and value for and through human and societal benefits

Perhaps a simple example demonstrates this. Since we first covered the paper and started talking about digital transformation (already emphasizing that regulations also could lead to digital transformation, long before the GDPR, for example, even existed) there have been so many evolutions on the level of regulations, technologies and, this one really needs no further explanation, the macro-economic and societal context (which we also pointed out very early on, long before the utterly changed current global realities that no one could even imagine at the time), that organizations needed to change plans and strategies on multiple levels.

There are many digital transformation strategy approaches and many unknowns. Yet, in the end, digital transformation needs most often come from outside the organization or are caused by external factors impacting ‘internal’ aspects with people (workers) first. And the unknowns are precisely the reason to have agile capabilities.

We initially respond to these factors with internal goals and improvements. However, if transformation needs (mainly) come from the “outside”, it makes more than sense to transform by focusing on the internal goals needed to meet customer-facing, ecosystem-oriented and thus “external” goals, actions and our very place in this external context in which we become more embedded and active and where we create value and derive it. This is not new either and partially relates with the age-old extended enterprise model. Yet, this time the borders increasingly blur, whether it’s on a technological, strategic, collaborative, societal or other level.

Digital transformation maturity models in which people only are mentioned in a scope of the skills and capabilities needed, leadership and internal ‘culture’ in a digital age and where collaboration is just about work models should be dropped and it’s time to put the transformation back in digital transformation and bring it outside just the internal level. People and ecosystems matter in all stages and must take center stage in the advanced digital transformation maturity goals as such. Full stop.

The blurring between internal and external goals and operations – ecosystems and their limits

Ultimately, the blurring of the borders between internal and external “goals”, processes etc. is where the as-a-service economy, IoT, data exchanges, platforms of platforms, blockchain, the changes in data ownership brought by new regulations, ecosystems of collaboration, hyper-connected technologies and more evolutions could lead to.

The focus in digital transformation has shifted away from the business model, innovation and people aspect to the IT and technology dimension, which is normal but not without risks

And it’s perhaps one of the major fears and reasons why the global economy has changed so much in such a short time: the will to cling to power, the fundamental inability of people to have a common goal by focusing on stressing the dangers of differences rather than embracing them as valuable input, the not to be underestimated power of the ego and the clear and present dangers of a world where digital identities get created and are the real reasons behind global differences and the single most attractive future prey for cybercriminals. That’s why we say, ‘could lead to’ instead of ‘will lead to’ as it won’t.

However, those that blur the lines to the extent of real benefits and able to collaborate with a genuine focus on change for the better in a broader context, sustained by standardized and regulated secure data exchange models in an end-to-end, customer-centric and ecosystem-oriented way will reap the real value.

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