https://www.techtarget.com/searchcio/tip/What-is-a-digital-transformation-strategy-Everything-you-need-to-know
A digital transformation strategy details how an organization will use digital technologies to continuously create new products, services, processes and engagement channels, as well as reengineer existing ones to meet ever-evolving customer needs and market conditions.
Ideally, a digital transformation (DX) strategy articulates what the organization wants to achieve and provides high-level direction as to how digital technologies will be used to reach those objectives. Business process improvement plans and any required shifts in organizational culture should also be included. "It needs to have enough detail so that the organization can understand it," said Joan Smith, managing director and global solutions lead at Protiviti Digital.
The strategy should be customer-centric and driven by the business outcomes that organizational leaders want to achieve. "It's focused on reshaping the organization's long-term competitiveness and the sustainability of the business," said Raja Ranganathan, chief growth officer at Randstad Digital.
A digital transformation strategy is a must-have for organizations today, according to executive advisers and management consultants.
"Everything is underpinned by the need for digitization, and every organization has to articulate how they're digitalizing and how they're evolving their digital state and how they leverage technology to execute on their business strategies," said Debbie Vavangas, a vice president at IBM Consulting and global lead for Garage, IBM's transformation model. "Transformation is pervasive across organizations, and it's constant. As we look forward, this strategy needs to be almost laser-focused on how you drive growth and optimization through technologies like generative AI, cloud and the integration of ecosystems."
At its most basic level, a DX strategy is the use of digital technologies to create or reimagine how customers are served and how work gets done.
A well-thought-out and well-crafted digital transformation strategy ensures an organization correctly identifies what products, services and work need to be created or reimagined to remain competitive. For nonprofits or government agencies, this might mean effectively and efficiently delivering on their missions. For businesses, this typically means being as profitable as possible by boosting revenue, cutting costs and improving market share while meeting other strategic goals, such as sustainability.
Multiple studies and history show the importance of having a good digital transformation strategy. Indeed, an organization's success and often its very survival are at stake. Digital-leading organizations consistently outperform digital laggards, and digital disruptors can shutter legacy entities.
Case in point: In 2023, global consulting firm McKinsey & Company published the results of its study of 20 digital leaders and 20 digital laggards in the retail banking sector between 2018 and 2022. The study found digital leaders outperformed laggards in several financial metrics, including total shareholder returns.
Such figures have spurred executives to action. The "2023 State of Digital Transformation" report from TEKsystems, for example, found that only 17% of surveyed leaders lacked a strategy around digital initiatives. That's an encouraging statistic, as the report authors noted that "simply deploying technology, without a plan, is a recipe for disaster."
Vavangas said a DX strategy explains to everyone in the enterprise where the organization is heading, thereby helping to "bring everyone on the journey" and working toward the collective goals.
A thoughtful DX strategy also focuses the organization's attention, said Kamales Lardi, author of The Human Side of Digital Business Transformation and CEO of Lardi & Partner Consulting. More specifically, it focuses the organization on the most pressing digital initiatives -- those that deliver value toward meeting its enterprise-wide goals.
Lardi said this approach keeps teams from pursuing initiatives that introduce new technologies without understanding how they'll deliver value or implementing transformation projects that only help segments of the enterprise.
"True transformation comes when you look at the whole organization, and you transform the whole organization to be successful," Lardi added.
To illustrate this point, Lardi walked through how an organization should address plans to implement AI to transform customer support services, explaining that a well-crafted strategy recognizes and plans for transforming the back-end systems and processes required to support the new front-end use of AI.
Moreover, experts said a DX strategy assures stakeholders that executives and their teams are addressing ongoing competitive pressures and that they have a plan on how to use technologies to respond to those pressures in ways that are the most beneficial to the organization. In other words, a DX strategy clearly establishes the expectation that the enterprise is committed to and actively planning for change.
"By holding out a separate digital transformation strategy, you're calling it out, and there is a cultural and communication element to that … you've named [it] specifically as critical to the future of your company," said Jeff Wong, global chief innovation officer at professional services firm EY.
Furthermore, articulating DX plans and setting timelines for achievement, which are typical components of a DX strategy, encourage speed of action and create a sense of urgency -- both needed to keep up with today's rapid pace of technology evolution and the innovation it spurs.
"In any organization, it's easy to do what you were doing last year or the year before. [Therefore,] to ensure the organization is heading in a new direction, you have to call it out, which enforces the criticality of it and the speed at which it has to be done," Wong said.
A DX strategy establishes the agility, speed and ultimately the resiliency an organization needs to effectively compete in the 21st century, where "the world is moving faster and faster," Wong added.
Successful digital transformation requires attention to an organization's technology resources, business processes, outcomes it seeks to achieve, and the products and services it delivers to the market to meet customers' needs and expectations.
As the idea of digital transformation takes off, DX experts have stressed the need to address all those pieces in concert. Addressing one or two areas might create new digital capabilities, more efficient processes and even new products, but it won't deliver the sustained, continuous innovation that meets or even anticipates the changing customer and market requirements that are hallmarks of a successful digital organization.
As such, a strong DX strategy must address how to advance enterprise operations, business models and the technology ecosystem. An ideal digital transformation strategy also addresses how customers and employees use and interact with those three elements.
A robust strategy does that by articulating the organization's current state in all those areas, envisioning the future and detailing the actions needed to move the organization forward.
"You need your objectives and visions, a map to make sure you're heading in the right direction, and the organizational and financial resources that are going to help you get there," said Ramesh Vishwanathan, practice senior director at TEKsystems Global Services.
An effective strategic plan is more than a description of where the organization is and what it wants to achieve, according to Vishwanathan and other DX experts. It contains and requires the following elements:
With digital transformation an imperative for organizational success, DX experts stressed the criticality of building a complete and compelling strategy.
They also emphasized the importance of having executive engagement in the planning process and the needed resources -- such as market research and input from strategic partners -- to build a comprehensive plan.
Lardi outlined a four-step process that, at a high level, calls for the following:
Vavangas offered similar high-level steps, and added that an effective DX strategy starts with the following:
To ensure an organization delivers value to its customers and can differentiate itself in the market, DX experts advise executives to use business metrics to determine whether their transformation initiatives are successful.
The following measurements can be used to evaluate transformation initiatives:
The pressure to transform is not new. Organizations of all types have had to transform their operations, products and services, as well as how they engage with employees, customers and business partners.
However, the pace of change has been ramping up in recent decades thanks to computers, the internet and now digital technologies.
That pace and its continuous nature have made digital transformation distinct from prior eras of change, which gave organizations much more time to evolve, according to management consultants and transformation experts. Those same factors, they noted, are also why an organization should plan digital transformation as its own program.
However, as organizations become more capable of continuous transformation and learn to quickly embrace emerging technologies, some enterprise leaders and DX experts said the digital transformation strategy might be absorbed into the overall enterprise strategy.
"When I think about digital transformation and digital transformation strategy, I agree with the idea that it should simply be part of your overall strategy," Wong said. "It's something that supports the overall strategy, it's not separate from it."
06 Nov 2023