Guidance for Decision-Makers
A White Paper by:
Dave Hornford, Conexiam
Sriram Sabesan, Conexiam
Vidhya Sriram, Saashvata
Ken Street, Conexiam
September 2017
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The Seven Levers of Digital Transformation: An Overview
Document No.: W17C
Published by The Open Group, September 2017.
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Table of Contents
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The term Digital Transformation is defined in ways that suit the message an enterprise wants to communicate to its external or internal audience. This overview document provides a framing for the conversation about Digital Transformation. It lays the foundation for enterprises to think about strategy and culture before technology. Technology is the glue that connects all players in the ecosystem – the supplier, the distributor, and the maker or service provider – to truly address the human experience for the employee and the customer.
This White Paper presents the reader with key considerations, the seven levers that influence successful outcomes from the Digital Transformation journey. Once the impact of the seven levers is understood, a well-governed and innovative path can be defined to reach a positive outcome at each stage of change.
Digital Transformation is fundamentally a strategy and an operating model change, wherein technological advancements are leveraged to improve human experiences and operating efficiencies, and to evolve the products and services to which customers will remain loyal. It is the consequence of:
• The ability to handle information in the digital form
• Using digital technologies to manage the process of creating, capturing, and analyzing information to deliver perceptive human-machine interaction experience
There is a lot that needs to happen to make this happen.
It is true that modern information and operational technologies have reduced the barrier to entry or have paved the way for substitutes for most industry verticals. It has created the perception that businesses are disrupted by start-ups or IT giants. However, the IBM CEO study[1] shows that the threat is high from the same vertical. The nuance to discern here is to prepare to self-disrupt; build a talent pool that balances digital technology and industry-specific value chain, and gain the freedom to invest in digital technologies; not to remain passive. On the contrary, many enterprises are resorting to outsourcing their digital initiatives[2] resulting in an in-house knowledge vacuum.
Digital Transformation connotes varied implications to different audiences. Most common interpretations are focused on marketing, sales, IT, or customer service. This is not incorrect, just not complete. Enterprises have made investments based on this skewed understanding resulting in fragmented initiatives with underwhelming outcomes. Though their expectations from Digital Transformation were focused to invest in themselves, stay relevant, or outpace their competitors, they have failed to realize that there is no cohesive strategy. What’s worse, there was no disciplined way to diagnose.
The technologies contributing to Digital Transformation such as cloud, mobile, and blockchain are mostly general-purpose in nature. These technologies enable exponential growth benefits due to new applications and business models. There are other contributing technologies, all aimed at reducing the cost of gaining something valuable.
Digital Transformation has been employed either extremely well across the enterprise or employed within a small team with no clear value realization. The most common cause for poor value realization or failed projects is the inability to re-articulate corporate strategy or its implication accurately. Without connecting other parts of the organization, return on technology dollar will always fall short of projected value.
Digital Transformation is highly interconnected. It starts with leadership and strategy and permeates to every leaf-level process and employee. Unless the interconnected nature of products, services, technologies, and environment is understood, benefits will fall short of projections and expectations. This document is about creating an awareness about this interconnection; an awareness that would result in creating value for the enterprise and its customers. It is about framing the problems we are solving before decision-making.
We assert that Digital Transformation encompasses seven levers of change. These levers will reduce the number of failed projects, guide investment decisions, and create a set of products and services to seal customer loyalty.
What is new in this view? The fundamental needs of an enterprise – agility, market sense, and efficiency – have not changed. The tools of the trade and the level of customer expectation have evolved. A response from the enterprise to this new demand can no longer be limited to thinking within the boundaries of the enterprise.
The seven levers are about framing a complete problem statement and a comprehensive realization of outcomes. Strategy, Ecosystem and Business Model, and Customer Engagement and Experience frame the problem statement. Business Process Transformation, Product or Service Digitization, and Organizational Culture are operational steps to realize the strategy. IT and delivery transformation span both sides and help realize agility, efficiency, and decision support goals.
Figure 1: The Seven Levers of Digital Transformation
Figure 2: The Way Forward
The seven levers are:
Lever No |
Name |
Aspects Addressed |
1 |
Business Process Transformation (BPT) |
Creating the right balance of process discipline and instrumentation, with phased rolling-in of all parts of the enterprise to build intelligent insights Using the same concepts of productivity and efficiency to understand customer behavior and interaction patterns Building processes that match customer and partner touchpoints |
2 |
Customer Engagement and Experience (CEX) |
Experience is the emotion felt about how customers perceive the product or service has fulfilled their expectations – it is subjective, ephemeral, and qualitative, making it hard to measure Engagement is the behavior demonstrated by the interactions across touchpoints – it is intentional, measurable, and quantitative; a touchpoint is where a human or a system and the enterprise interact Correlating insights from business processes to deliver products or services that delight the customers, driving continually increasing revenue |
3 |
Product or Service Digitization |
Creating products or services that are focused on the outcomes the customer wants – it may involve the use of digitization and/or digital twins to promote effectiveness in the usage of the product or service |
4 |
IT and Delivery Transformation |
Applying the same business process optimization, interaction insights, and customer experience-driven product development to IT operations of the enterprise Arriving at consistent agility across IT and other functional areas of the enterprise that is in-sync with the market expectations |
5 |
Organizational Culture |
Achieving transparency in decision-making, informed by data Continuously learning to optimize the product and service portfolio Focused on sustainability over cost optimization This includes the considerations about the approach to operations, solution delivery, and organizational structure |
6 |
Strategy |
Choosing unique configurations of the value chain and making decisions to maximize the benefit from employment of concurrent technologies Making a deliberate choice to employ the levers mentioned for the benefit of the enterprise This includes the commitment and clarity of direction provided by the leadership and the vision |
7 |
Ecosystem and Business Model |
Building and collectively growing the share of customer wallet with partners Cultivating a thoughtful approach to attract and retain partnerships that virtuously impacts the brand Driving laser clarity about core the business focus of each player in the ecosystem |
With the exception of lever 7 – Ecosystem and Business Model – all the levers are applicable to all enterprises. However, with the saturated market place, it is worth pausing to revisit your ecosystem and business model. All these levers should be engaged in tandem to amplify the returns. As we review each lever, it will broaden the understanding of the Digital Transformation landscape, help you assess where gaps exist within the enterprise, and successfully address them.
Each lever does not act alone. They are symbiotic and amplify the effects of one another. By the same token, missing or reduced output from each lever will have an exponential impact on the overall efficiency of the enterprise. Engaging these levers in conjunction with equitable investment is key. Additional benefits can be reaped by automating the relationships and connections from strategy to sensors in the field or by combining more than one technology. The common denominator is continuous improvement of west-to-east customer journey and north-to-south enterprise communications.
Figure 3: What if a Lever is Partly Implemented?
Business processes, in addition to being the operational backbone, provide the basis for artificial intelligence engines and the guidance framework for autonomous bots. Transforming technology delivery drives time-to-market, agility, and margins. Transforming organizational culture ensures nimble operations and seamless governance.
If this were to be changed into simple set of “go-do” catch-phrases, it would be:
• Get a handle on the rate of change (processes, rules, behaviors) to get ahead of the curve
• Reduce the need to change every component of the enterprise from the surface to core
• Enable agility and nimbleness by fostering a culture to learn and evolve
It is the responsibility of the decision-maker to control the portfolio – to guide the value realization with strong foundations and governance. You have made conscious choices to configure your value chain to sustain or lead in your industry segment – don’t let mundane operational issues let you lose sight of those configurations. Digital technologies and the resulting transformation are another opportunity to maximize the benefits of your value chain configurations.
Figure 4: The Way Forward
Govern the transformation for value, not activities performed. To support governance:
• Gain as many empirical insights as needed
• Develop your roadmap top-down and change course often based on bottom-up learnings
• Exercise all seven levers – be a learning organization that is future-ready!
Dave Hornford is the former Chair of The Open Group Architecture Forum. He is a key developer of Conexiam’s Navigate Roadmap Atlas and was a key contributor to the TOGAF® 9 standard. Dave serves on the board of trustees of The SABSA® Institute. Based in North America, he leads Conexiam’s Boston practice and works in a variety of industries including financial services, oil and gas, and capital-intensive industry. Typically, he helps clients develop and execute a roadmap to transform.
Sriram Sabesan is a practicing digital strategist and management consultant guiding enterprises through their transformation journey. He has co-authored white papers and guides in Digital Transformation and Enterprise Architecture. Sriram serves on The Open Group Governing Board as an elected representative of suppliers. He also serves on The Open Group Architect Certification Board. His deep experience working across multiple industry segments and Fortune 1000 clients enabled him to see patterns and leverage ideas from adjacent industries. Leading teams spread across multiple geographies finessed his approach to adopt evolving practices in delivering architecture and solutions.
Vidhya Sriram is a Customer Experience strategist and a product manager at Saashvata. She leads the practice and supports clients to establish a lean approach to customer research, product vision, and continuous refinement of sticky-features. She works with start-ups in the US and India as well as Fortune 1000 clients. She is a Certified Customer Experience Professional and a Project Management Professional, who lives the principle “reduce the cognitive load”.
Ken Street is the current Chair of the Big Data project and is active within The Open Group IT4IT™ and Open Platform 3.0™ Forums. Based in Canada, he leads Conexiam’s Governance and Big Data practices. He works primarily in financial services and oil and gas, helping clients to develop their Enterprise Architecture Capability, improve their IT organization, and execute architecture-driven change programs.
The authors would like to thank Sukhi Gill, VP and Fellow, HP Enterprise UK, for stimulating our thinking to explore the contextual and correlation possibilities with the use of technologies; discussing a challenge about use of the value chain and digital tools to transform a manufacturing company; and emphasizing the need to use ecosystem as a lever, and not as a context.
We are indebted to the artists and creators of some of the images used in this document. We have used The Noun Project and Creative Common image library extensively.
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[1] Refer to www-935.ibm.com/services/c-suite/study/studies/ceo-study and www.ibmsystemsmag.com/newsupdates/IBM-Study-CxOs-Set-Their-Sights-Back-on-Traditiona.
[2] A 2016 PwC study highlights the state of affairs: 45% of the digital projects faced scope issues; 25% of the projects required outside help for skills, despite internal teams getting trained; and 57% outsourced their digital projects.