3. Digital Transformation

This chapter describes Digital Transformation.

3.1. Example Scenario

Consider a scenario wherein an individual is looking to buy a prosthetic limb for her brother. Today and in the near future she is likely to perform the following activities:

  • Send a picture of her brother to a limb designer

  • Use an electronic device to measure the limb

  • Visualize the design options of the limb with her brother and designer

  • Get the limb design and connections validated by a specialist several thousand miles from her home

  • Select a facility closer to her home for final fitting and delivery

  • Share the design electronically with the local facility

  • Complete necessary arrangements with the local facility and the insurance company

  • Transfer money to the designer and the print facility

  • Make a reservation and have it honored at the print facility

  • Use a wayfinding application on a smart device

  • Watch the limb 3D printed, quality-tested, assembled, and fitted

  • Make sure the insurance company has paid all parties

  • And, most importantly, watch her brother light up in delight

Each of these experiences is co-created by her desire for value, and the responses of a set of digital resources. It also reflects how distance, time, and costs have shrunk while the consumer’s experience is increasingly customized and personal.

The resources and capabilities required to deliver such experiences are vast and complex, spanning mainframe and distributed computers housed in data centers and managed in various ways, including advanced cloud services. Every individual involved in the design and delivery of these contemporary, evolving digital technologies is a Digital Practitioner.

3.2. Digital Transformation as Strategy

Jim Fowler, CIO of GE, stated in 2016: "When I am in business meetings, I hear people talk about digital as a function or a role. It is not. Digital is a capability that needs to exist in every job. Twenty years ago, we broke e-commerce out into its own organization, and today e-commerce is just a part of the way we work. That’s where digital and IT are headed; IT will be no longer be a distinct function, it will just be the way we work. …​ we have moved to a flatter organizational model with “teams of teams” who are focused on outcomes. These are co-located groups of people who own a small, minimal viable product deliverable that they can produce in 90 days. The team focuses on one piece of work that they will own through its complete lifecycle …​ in [the “back-office”] model, the CIO controls infrastructure, the network, storage, and makes the PCs run. The CIOs who choose to play that role will not be relevant for long.” [128]

Digital Transformation is fundamentally a strategy and an operating model change, in which 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

The modern digital enterprise faces multiple challenges in its transformation to the digital economy. New technologies (cloud, IoT, machine learning) and new techniques (DPM, reliability engineering, continuous delivery) both demand attention. This family of guidance will address both aspects. However, technologies are faster moving, while techniques and practices evolve at a slower pace.

For organizations to cope with this fast technology evolution pace and succeed in this Digital Transformation, changes should be pervasive through the whole organization. Digital Transformation as strategy should be aligned with the overall organization context and environment, and should be derived and sometimes even replace the existing organization strategy.

This strategy shift should encompass the new business and IT disruptive trends, using an outside-in perspective, and lead the development of new business and operational models connected with digital technologies and platforms and with the digital economy as a whole.

3.3. What is Digital?

Being "digital", in the sense of digitizing information, is not new. It has existed, arguably, since Shannon mapped Boolean logic onto electronic circuits [253]. This document uses the definitions defined in Definitions.

A "digital-first" culture is where the business models, plans, architectures, and implementation strategies are based on a digital organization architecture that inspires and rewards a number of desired behaviors, such as servant leadership, strategic value chain thinking, consumer focus, fault tolerance, agility, and more. It requires a workforce with a sense of psychological safety, digitally savvy enough to execute a “digital-first approach".

As part of this paradigm shift, it is important to have a clear understanding of the existing capabilities, which can be retired, and the new ones that will be needed. In some cases, organizations may need to deal with all these changes while keeping their current legacy platform and supporting applications.

3.4. Seven Levers of Change

To succeed in today’s digital era, organizations will need to consider the following seven levers of change, as discussed in the White Paper: "The Seven Levers of Digital Transformation" [81]:

  • Business process transformation

  • Customer engagement and experience

  • Product or service digitization

  • IT and delivery transformation

  • Organizational culture

  • Strategy

  • Business ecosystem

These levers require a fundamental understanding of value creation for both the organization and the customer. They equip businesses with a structure to reduce the number of failed projects, guide investment decisions, and create a set of products and services designed to seal customer loyalty. For digital success you will need to assess readiness, actively include your people, measure and govern for value - not activities performed, develop your roadmap top-down, and pivot often with bottom-up learnings.

The example given at the start of this section is an illustration of the impact of seven levers to the primary value chain. In the example, some organizations that enabled the experience may be startups, but others may be more established firms now changing the way they have been operating. The printing facility, the orthopedic and prosthetic specialist, and even the customer changed their expectations and ways they used to function. The change has been made possible with the innovations in digital technologies.

Technology is the glue that connects all players in the ecosystem – suppliers, distributors, service providers, employees, and the customers - and it is a powerful means to building a future-ready organization. However, it is worth bearing in mind that it is not an end in itself. The seven levers are symbiotic pillars that amplify the effects of one another.

For an organization to become Agile, change should start with organizational structure and cultural change – the whole organization should be aligned with the Agile view. The new paradigm for an Agile enterprise should focus on becoming flexible by design: the ability to modify tactics and operations to respond to changing conditions.