The term “digital transformation” has become so ubiquitous that some people roll their eyes at it. Yet the effective use of new digital technologies is proving to be a business performance driver. Some 61 percent of companies deemed effective at using digital technologies saw higher revenue growth than their competition, according to the Harvey Nash/KPMG CIO Survey 2018.
However, the likelihood of transformation failure is high. With digital transformation spending predicted to hit $2 trillion by 2020, most IT leaders would agree that we’ve reached an inflection point: Understanding whether digital transformation is working is imperative.
But figuring out what digital transformation effectiveness looks like has been difficult. The meaning of digital transformation has become somewhat imprecise and can range from a technology upgrade to fundamental industry disruption. Not surprisingly, there are many different ways to characterize success with digital transformation, says Barry Brunsman, principal with KPMG’s CIO Advisory.
[ Read also: Digital transformation ROI: How to check a project’s payoff. ]
If you define it as “a change in an organization’s business model to focus on stakeholder experience that is enabled by disruptive technology,” some common hallmarks of digital transformation success emerge.
1. Moving at market speed
Perhaps nothing indicates success with digital transformation more than an organization’s ability to identify and capture opportunities in the marketplace before the competition can, Brunsman says.
Some assume that because they’ve adopted agile development or project management processes or embraced DevOps that they’re doing this already. Not true, says Brunsman. He points out that moving at market speed means looking carefully at all aspects of the IT operating model, including those parts of the model that are part of the IT organization and those that are not.
Agile and DevOps are usually necessary, but not sufficient. Organizations that are succeeding at digital change have also considered and addressed the impact of governance and organizational design on velocity, he says.
2. Digital capabilities at scale
Organizations that are moving up the digital transformation maturity curve are progressing from innovation to institutionalization, Brunsman points out. If everything is still in the experimental stage, the transformation is not taking hold. However, making the leap from successful pilots to implementing disruptive capabilities at scale is where many organizations stumble on digital transformation. It requires transformational leadership and organizational commitment.
3. Progressive and adaptive implementations
At KPMG, they’ve started calling this “brick-by-brick implementation” to capture the agile, value-stream-focused implementation approach that underpins digital transformation. Successful digital transformers have developed a comprehensive digital strategy and designed a clear digital operating model. However, Brunsman says, their implementations move quickly, build momentum by adding value, and adjust to new conditions. This means implementation occurs initiative by initiative, and some will fail.
4. A culture of continuous learning
Digital transformation means developing and institutionalizing new capabilities, building innovative solutions, and continuously improving the implementation of digital initiatives, Brunsman says. All of these require a prolonged commitment to organizational learning.
Those who are making progress with digital learn from failures and successes and adapt accordingly. They also foster a culture of openness, knowledge sharing, and continuous learning.
5. Mastery of risk management and controls
Everything about digital transformation and disruptive business models seems to go against the traditional IT concepts of risk containment and controls. Digital transformation is about moving fast, challenging the status quo, and developing and scaling new technologies and operational mindsets, says Brunsman. However, these very characteristics demand the diligent design of risk management and controls around the digital transformation effort. CIOs who have mastered this aspect of disruptive change are more likely to be managing a successful transformation program.
6. CIO priorities
IT leaders can also look in the mirror to gauge digital transformation success. As Stephanie Woerner, research scientist at MIT Sloan’s Center for Information Systems Research, outlined at the recent CIOChat Live conference, strategic CIOs winning at digital transformation share 4 characteristics:
- Work with the C-suite/executive committee to create a vision for what digital transformation will create
- Build digital discipline across the enterprise – not just in IT
- Relentlessly deliver on operational efficiencies
- Focus on customer engagement
According to Woerner, MIT research shows that IT teams that have this formula down deliver 24 percent higher profitability compared to competitors.
[ Get advice from CIOs succeeding with transformation. Read our report from HBR Analytic Services: Transformation Masters: The New Rules of CIO Leadership. ]