Digital transformation vs. IT modernization: What's the difference?

Are your digital initiatives truly transformative, or just an upgrade? Consider these five defining characteristics of real digital transformation
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Companies have been pursuing digital transformation for years now, but there is not always consensus on what that means. Even the most experienced IT execs use the term as an umbrella for everything – even simple application modernization. So, how can you tell the difference between true digital transformation and simply modernizing IT?

Digital transformation transforms business models and can open up new revenue streams.
Modernization is about taking your technology to the next level through upgrades or even entirely new technology. It shares some key benefits with digital transformation, such as streamlined processes, new efficiencies, and automated productivity, but that’s where it ends. Application modernization is never going to change your business model or put you in a new business category.

Digital transformation, on the other hand, transforms business models and can open up new revenue streams. 

[ Are your digital transformation metrics up to date? Read also: 10 digital transformation metrics to measure success in 2021. ]

We’ve all seen high-profile companies implement true digital transformation to succeed, but it’s a paradigm business shift that is occurring in companies of all sizes. What does it take to become a digital transformer?

Digital transformation: 5 defining characteristics

Consider the following attributes:

1. A digital-first culture

It’s important to evaluate every aspect of your business in terms of its digital value. Did you deploy your own technology to help your operations run more smoothly, cut costs, or boost customer experience? Perhaps that same solution can be transformed for other areas of your business or market segments. Gather representatives from departments across the organization to identify the hidden digital gems you may have, and then boldly imagine how they can be monetized. A few years back, Gartner coined the term ContinuousNext to refer to the next evolution of digital transformation; today’s organizations need to embrace a digital-first or ContinuousNext mindset to be more adaptive to change and create new ways to succeed.

[ Get exercises and approaches that make disparate teams stronger. Read the digital transformation ebook: Transformation Takes Practice. ]

2. A design-thinking mindset

Design thinking takes a people-centric approach to come up with new ways of addressing a problem. Before implementing any digital transformation, gather all key stakeholders – end-users, customers, line-of-business execs, and management – to discuss wants, frustrations, goals, and likes and brainstorm digital solutions. Once this process is completed and a solution has been developed, you can test it out in a trial run via a design sprint.

Digital transformation is a major leap forward, so it requires strategic thinking and incremental steps before you attempt any full-blown implementation. 

Digital transformation is a major leap forward, so it requires strategic thinking and incremental steps before you attempt any full-blown implementation.

3. Effective change management

Change can be difficult for employees and customers who are used to doing things a certain way. For this reason, regardless of who does the implementation, the initiative must be owned and communicated from the C-suite, and it needs to address the fears, concerns, and reservations of everyone. Digital transformation can be disruptive; it changes traditional processes, roles, and expectations and it can cause corporate mayhem before it becomes operationalized. Especially when a digital transformation involves AI or automation, employees may fear that it will take away their jobs, so it’s important to address fears and implement change gradually.

4. A data-driven organization

One of the key attributes of a true digital transformer is one that leads by the data and applies analytics to uncover the insights hidden in that data. In fact, most digital transformation initiatives today are centered around data. Knowing where your company’s data resides, how that data might need to be enriched, and how to apply analytics and AI to leverage that data are the first steps to digital transformation success.

5. Quality champions

A key goal of any digital transformation is to improve quality – in customer and employee experiences, in products and services, and in the corporate image. At the outset of a digital transformation initiative, ask this key question: Can we maintain the highest levels of quality throughout the journey?

This requires taking an incremental approach to the project, testing and validating outcomes at each step, honing the processes and procedures that are being used to excel, and fine-tuning or pivoting when that is required.

Digital transformation projects have drastically changed from the days of analog-to-digital technology. Today, AI, automation, IoT, cloud migration, and other advanced technologies are changing how businesses operate, requiring a complete corporate shift in mindset, culture, and business model. Yet no matter how you define it, digital transformation, while often fraught with unknowns and some level of risk and disruption, is changing business for the better.

[ Culture change is the hardest part of digital transformation. Get the digital transformation eBook: Teaching an elephant to dance. ]

Morgan Palmer
Morgan Palmer is Chief Technology Officer of ETQ. Morgan has been at the forefront of quality management technology for more than 20 years.

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