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Tuesday, October 24, 2023

7 sins of digital transformation

Even as business drivers for transformation evolve, some things stay the same — and that includes the outcome-derailing habits CIOs too often fall prey to. Here’s how to right yourself for the next wave.

As CIOs prepare for the next wave of digital transformation, they must demonstrate shorter-term business impacts from technology investments and achieve larger innovation goals that evolve the organization’s business model. But perhaps more importantly, they must learn from their previous big digital wins — and avoid repeating all-too-frequent mistakes that cause transformations to fail or lag behind expectations ↗.

Business drivers for the first wave of digital transformation through 2020 targeted growth, data capabilities, cloud migration, and delivering competitive technology capabilities. Over the past few years, CIOs have focused on enabling hybrid work, driving efficiencies through automation, modernizing applications, enabling machine learning predictions, and maturing the data-driven organization. With generative AI now a firm digital transformation priority ↗, 2023-24 will mark the beginning of an AI-driven transformation era.

Even as the drivers for each digital era evolve, CIOs can still derail transformation ↗ by customizing solutions or prioritizing too many KPIs. Alternatively, they can accelerate transformation by prioritizing force-multiplying initiatives ↗ such as aligning data science and data governance programs or improving IT operations with AIops capabilities. Still, certain issues surface time and time again to trouble business outcomes regardless of the strategic objectives. Based on my conversations with industry leaders, here are the most deadly digital transformation sins CIOs need to avoid to ensure this next wave of initiatives truly transforms their organizations.

1. Focusing on the technology, not business outcomes

According to a recent Gartner survey ↗, the most critical digital transformation outcome is to excel at customer and employee experiences. Unfortunately, the survey also finds that only 12% of CIOs are “franchisers” who “co-lead, co-deliver, and co-govern digital initiatives with their CxO peers.”

It’s hard to deliver business outcomes from any technology investment without business executives as partners. Gartner’s data suggests that, without executive partnership, as many as 88% of CIOs are primed to fall short.

“Few companies realize the role that organizational structure and culture play in driving transformation, and instead focus solely on the technology,” says Sunil Senan, SVP and global head of data, analytics, and AI at Infosys.

By focusing on technology, CIOs can deliver transitionary results, such as improving infrastructure agility by migrating to the cloud or improving user experiences by upgrading legacy systems to SaaS. But transformation initiatives require business leaders to rethink customer priorities, operations, and where technology can be a competitive game-changer.

“To meet digital transformation goals, companies must build structural ambidexterity, focus on short-term efficiency opportunities that fit the current structure and model, but also pursue medium- to long-term discontinuous expansion opportunities in business that potentially would require structural and cultural changes,” Senan advises.

The second deadly sin is to use digital transformation as a calling to upgrade every legacy system and address all accumulated technical debt. CIOs can’t prioritize everything and must look beyond the technology risks, costs, security gaps, and inefficiencies to instead target investments that will deliver the most customer value and align with competitive trends.    

“One of the biggest mistakes companies make is tackling too much at once, and digital transformation is rooted in well-designed organizational change management,” says Josh Miramant, CEO of BlueOrange. “There’s often ambition to address all or most problems, but that can leave the system user behind. A perfectly built solution is of no value if it’s not designed around the users.”

Srikumar Ramanathan, chief solutions officer at Mphasis, shares a related sin: when IT sets too high a bar on scope that takes too long to achieve and fails to provide incremental customer improvements. “The most successful digital transformations focus on creating impact to stakeholders like customers and employees within a short cycle of three to six months,” he says.

Transformations that emphasize more building than buying can also be at issue here. “Innovation is expensive, and CIOs should navigate the cultural aspects of digital transformation by discouraging nondifferentiated build projects that don’t provide outsized value for the business while greatly rewarding selective and strategic innovation,” says Sean Knapp, founder and CEO of Ascend.io.

CIOs must start with customer needs first, map them to current technology limitations, seek simple implementation approaches, deliver capabilities in short iterations, and capture customer feedback to adjust priorities. 

3. Neglecting change management from the start

Leaving communications as an afterthought and addressing change management just before new capabilities are ready to deploy is another recipe for transformation failure. 

“When undergoing a digital transformation, executives often fail to consider the need for clear communication with their employees,” says John Veltri, managing director at SADA. “When it comes to enterprise innovation, most employees are excited, yet it is important to recognize that a small percentage may be concerned about how they will communicate and collaborate with their peers, how they will complete their day-to-day tasks, and in some cases even worry about their level of job security.”

IT loves solutioning and implementing, especially when some underlying technical limitations are rooted in legacy systems and technical debt. In addition, business stakeholders often demand fast results. This often results in teams feeling pressure to dive into implemention, miss key communication steps, and skip building a change management program at the start of a digital transformation initiative. One easy step to get teams started on the right foot is to document and communicate a vision statement ↗ with stakeholders and selected end-users before beginning.

4. Expecting IT leaders to know how to lead transformation initiatives

In my recent book, Digital Trailblazer, I advise CIOs to train and mentor leaders to drive transformation initiatives. These leaders often come from IT backgrounds, such as product management, program management, application development, data science, and IT operations. They will have succeeded in managing technology initiatives but may not have the confidence or experience to lead transformation initiatives and deliver outcomes.

When CIOs don’t consider the mentorship, training, and support required to develop these leaders’ confidence to handle the many challenges they will face during transformation initiatives, they are doing their deputies a disservice. How will they learn customer needs, manage through conflicting priorities, align self-organizing teams on vision, oversee change management, or handle detractors ↗?

Growing a leadership team of digital trailblazers ↗ is a greater challenge today than during earlier digital transformation waves due to hybrid working, talent shortages, and the wide range of frameworks and best practices increasingly involved in such initiatives. CIOs that don’t drive standard ways of working or governance models may find teams debating which agile frameworks to adopt, what devops tools to focus on, or how to implement design thinking into their roadmaps.

There’s too much at stake for CIOs to limit learning programs to skill development and to leave leadership development for CHROs to oversee. One approach for CIOs is to partner with the CHRO ↗ on investing in transformational leadership programs and developing a vision of the enterprise’s future of work.

5. Assuming self-organizing teams will meet security and compliance requirements

Regulatory and security stakes are as high today as they’ve ever been, with enterprises also introducing sustainability goals, diversity objectives, and other ESG requirements that innovation leaders must factor into digital transformation initiatives. Assuming everyone involed in driving innovation is well versed in all the regulatory and security constraints is a sin with considerable ramifications.

Expecting developers on self-organizing agile teams, data scientists, and user experience specialists to have all the required knowledge and best practices can lead to material risks and implementation setbacks. CIOs must ensure security and compliance experts are plugged in and collaborate effectively with all teams involved in digital transformation initiatives.

“Connected and efficient collaboration across the enterprise is foundational to understanding the role of technology change, the use cases, and the right approaches to them,” says Andres Velasquez, technology consulting principal at EY. “Ideally, the organization will focus on institutionalizing ways of working that streamline how the business’s functional, technology, data, and change management teams experiment with and learn from new technologies.”

6. Investing in AI without a strategy or data governance

Generative AI looks to be a foundational priority for CIOs over the next few years, but as Brett Hansen, chief growth officer at Semarchy, says, “like any new technology, a thoughtful, pragmatic approach needs to be applied.”

Thankfully, CIOs have a wealth of experience here, as Joerg Tewes, CEO of Exasol, explains: “Businesses have always needed to transform their massive amounts of data into actionable insights. While AI will, in theory, accelerate the process, the particulars remain the same.”

But debate remains about how much of CIOs’ prior work in delivering data-driven capabilities will translate to the next machine-enhanced era.

“Organizations who think they can leverage artificial intelligence as a bolt-on to their existing digital transformation strategies are doomed to failure,” says Kjell Carlsson, head of data science strategy and evangelism of Domino. “AI is a fundamentally different set of technologies that requires a separate strategy and capabilities.”

And a key facet of that is data management. “Before embarking on a complex digital transformation journey, leaders must assess the viability of their data and implement a comprehensive cleansing and management strategy to ensure data is accurate and complete. Otherwise, AI will base its outputs on incomplete or inaccurate assumptions, leading to potentially disastrous ramifications for the organization,” Hanson says.

Also at issue are organizational issues that could magnify problems as AI becomes increasingly relied on, says Tewes: “To minimize complexity and create synergies, the CIO and CDO must report to the CEO. All three must align business and data-management strategies, complemented by streamlined data and analytics capabilities.”

All too often, digital initiatives don’t do full justice to the underlying data management needs for success, and those requirements — and how they are accomplished — may be changing as AI is increasingly brought on board. Moreover, nonalignment on data strategy, especially as pertains to data governance and where to assign leadership responsibilities, will come back to haunt you if you don’t get it right.

7. Declaring digital transformation a journey without communicating a roadmap

Many CIOs will say, “Digital transformation is a journey,” but do they all readily communicate and update that journey’s roadmap?

Roadmaps give employees a sense of direction, an explanation of purpose, and convey strategic priorities. They often indicate business objectives, planned investments, M&A possibilities, and share a vision of where the journey will lead, along with the stops along the way: target technology types, technologies with planned sunsets, timing, planned integrations, prioritized features, and target delivery timelines.

“One of the more common missteps we see with organizations going through a digital transformation is underestimating the decision fatigue involved,” says Asaf Darash, CEO of Regpack. Here, roadmaps help constrain the types of decisions, when they are needed, and limit the options.

CIOs should beware of developing roadmaps in an ivy tower, however, without getting into the weeds to understand customer needs and stakeholder business objectives. Equally important is spending time with technologists to learn more about modernized architectures, technology platforms, and AI/ML capabilities.   

“Effective IT leaders must take an interest in what’s being done at the ground level to drive a successful digital transformation,” says Jeremy Burton, CEO of Observe. “If IT leaders don’t sweat the details and the business impact of these new technologies, such as microservices, continuous delivery, cloud-native infrastructure, and AI, they’ll fall behind.”

Whether digital transformation is a journey or a core organizational competency ↗, CIOs should conduct a learning retrospective with their leaders to avoid repeating past issues and deadly sins.

BFIA Admin
BFIA Admin
The big boss.

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