Five Dimensions of Digital Transformation in the Enterprise

| 11th August, 2015

According to IDC, one third of the top twenty market share leaders in most industries by 2018 will be significantly disrupted by new competitors that use the 3rd Platform to create new services and business models. Malaysian enterprises will have to cope with geopolitical, economic, and environmental disruptions apart from rapid technological change to survive the coming change.

A transformation begins with a change in the mindset. Today’s need is a basic change in the very ability to reimagine one’s business through digital binoculars. Digital transformation is impacting all businesses, functions, and processes. The "people dimension" of digital transformation is reflected in workforce transformation, and it, too, will impact every enterprise, small or large, in traditional industries or untried business models.

IDC's Leadership Digital Transformation MaturityScape consists of five stages (ad hoc, opportunistic, repeatable, managed, and optimized) that represent a progression of increasing maturity of leadership's capabilities and actions. They are a measure of a leader's ability to recognize the opportunities in developing DX capabilities that are consistent with business goals and that of a leader's inherent ability to lead the organization in meeting or exceeding business goals.

Specifically, this new study was developed to help business and technology executives identify areasin need of improvement in support of digital transformation in some key areas or disciplines of leadership. Let’s take a look at these dimensions in detail:

Ecosystem Awareness and Insight

By becoming aware of the the underlying pulse of the ecosystem around them, Malaysian enterprises can conscientiously shape and orchestrate their standards and beliefs into the industry value chain. This is similar to how industry giants like Airbus and Walmart became market leaders as they orchestrated their domination in global markets.

A digitally transformed ecosystem works in an integrated way with its employees and helps them work together by breaking silos across different departments. As leaders of organizations looking to create ripples of change, they must work towards integrating value chains among their business processes to become part of a larger ecosystem, essentially enabling themselves to offer end-to-end services in the market. For example, insurance companies offer free medical check ups and incentives on no claims, thereby scoring brownie points for improved customer experience through an added service.

Business Model Innovation

Executives who think they're in a technology arms race are focusing on the wrong area: The 2015 Digital Business Global Executive Study and Research Project by MIT Sloan Management

Review and Deloitte identifies strategy and innovation, not technology, as the key driver of success in the digital arena. Conservative companies that avoid risk-taking are unlikely to thrive — and they'll also lose talent, as employees across all age groups want to work for businesses committed to digital progress.

It is interesting to note that innovation is a part of the culture in most digitally maturing organizations across the world, irrespective of the economy. Which of the digital technologies is most popular in this direction? This HBR study has found that leading companies are using the rise of public and private cloud computing to create new business models and services in addition to taking advantage of the greater cost efficiencies and scalability features that the cloud provides.

Organizational and Cultural Disruption

A digital transformation drive within the enterprise is often mistaken as an initiative that involves increased spending on technology acquisition only. Business leaders also suddenly realised the growing importance of mobility and so, digital spending, especially for mobile solutions, look like nothing more than hasty afterthoughts at the board room. Fortunately, even such efforts are making a huge difference to sway customer behaviour for many Malaysian organizations.

This exhibits the true power of digitally transforming the culture that drives an enterprise from within through digital technologies. The essence of any transformation, in this case digital, really comes down to the people involved and how their digital behaviors are different from traditional practices that prevailed before them. Most employees like being wired to be more productive at work and IT teams as well as business heads need to keep up with these dynamics.

That being said, cultural transformation with digital tools cannot happen by plainly adding some new mobile and social channels. Create new digital teams, centers of excellence, innovation teams, and other groups with cross-functional outreach. Ensure you have a good mix of digital and non-digital skills in these leading teams as they will decide the success of this process.

Agile Planning and Governance

It’s imperative to understand that success cannot be measured only by traditional business metrics like operating costs, profits and market value. The real metric of success in the digital world is measuring your business agility. Unless Malaysian enterprises do not begin to gain granular governance through digital tools, true digital transformation hasn’t happened yet.

Malaysian CIOs must not measure their digital journeys based on what they’re doing today. Don’t measure success based on what you’re doing today. Rather, they must begin to measure how successfully can they deal with the unexpected, disruptive needs of the future.

While there are numerous technical and system changes that are required to be done in order to support the scalability requirements of digital transformation, the most important architectural change is an improved focus on agility as a core business driver. A CIO should not only focus on the technical and organizational aspects of the process, but also on how those elements must change to bring governance within the prevailing system gaps.

IDC believes that most business leaders are at the opportunistic and repeatable stages of maturity. Most leaders will not and probably cannot have all of the competencies required at the managed and optimized stage, and striving to achieve them is likely an exercise in failure. Instead, leaders should focus on building teams that bring together the necessary competencies across the five dimensions and then focus on creating a collaborative and cohesive environment for driving DX throughout the enterprise and its ecosystems.

"Leadership of digital transformation requires a nuanced set of skills and abilities, some of which may not come naturally to many executives," said Fred Magee and Marc Strohlein, adjunct research advisors within IDC's Research Network. "Leading DX is inherently multifaceted and multidirectional — DX leaders must have the ability to create digitally fueled business visions; to attract 'co conspirators' including customers, partners, and competitors to help realize the vision; and finally to orchestrate the myriad components needed to actually execute on the vision."

The IDC Leadership Digital Transformation MaturityScape is part of a new series of Digital Transformation (DX) MaturityScapes, across five key dimensions: Leadership DX, Omni-Experience DX, WorkSource DX, Operating Model DX, and Information DX.