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Why Digital Transformation is not an IT Transformation
Digital transformation is not simply an IT transformation. It is a front-office, customer-facing transformation that can drive business growth, while IT transformation focuses on back-office efficiency. Digital transformation is driven by new technologies like social, mobile, analytics and cloud that create new digital business models and customer experiences. It requires changes across the organization in areas like culture, skills, and partnerships. While challenging to achieve, digital transformation has the potential to significantly impact companies through new revenue streams, global reach and optimized processes.
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Why Digital Transformation is not an IT Transformation
- 1. 1 BusinessandITAdvisory,©AllRightsReserved Why Digital Transformation isnot an IT Transformation
- 2. 2 BusinessandITAdvisory,©AllRightsReserved There arefour different categories of IT driven Transformation. 1st three categories are relatively well known and, adequately managed using traditional sourcing and delivery approaches • Business-as-usual change: • Delivery strategy: Business- as-usual IT releases done fully in-house or using vendors, depending on lower cost of delivery. Example: Incremental changes to existing applications or addition of small new applications to a stable IT landscape • Commodity transformation: • Delivery strategy: Traditional (prime) contracting model with an established supplier (typically a large systems integrator or large software vendor). Example: Multi-business-unit, multi-country ERP or CRM rollout • Pilot or controlled experimentation • Delivery strategy: Contract with technology owner and execute on an “incremental,” prototype-based design. Example: Travel company piloting dynamic packaging technology with one small business unit • Innovative: • Delivery Strategy: Take strong control of technology owner (through joint venture or buyout) to ensure control over innovation and to manage risks effectively. Example: Cross-country rollout of smart metering services IT Transformation Spectrum Low High Low DemandSide Challenges High Commodity BAU as Change Supply Side Challenges Innovative Pilot/Controlled Experimental Source: Booz & Co
- 3. 3 BusinessandITAdvisory,©AllRightsReserved IT Transformation Core Components Strategic Alignment Transformation Capability AgileIT Architecture Execution Excellence Source: Booz & Co Four key components must interact with and inform one another, leading to a smooth transformation process and repeatable capabilities
- 4. 4 BusinessandITAdvisory,©AllRightsReserved Transformation Capability Maturity Prog. Mgmt. Governance Performance Mgmt. LackingAd-hoc Competitive Best-in Class Differentiated Transition Mgmt. Vision & Strategy Design & Develop. Technical Readiness Stakeholder Mgmt. Change Mgmt. None Business Readiness Source: Booz & Co Stewardship Ownership Building Capability Building A company must ensure that it has the right set of drivers and capabilities in place to carry out the transformation. The drivers, which can vary from company to company, demand careful consideration, as they will determine the ultimate success of the transformation. Following is a generic template for transformation capability.
- 5. 5 BusinessandITAdvisory,©AllRightsReserved IT Transformation Enterprise Architecture Application Architecture Business Architecture Source:Booz & Co Infrastructure Architecture Data/Information Architecture Design and Architecture Principles Operating Model, Program of work, Road Map EnterpriseArchitecture Agile IT Architecture
- 6. 6 BusinessandITAdvisory,©AllRightsReserved IT Maturity IT Transformation ITMaturity Business Silos Standardised Technology Optimised Core Business Modularity PercentageOfInvestment(0–100%) HighFlexibilityLowFlexibility Source: 2005 MIT Sloan Center For Information Systems Research Global Flexibility Local Flexibility
- 7. 7 BusinessandITAdvisory,©AllRightsReserved Transformation IT Enabled Source: Booz& Co IT Transformation projects are massively complex and highly disruptive to long-standing business processes and their end-users, and can span years and cost hundreds of millions of dollars. Success of such large scale transformations projects on all agreed objectives in the beginning is quite low. Why such projects fail is presumably well understood: • lack of user involvement, • weak support from top management, • unclear business objectives and so on, the list is long. What is required • Companies must align the transformation with overall corporate strategic and business goals, and all stakeholders must buy into the future vision. • they must settle on the necessary transformation capabilities, and fill any gaps in current capabilities. • Third, the transformation team must work to create an agile interim architecture that can see the company successfully through the transformation, maintaining business continuity while enabling the planned changes. • Finally, successful execution will require the creation of a transformation operation model and appropriate progress monitoring and governance procedures for guiding the program to completion
- 8. 8 BusinessandITAdvisory,©AllRightsReserved Transformation Digital Transformation isnot an IT Transformation Digital Transformation is : • Front-office, customer-facing, and demand-generating or generates Revenue. They're the business's brand. • Digital demands move at the pace of the market, competition, and customer expectations rather than the upgrade cycles of IT vendors. • Digital transformation drives or can drive the IT Transformation, but not the other way around. IT Transformation is : • Back office, customer enabler, fulfils demand or an OPEX control measure. Its about operational efficiency and optimisation. • IT demands move at the pace of technologies lifecycle and the upgrade cycles of IT vendors. Source: HBR. Cost Revenue Fulfillment Demand Side Generation IT Transformation Economics Digital Transformation
- 9. 9 BusinessandITAdvisory,©AllRightsReserved Source: BCG Digital Transformation Impacton IT, Relationships and Stakeholders Applications Speed& Cycle Time Methodology and Tools Skills Customer to Business Business to IT IT to IT IT to 3rd Parties Industrial (non Digital) Speed Digital Speed • Mature technologies with long life cycles • Emerging, short life time, built on fast changing technology with legacy technologies • Release cycle of 6 to 12 months driven by planned business needs • Quick cycles (<1 mth) from idea to deployment, driven by rapidly changing users needs and comp. • A hierarchical organisation using established frameworks and standardised approaches to design • Self organising teams using agile tools, fast evolving SDK and automated • Individuals with specialised skills • Jack of all trades who combines upto date knowledge of technologies and business • Predictable demand via established channels, products and processes • Unpredictable demands due to evolving trends, technologies and channels • Siloed and Fenced driven by mid and long term strategies • Highly collaborative and constantly changing • Siloed and Fenced, vertically integrated, tech stack is stable • Collaborative and horizontally integrated, tech stack is constantly evolving • Buyer – vendor relationship, IT controls the pace of interaction • Participating in 3rd party ecosystem, the ecosystem sets the pace
- 10. 10 BusinessandITAdvisory,©AllRightsReserved Digital Transformation Disruption Led Disruptionacross industries by digital evolution is swift and deadly • It is operating at the speed of thought • It turns assets into liabilities • It comes from any firm of any size and from anywhere Digital Disruption is driving fundamental shift in Business Model. This shift has led to deep impact on organisations operation, structure and, their culture. Its low barrier to entry is driving constant innovation and opening doors for non digital business. Source: Disruptors Handbook, Forrester.com 2012
- 11. 11 BusinessandITAdvisory,©AllRightsReserved Social Mobile BigData/ Analytics Cloud Digital Transformation Driven by Technology - SMAC • Four major technology drivers aka SMAC (Social, Mobile, Big Data Analytics, Cloud) is driving the major transformation themes across Business Model, Customer Experience and Operations. Business Model Customer Experience Operational Process New Digital Business Model Driving Revenue with Global Reach New Touch Point across Customer Experience Mapping New Digitised Process and Workflows across the Value Chain
- 12. 12 BusinessandITAdvisory,©AllRightsReserved Digital Transformation Driven byInternet of Things Stage 1 Internet & Dot Com e-Commerce with Control & Choice DriversOutcome Stage 2 Mobile Device m- Commerce Anywhere, Anytime Stage 3(Today) Smart Device with App Stores Cashless Commerce, User Exp. & Ubiquitous • Ubiquity of internet has led to Digital Transformation across vertical industries and merging the gap between physical and digital world. • Consumers driven by customer experience are adopting new platforms and technology. • Owning the digital ecosystem (like app stores) has become a vital channel for customer engagement, retention and revenue generation. Credit: Banking 2.0
- 13. 13 BusinessandITAdvisory,©AllRightsReserved Digital Transformation Convergence Led •Emergence of Social Platforms like Facebook, Twitter and Linkedin has redefined how customers are engaged in a digital world. Customers used these as a learning, sharing and collaborating platform. • Emergence of Smart Mobile Device(incl. Tablets) with superior and engaging UX has led customers to use this as a preferred platform for commerce and service consumption. • App Store led Commerce and Services in digital world is increasing in double digits (yoy). • Owning the digital ecosystem (like app stores) has become a vital channel for customer engagement, retention and revenue generation. • Emergence of GPS enabled devices have allowed localised targeting of services. • Convergence of SO, LO, MO is driving digital disruption across every industry. Source: TOP MOBILE INTERNET TRENDS , KPCB, 2011 Social Local Mobile LO MO SO Transformed Superior and Engaging Customer Experience Anywhere, Any device, Anytime
- 14. 14 BusinessandITAdvisory,©AllRightsReserved Digital Transformation Value Proposition Differentorganisation require different approach for leveraging benefits from digital transformation in their evolution. • Pure Digitisation leads to expansion of core business to digital platforms. • Pure Transformation leads to change in traditional business model to a new type of business model. • Combination of executing Digitisation (services and platforms) and Business Transformation (culture and business model) in parallel is less agile and difficult task to achieve. However this is the best option, executing either option individually or sequentially will not give the desired outcome. Core Business Diversification OrganicGrowthInorganic Digitisation Transformation Sweet Spot
- 15. 15 BusinessandITAdvisory,©AllRightsReserved Digital Transformation Attributes • Simple •Ubiquitous – universal access to services and apps by consumers and enterprises • Personal • Affordabiltiy – pricing to make them affordable • Speed – extent to which digital services can be accessed in real time • Usabiltiy – ease of use • Empowering • Skill • Reliability – quality of available digital services
- 16. 16 BusinessandITAdvisory,©AllRightsReserved Digital Transformation Challenges Finance (Transactions) Customer (Engagement) Internal (Ops.) Learning, Culture & Infrastructure RapidlyChanging Customer Desire and Needs. Digital generation is always on the move. Increase the top line and bottom line growth with seamless transactions Business process are fragmented, need to digitise all, leveraging new digital platforms. Resistance to Cultural Change, Fail Fast is Missing. Lack of unified Marketing, and fragmented Channels. Old operating Model. Lack of Analytics and Intelligence on Digital Operations. Ageing infrastructure and Information Overload. Ad hoc strategy to leverage and integrate social and mobile ecosystems. No well defined KPIs. Lack of Customer Centric Services. Most services are functionality driven and aren’t intuitive. Lack of collaboration and Silo based Approach hindering Boundary less information flow.
- 17. 17 BusinessandITAdvisory,©AllRightsReserved Digital Transformation Why It’sDifficult Source: Creating Corporate Advantage , David J. Collis & Cynthia A. Montgomery Structure, System & Procedure Linkages & Alignment Intro Growth Maturity Decline C C Drives Behaviour People Shapes Culture Time Culture Shapes People Culture is the biggest challenge for any transformation to be successful. For matured organisation cultural challenge is magnified enormously as it drives the behavior of people. Any change to that is resisted vigorously. Cultural
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- 19. 19 BusinessandITAdvisory,©AllRightsReserved Digital Transformation Capability Maturity Source:UQ and EY, Digital Capability Maturity Framework. 2013 Strategy Digital User Experience Low Moderate Considerable High Extreme Design Services and Content Channel Integration Operations Governance Digital Infrastruct. None
- 20. 20 BusinessandITAdvisory,©AllRightsReserved Summary Digital transformation isan end to end business transformation which drives or can drive IT Transformation. Its not only transforming the industries but laying a new foundation for corporate IT. It’s still early days..
- 21. 21 BusinessandITAdvisory,©AllRightsReserved Advisory Services Catalogue Business Advisory •Business Strategy • Go To Market Strategy • Competitive Analysis, Wallet Share Analysis • Profiling, Alliances, Pricing, Positioning • Market Watch • Distribution Channel Analysis • Sales Enablement • Value Management and Articulation • Messaging, Buyer Profiling (360 degree view) • Pipeline and Account Management • Industry Trend Executive Briefings • Telecom, Media, FMCG, FSI • Market Research and Feasibility Analysis IT Advisory • IT/Business • Alignment, Business Case Development (Val2.0) and Value Management • IT Assessment • Due Diligence, Current and Future State Assessment • IT Strategy and Architecture (EA) and Portfolio Analysis • Technology Assessment & Enablement – Digital Transformation, Mobility First, Cloud Fitment, Analytics and Reporting, Social Media Strategy • Operating Model Review and Design. • IT Economics • CFROI, TCO, ROIC, IRR, ROA • IT Sourcing - Insourcing/Outsourcing/Offshoring • IT Cost Allocation/Chargeback/Cost Reduction • IT Performance Management and Portfolio Management • IT Governance/Compliance/Risk Management - COBIT
- 22. 22 BusinessandITAdvisory,©AllRightsReserved Telco 2.0 –N Sided Model 2010 Cloud IT Services Model 2013 NBN Impact Aussie Indus. 2011What is Value Management 2013 Mobile Industry Analysis 2011 Social Media Strategy 2012 Digital Transformation Framework 2013 Facebook Strategy 2011 Insight Driven Sales Model 2013 Cloud For Enterprise IT 2009 Australian IT Industry 2013 GTM - Services Company 2013 Value Based Relationship 2012 Big Data - 2013 Value Based Relationship Advisory Services Work Samples
- 23. 23 BusinessandITAdvisory,©AllRightsReserved To Know More Contact Name:Vishal Email: info@sharmavishal.com Twitter Handle: sharmavishal Linkedin : http://au.linkedin.com/in/sharmavishal01/ Web: http://www.sharmavishal.com Mobile: 0468-675-566 (From overseas + 61- 468 - 675 - 566) Fax : (03) 9381- 4459