The term Digital Transformation, “DX” in short, has become overloaden and has become confusing, if not, meaningless. How did it come to this? And what does it actually mean originally? Are there risks of misinterpreting it?
Let’s first discuss what it is not, notwithstanding what vendors and consultants say about DX.
DX is not the mere technolgical transition from on-premise computing to the cloud. There is no doubt that cloud technology and digital transformation are inextricably linked. But DX is not the mere modernisation of IT. Typical examples of this are switching from on-premise legacy architectures to API-driven microservices, local systems to the “cloud” or from IT development via the waterfall method to “agile” and “scrum”. Even though these projects have a fundamental impact on the IT deperatment, these changes in themselves do not define the digital journey of an organisation. This only concerns adapting existing constructions to today’s standards.
DX is not the mere digital optimisation. Mobile apps, chatbots and other types of digital services are often aimed at optimising existing services or at offering them through newer channels. As such, these projects are rather digital marketing initiatives.
CIO’s and CMO’s do like the label their initiatves as digital transfroming the company, whereas they typcially only modernise their own department. These initiatives do take a lot of blood, sweat and tears to get rolled out. And CIO’s and CMO’s do have to teach the rest of the organisation to appreciate new technologies and new marketing and sales channels. And workflows and maybe organisational charts may need to be adjusted. However, it is not because it feels like a major change that they are “transforming” the enterprise.
So what is DX then? Digital transformation is the integration of digital technology into all parts of an enterprise, fundamentally changing the way it addresses it markets, how it works and how it adds value. It is also a cultural change that requires the enterprise to constantly challenge the status quo, experiment and feel comfortable with failure.
An enterprise goes a digital transformation when it uses digital technology to radically change its performance and reach. It must therefor be led by the CEO because it requires collaboration across departments in linking business-oriented philosophies with rapid application development models. In fact, if it is not supported by the CEO, DX has little chance of success. As such, a DX programme is more like causing disruption, not only within the enterprise but even in the market. Such disrutpion is ideally underpinned with new a Enterprise Architecture.
In summary, we preserve the term DX for enterprises pursuing net new revenue streams, products, services and business models. This could include creating new digital business units or acquisitions. Sometimes the new business models can lead to companies in adjacent markets or new industries. Conversely, if a digital project is limited to digital modernisation or digital marketing, the enterprise should be extra wary of digital disruption in its market caused by someone else.
Don’t fool yourself: if it doesn’t have a radically different or fundamentally different outcome compared to the current state of affairs, it probably doesn’t fall under the heading of Digital Transformation.
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