Digital Transformation - Digital Transformation

The Long Journey of Changing Habits in a Digital Transformation Organization (2/2)

01/07/202411/27/2023 by DX Talk

Today I’m sharing a two-part article on The Long Journey of Changing Habits in a Digital Transformation Organization. This is part 2 of Digital Transformation Strategy: The Essential Guide to Enterprise Success.

Be sure to check out our previous post, The Long Journey of Changing Habits in a Digital Transformation Organization (Part 1 of 2).

COVID-19 and DX: The New Business Landscape

COVID-19 has changed not only our daily lives, but also the business environment of companies. DX, which was only a question mark, has suddenly become an authority and taken over everything. With the outbreak of COVID-19, companies suddenly faced shutdowns, and telecommuting was implemented without proper preparation.

In addition, the performance of brick-and-mortar companies, which had been leading the market, crashed, and IT companies, which had been represented by contactless, began to lead the market. Digital has entered every aspect of our lives and companies, with contactless environments becoming commonplace and video conferencing becoming the norm. In response, Satya N. Nadella, CEO of Microsoft, said that DX, a two-year project, was completed in just two months during the COVID-19 crisis.

The DX Imperative: Responding to a Rapidly Changing Industry

As a result, companies in traditional industries, as well as IT companies, are becoming more comfortable with the semi-forced acceptance of working from home. They are also realizing that not having to meet face-to-face doesn’t make a huge difference to corporate productivity. The internal culture of companies is also changing to the point where it’s no longer awkward to conduct video conferences face-to-face.

Collaboration in the cloud is also becoming increasingly important to support remote work. As a result, even companies that have been reluctant to invest in IT have begun to embrace digital tools. (In its earnings call, Microsoft Teams Solutions, a cloud-based collaboration tool, announced that it surpassed 100 million daily active users in October 2020, a 53% increase from April.)

Obstacles to DX: Changing internal systems and culture

Of course, there were problems. From small issues such as what to do if you forget the password to your company-issued laptop to how to resolve various system access errors in the company, various issues began to emerge that would not have come up without the changed environment. However, the fact that many companies, regardless of industry, have been actively responding to the COVID-19 situation by using IT technology is enough to say that DX has successfully broken ground.

From unilaterally creating a program and urging employees to use it, companies are now starting to reorganize their internal IT systems to improve the user experience for employees’ convenience. This means that we are starting to look at DX as an investment in people, not just an investment in technology. It also meant that DX wasn’t seen as something big and far away, but rather as improving the digital experience of our people, whether that meant working remotely or having video conferencing.

DX’s Ultimate Goal: Toward Sustainable Growth

What do companies really want from DX? A common expectation for many companies is “sustained growth”. But the word “sustainable” can mean many things. In a world where even the fastest-growing companies have a hard time looking 10 years ahead, sustained growth means a fundamental shift. In particular, companies in traditional industries that are far from digital (B2B companies, brick-and-mortar companies, and one-person businesses where digital is a secondary means of doing business) are being asked to change more than companies that were born in IT.

Up until now, these companies have simply adopted IT tools and, in some cases, increased their IT investments. But now they need to digitally transform their entire workforce and organizational culture. So, from transforming business models to digitizing existing products and transforming operational efficiency, it all falls under the concept and scope of DX. That’s why DX should be thought of as a “long journey” to support “sustainable growth,” rather than a one-time endeavor. Therefore, rather than thinking of DX as a project with a clear beginning and end, it is better to recognize it as an attitude or habit that should be done all the time.

DX: Changing organizational culture and attitudes beyond technology

When it comes to DX, technology has been at the center of the discussion, but once again, it’s not about technology, it’s about people and process. It’s all about attitude and sequencing. In short, DX is a long journey to change the way people work, which in turn changes the processes, which in turn changes the business.

The Long Journey of Changing Habits in a Digital Transformation Organization (1/2)

01/07/202411/27/2023 by DX Talk

Digital Transformation: An Essential Strategy for the Modern Enterprise

Digital Transformation (DT or DX) is a buzzword that is rocking the enterprise market. Many organizations are feeling pressured and impatient to get ahead of the curve. DX solution and data services companies are trying to capitalize on this impatience with a lot of marketing. They’re talking about artificial intelligence, big data, etc. and telling you that if you don’t adopt their solutions, you’ll be left behind. At the center of this phenomenon is technology.

DX beyond technology: The importance of people and process

Is it possible to talk about DX in terms of technology alone without also talking about the people and processes that make up the organization? When you look at proven DX success stories, you see that while technology is important, it’s more about changing the culture of the organization and the digital awareness of its people. By focusing on the people and the organization, rather than the technology, DX has been successful. But culture doesn’t change in an instant. They change over time as people become more digitally literate and redesign how they view technology and how they work. That’s why DX is a “long journey” of designing and transforming into a new business.

From the 1990s to the Present: The Changes and Evolution of DX

When it was first introduced in the 1990s, DX meant applying digital technologies to disrupt traditional social structures. Indeed, in the 2000s, with the internet and mobile era, digital technology has revolutionized our daily lives. When Amazon first announced its intention to sell books online, many media outlets mockingly criticized the idea, saying it would never succeed. But now it’s the number one e-commerce company in the world.

The same was true when Apple launched the iPhone and proclaimed it would change the world. At first, we looked at smartphones as just a cell phone with a little bit of intelligence, but now, as we know, every service in our daily lives is done on a smartphone. And when the Fourth Industrial Revolution became a business buzzword, digital was no longer the preserve of a few IT companies, but was recognized as a necessity for all businesses to survive.

What are the differences between DX in the past and DX today? DX today does not just mean technology change, but also includes management transformation and even business model transformation. The reason for the shift from technology change to business model is that the maturity of the technology has reached a significant level unlike before. In other words, DX is no longer a buzzword, but a realistic business transformation, and the market has built up trust that it is a reality that can no longer be postponed. In fact, DX-related technologies represented by cloud, big data, artificial intelligence, Internet of Things, and blockchain are producing meaningful business results beyond attempts and trends.

The cloud server market has already started to emerge as a large industry (Amazon AWS, Microsoft Azure, Google GCP, etc. are representative companies), and artificial intelligence technology is being used for deep learning, natural language processing, and self-driving cars, making it difficult to predict where the technology will end up.

Doubting DX: Resistance from Traditional Industries

However, despite the maturation of the underlying technology, some still have reservations about DX. This is especially true for organizations based in traditional industries. From questioning how a business model or process that has been at the center of an organization for so long can be digitally transformed, to believing that DX is just a fad that sounds good because we don’t know how effective it will be, to resisting the idea of a department that was once considered a computer room suddenly becoming the center of the business.

The Future of DX: Opportunities and Challenges

However, with the recent news of the failure of GE Predix, a symbol of DX, traditional companies are once again left with the question: is DX still relevant? (GE launched a business in 2013 to digitally transform various devices used in electricity, energy, and railroads, but it did not grow into a new business and ended up supplementing the digital resources of each affiliate). Meanwhile, the impact of COVID-19 was felt around the world.

(Continued in The Long Journey of Changing Habits in a Digital Transformation Organization (2 of 2))

Key to Digital Transformation Success: Executive Sponsorship is 80% of Success

01/07/202411/26/2023 by DX Talk

Clear Vision and Strong Executive Commitment

In this first installment of Digital Transformation Strategy: The Essential Guide to Enterprise Success, I’d like to talk about Digital Transformation Strategy I: Clear Vision and Strong Executive Commitment.

Digital Transformation (DX) starts with an executive decision

One day at a management meeting with key executives, the conversation went something like this

“Mr. Kim, shouldn’t we start doing DX, which is all the rage in the industry right now, for the future? I hear that some of our competitors are starting to do so, so Mr. Kim, please prepare a plan and report back to me on what we should do.”

“Mr. Kim, it’s clear that DX is a hot topic in the industry. We’re seeing real-world success stories in many areas, but we don’t know exactly how to get started, so instead of trying to prepare internally, I think we should get some professional consulting.”

“Sure, let’s do that. However, we’re running out of time, so please hurry up and let Mr. Kim oversee it.”

Executive DX decisions and the role of the executive team

After the meeting, Mr. Kim sought out well-known consulting firms with extensive experience in DX strategy, and after hearing their proposals, he selected the most suitable firm to partner with. Over the next three to four months, the external consultants reviewed the company’s main business model, interviewed members of each part of the company, and checked various documents. They also benchmarked how the industry is doing DX and looked for suitable strategies and measures compared to existing DX practices. However, because of the limited time required by the management, we focus more on drawing conclusions in the direction of the management’s expectations rather than deep thinking from the origin.

Finally, they have something that compares favorably to the competition and looks pretty good when you look at it logically. Kim decides that the quality versus the timeframe is not a problem and makes a final report to the CEO.

DX strategy and executive sponsorship

“Mr. President, to summarize the results of the consultation, we have two goals: to innovate the business model through DX in the main business, and to solve various problems, streamline operations, and reduce costs. With these two goals in mind, we looked for possible areas that can be executed in the shortest possible time and are expected to be effective: streamlining operations of existing businesses and using big data for this purpose.

Specifically, we came up with tasks A, B, and C. For these, we can outsource, but in the medium to long term, we would like to have a dedicated organization within the company to build internal capabilities. For DX, technical understanding of AI, big data, and cloud is very important in the future. I would like to start with DX using data from the perspective of starting small, so I would like to create a data analysis organization first.”

“Mr. Kim, I understand, speed is important. Let’s get the organization up and running and start doing DX. I want the other executives to help Kim and lead the charge to change the company.”

Of course, this is a hypothetical scenario, but in many cases, the decision to implement DX is often driven from the executive team down to the line of business, rather than from the line of business up to the executive team. In that sense, this is a very positive start. But will this new organization be able to do DX well? The bottom line is that, unfortunately, they most likely won’t.

Structure and roles in the DX organization

Non-IT companies often create a small, dedicated organization to accelerate DX execution. This organization may be part of a traditional IT department, or it may be part of a strategy or business support function. And they need new capabilities that the company doesn’t have, whether it’s data analytics or cloud.

So a lot of times, you’re building an organization by hiring new people from the outside. This is the preferred method for many companies. The new organization starts out with the expectation that it will bring new innovation to the company, and it’s tasked with delivering significant results that reflect the high expectations of the executive team. It’s a natural progression up to this point, but then comes the challenge.

Implementing DX is not about one party fulfilling the requirements of the other, as in a typical SI (system integration) project, but rather about the business and DX organizations communicating with each other based on their respective roles, identifying problems, and figuring out how to solve them with DX. Imagine solving a problem in an existing business unit through big data analysis. The DX organization creates a plan through analysis, but the on-site organization applies it to the business.

In other words, the DX organization is not a department that takes the results of analytics and puts them into practice, so rather than creating results on its own, it should be in close consultation with the business unit, creating the results that the business unit needs and helping the business unit to achieve results. However, the reality is often the opposite.

DX organizations are often under pressure to produce tangible results quickly, and in the rush to move quickly, they often find themselves pursuing topics that are not relevant to the needs of the business without sufficient collaboration with the business. As a result, they get off to a very bad start. This is more likely to happen in large organizations. This is because they have many departments and complex interests.

Collaborate with on-the-ground organizations for DX success

As we all know, working with other departments can be a challenge. In the case of big data, we have to re-analyze the data we already have and create new modeling results using the latest technology. It’s a new organization, and the results are pretty good because the experts were brought in from outside. From the DX organization’s point of view, the results were impactful.

DX organization. But unfortunately, because there is no foundation for collaboration, there is no real organization that wants to use it. So it doesn’t really get utilized. From an executive perspective, it’s a lost cause. What happens to DX organizations? Unfortunately, it’s not long before they are dismantled. Experts who feel they’re not making a difference resign and leave the organization.

While a lack of cross-functional collaboration is part of the reason for this outcome, it’s more fundamentally a management issue. It’s a lack of understanding of the nature of DX and how to execute it. The most important gateway to the success of DX is to define the immediate and pressing problems within the company, and to make sure that they can be solved through DX – to be clear about what the problem is, why it needs to be solved, and what it will accomplish.

And then the executive team needs to be an active sponsor to help drive it forward. When that happens, it’s hard for line-of-business organizations to not be on board with the idea that DX is going to solve their biggest pain points. And then there’s the executive team behind it.

The importance of executive leadership: alignment with the workforce

In any organization, large or small, there’s a natural reaction to the introduction of unconventional practices. It’s almost instinctive. The so-called experts brought in from the outside are viewed with wariness. Executives can’t afford to let this happen. If you want DX to take root in your company, you need to not only create an organization, but you need to be a strong sponsor and provide constant attention and support so that it fits in well with the existing organization.

Executives need to take the initiative to show interest in DX findings and actively work together to figure out how to utilize and scale them. They need to continue to provide the same strong support as they did when the DX organization was first created. This will increase your chances of success.

Executive sponsorship to drive DX success

It’s not an exaggeration to say that eight percent of DX success comes down to strong executive sponsorship. Not only do you need to create a dedicated organization to execute, but you also need to exert direct and indirect influence to ensure that they are well integrated into the existing organization. If you don’t think you can do that, you’re better off not creating an organization and just adopting DX tools. Once again, it’s important to remember that the key to DX success is the executive team, not the practitioners. DX doesn’t happen in a vacuum, so it’s important to lower expectations, celebrate small wins, and be patient. Doing so will ensure a successful start to your DX journey.