Digital transformation and the IT department: Effective management and strategy

Digital transformation and the IT department: Effective management and strategy. The fifth part of Talent Acquisition and Organizational Structure to Drive Digital Transformation (DX) Success explores how to approach and execute digital transformation with the traditional IT department. Learn about organizing for DX success, the importance of pilot projects, and strategic organizational placement.

Digital transformation and the IT department: the pros and cons and leveraging your IT department

We’ve talked about who you should organize for digital transformation (DX). Now let’s take a look at the pitfalls of running a DX organization. When it comes to setting up a DX organization, the most popular choice is to leverage the IT organization already in place. Companies of a certain size already have a separate organization that runs enterprise systems like ERP and HR. Smaller companies may not have that level of organization, but they do have an IT person who is responsible for their employees’ OA experience.

So it’s very natural for them to take on DX when planning and organizing DX. However, as I mentioned earlier, the chances of success are very low if the existing IT department is tasked with DX. Sure, there’s a very small chance that they can pull it off, but for the most part, the results are far from successful. This is the path most companies take, but it can also be the riskiest. Why? Let’s take a closer look.

IT’s limitations and strategies for organizing for DX success

First of all, if your main business is not in IT, you can’t afford to have a large IT department. With a small staff, these organizations are responsible for the operation of existing internal systems and, in some cases, new development projects. For these organizations, keeping existing enterprise systems running reliably is a key performance indicator. And they don’t have a lot of internal headcount to spare.

They rely heavily on external partners to maintain their systems. As a result of this situation, the existing IT department members are mainly required to perform administrative functions, and they tend to focus on the stable operation of existing systems rather than pioneering new technological changes in the market. This is a conservative approach from a technical point of view. Rather than defining and solving problems on their own, they are more likely to leverage the resources of their environment and the partners around them to keep things running smoothly.

I emphasized earlier that sustained DX requires internalization as an enterprise capability. This is why the ability to define the problem and lead the content is more important for DX success than the management capabilities required of IT. If IT continues to work in the same style as it has in the past, with a focus on cost savings or stable operations, it will be slow to get up to speed on DX. The systems, internal processes, and regulations it has created will continue to self-censor against an unclear goal like DX. As a result, you’re stuck in a holding pattern instead of taking action. So what can you do?

Approach DX implementation with a pilot project

One way to start is to leverage your IT organization to run some pilots before you commit to a full-fledged DX organization. The idea is to introduce digital tools and, if necessary, run a few big data or artificial intelligence pilots to see if they can make your existing core business more competitive or even test the waters for the DX you want to pursue.

However, keep in mind that this is a pilot, and the return on investment should be less about the return on investment and more about the fact that you’ve tried something that falls into the DX category in your organization. If you’re satisfied with the results of the pilot and want to take it to commercial scale, it’s a good idea to consider separating the organization. In some cases, pilots can be delivered without any internal resources and with only external partners. Moving to commercialization means you’ve decided to make it a core part of your business. This means you need to think about the structure that will allow you to internalize the capabilities.

The importance of organizational and role separation in DX execution

And while running pilots, it’s a good idea to separate the people working on enterprise systems from the people working on DX, if possible. This separation is necessary to increase the likelihood of success and to lay the groundwork for a dedicated organization down the road, as the two will inevitably have very different goals. As the pace of technological change in IT continues to accelerate, and jobs are increasingly fragmented, it’s not uncommon to see developers with different competencies and specific skillsets.

Based on this understanding, DX should be pursued with the understanding that a new organization should be created if possible, or at least a temporary one if not. In addition, it can grow into a major management issue, so it is recommended to think about the placement of the organization in the approval line regardless of the size of the number of people, such as running the organization directly under the CEO.

Internalize and strategically align your organization for DX implementation

As we’ve said many times, DX must be internalized. That’s why you should start with a separate organization if possible, but if you have to leverage your existing IT department, you should definitely pay attention to the things we talked about today and decide on an organizational structure.