Digital transformation: are we done yet?
For centuries, technology has held the power to revolutionise, from printing press to steam power to production line to robotics and artificial intelligence, and one thing is certain, those that stay ahead of the curve stand to do much better than those that are slow to react.
Is your company doing enough to harness the power of technology?
It is a question that every c-suite executive should be asking themselves, as the trend for digital transformation in business continues to steamroll on. But it remains a fact that not all businesses are engaging with this to the extent they should.
While some have enthusiastically embraced the way that technology allows for a rethink in terms of how they operate, others remain fearful of the unknown and are content to make do with how they have always done things.
“Irish companies underestimate how big a change digital transformation heralds or how much the concept encompasses. There are a number of sectors that have really seen the need to reimagine the way they do things,” said Michael Feith, digital transformation lead for Cap Gemini Sogeti Ireland.
“Some of that’s been accelerated by the general data protection regulation (GDPR) and revised payment services directive (PSD2) coming in, which have forced some companies to change how they do things and as a result they had to set aside budget to do so.”
In particular, Feith believes that the banking industry is a number of years ahead in this area.
“That’s actually something we see globally. The financial services industry is one of the first to implement change based around these technologies. After that, the telecommunications companies have also been quick off the mark and have invested heavily in digital transformation.”
Driving this is the need for companies to react to a general pressure in the market to become more customer-centric. Where once it was okay to offer a service or product and then construct a delivery model around the easiest way of servicing that, today companies are seeking competitive advantage by building their businesses around a customer-first approach.
“The result is that a lot of companies are now looking at how technology can improve their internal processes. Most Irish companies really at the moment are focusing on operational excellence and cost consolidation as part of that digital transformation but I think the real value not only for companies but I think also Irish society as a whole, is looking to be more customer centric and examining ways to actually improve life with digital technology. It’s about a lot more than just cutting costs,” said Feith.
“In the end that’s what digital transformation should do, it should make your life easier, not just your job. It should make you happier about having to spend eight hours in an office and I think Irish companies forget that. They kind of think ‘oh it’s a quick win, it’s something we can do in seconds’ and it’s not. It is a transformation that’s broader than just implementing a tool or technology.”
Among the challenges facing companies undertaking a digital transformation strategy is how best to handle the issue of people. Because while many companies see this as an IT issue, Feith insists it is actually a people issue.
“The Irish market sees digital transformation as an issue around technological change. But what is definitely underestimated is the people part. The organisational change you need to make to support digital isn’t just about people changing roles or people having different technology to work with,” he said.
“It’s really about a mind-set change. It’s about adopting continuous development and continuous improvement of your processes and your systems, because the life cycle of technology has gotten so much shorter. You can’t wait three to five years to revisit what you do based on a traditional technology refresh cycle.”
The take away from Cap Gemini Sogeti on this is that companies should make sure that their technology supports their people and not that because they do not refresh regularly, their people are supporting their technology.
Fujitsu Ireland recently conducted some research into the Irish marketplace around digital transformation, looking at how Irish businesses are performing against what it sees as the four strategic elements required to digitally transform, those being: people, actions, collaboration and technology (PACT).
“The research revealed that organisations recognise the importance of digital transformation, with half of Irish businesses already implementing transformational projects and 30% at a testing stage in terms of other digital projects,” said Tony O’Malley, chief executive of Fujitsu Ireland.
“However, businesses continue to face challenges across the four pillars of PACT as we see it.”
Interestingly Fujitsu’s research appears to show that digital transformation is now seen as a core part of business and that many companies have undertaken digital projects, with some of them already seeing return on investment.
“It’s seen as vital in terms of transforming business operations and business processes as well as impacting the quality of customer service. Of course some organisations are ahead of others. Some of them are being driven into action, given the disruptive nature of technology,” said O’Malley.
“The barriers to entry into anybody’s sector now are a lot lower than they were and there isn’t necessarily the same level of investment required to set up a competing business model or a competing service. I think that’s got the attention of a lot of boards of organisations.”
O’Malley suggested that organisations that have a more innovative mind-set and culture are typically the organisations that adopt early in relation to digital transformation.
“It can be as simple as that and indeed if you decide to do a digital transformation project and you don’t have a mature approach to innovation then that is potentially a limiting factor because this isn’t a destination in itself. This is a journey and you will continuously have it evolve and improve it,” he said.
“We’re seeing varying levels of adoption and varying levels of success across different industry sectors but what we are also seeing is more and more organisations looking at artificial intelligence or machine learning to see what advantage is to be had from it. This is where around 70% of enterprises were going to make investment and where they wanted to see a return on investment.”
As a term, digital transformation is vague and imprecise, meaning different things to different people. But according to Dell EMC’s enterprise director Catherine Doyle, the process of using technology to improve a business is rapidly becoming the norm, and does not need a special term.
“Realistically, what companies mean by this is that they are trying to enable their customers, either business to business or business to consumer, to engage with them in a meaningful way on a digital platform,” she said.
For many companies, the extent of their digital offering is some kind of technology-powered front end designed to service customers but to do this well, Doyle said that this needs to extend into the back end of the company.
“A lot of companies have built a front-end portal that creates a user-experience and it puts them out there digitally. It makes them look a lot better but it isn’t actually end-to-end in the back-end. What they do at the front-end portal doesn’t necessarily transfer all the way back in to updating a system at the back-end,” she said.
However a number of factors are at work influencing the way companies are thinking about digital transformation, such as the upcoming GDPR and PSD2 regulations.
“These are forcing people to get more organised with their data and they’re serving as great catalysts to help companies move on to creating that end-to-end digital transformation. How all these regulations are going to integrate with the business is a source of concern for some and as a result they need a strategy.”
According to Doyle, a company’s data and how it operates end to end internally, are rapidly becoming core business concerns. Things which have been taken for granted in the past can no longer be treated as afterthoughts.
“You need to become a lot more digitally advanced to take advantage of the new world, stay relevant and as a result make money. In Ireland, we obviously have a huge amount of dotcom companies and they tend to be extremely advanced,” she said.
“Many were ‘born in the cloud’ so aren’t shackled to legacy technology but if we take the legacy companies like insurance companies and banks, what they’re doing is on a par with what’s being done in the UK and Europe.”
In a lot of situations, companies like Dell EMC are advising clients in highly regulated industries, which makes it more difficult for them to adapt to change.
“But, in general, I think Irish companies are beginning to really move at pace. You can see that with the appointment of a lot more people to ‘head of digital strategy’ roles up at the CEO level or digital transformation officers. There’s an awful lot of them coming into traditional companies where we wouldn’t have seen that before. Increasingly this is a role that reports to the CEO, not the CIO and it’s got a budget behind it,” she said.
These people are charged not with running the IT function of the enterprise but rather with the process of changing the business.
“Companies want to know what they are going to do into the future and how to make things better. They’ve taken the shackles off those digital transformation officers and said just let’s see what you can do. A lot of them are working around things like artificial intelligence, machine learning, robotics—newer technologies rather than just looking at how they can digitise all their apps, which is really interesting.”
For Microsoft, the digital transformation question is a relatively simple one with far reaching implications. It defines digital transformation as ‘the application of digital technology to transform an organisation’s business model’.
“While it sounds simple, it implications are profound. Through global and local research, we know that Irish enterprises have less than two years to digitally transform – with the growth of data analytics and the power of cloud computing, competitors from within their industry and new entrants are using digital transformation to disrupt existing companies and market places,” said Aisling Curtis, small and medium solutions and partners director for Microsoft Ireland.
“We researched this, and found that a mixed view of digital transformation prevails but with a mixed picture, we are likely to see mixed results. For example, 47% of Irish enterprises see digital transformation as technology experimentation and innovation. But then 46% see it as using technology to do your business in a better way, whereas 46% see digital transformation as being about data analytics or the Internet of Things (IoT) initiatives.”
“But less than half (43%) see digital transformation as being about customer facing technology initiatives such as web, mobile apps and social media.”
According to Curtis, the top three elements of digital transformation being adopted by Irish businesses are data analytics, Internet of Things and artificial intelligence.
There is “wide scale adoption of data analytics for better CRM as enterprises want to maximise the value of their business data and glean valuable insights for their business. This is especially true in retail, where IoT is the next big trend, especially in something like manufacturing, where we predict our factories will never look the same; with 40% of operational processes becoming self-healing and self-learning by 2022,” she said.
“Artificial Intelligence is appearing as an element as enterprises are looking to automate some aspects of their business. This is in its very early stages and if you look at retail for example, HP and Carphone Warehouse are now using bots to redesign their customer services and help them to pinpoint and resolve customer services in a more efficient way.”