What Is a Digital Transformation Strategy?
A digital transformation strategy is the approach to remodeling the enterprise to incorporate digital technology across appropriate facets to achieve everything from greater efficiencies and collaboration to improving delivery speed and customer satisfaction. According to Gartner, “Digital transformation can refer to anything from IT modernization (for example, cloud computing), to digital optimization, to the invention of new digital business models.”
But as critical as it is to rapidly innovate and deliver in this digital landscape, digitizing the enterprise is more than implementing new technologies, launching digital products or moving systems to the cloud; digital transformation involves a significant shift in culture, processes, and workflows.
Digital transformation moves the organization from siloed departments that are project-based and output-focused to being product-based and outcome-focused, with cross-functional teams collaborating to deliver incremental value through Agile practices.
This transformation often sounds daunting. It’s never easy to implement change, much less a seismic shift. But the benefits of digitizing processes and tools, and aligning strategy to delivery, outweigh the effort required: increased productivity, quality, and collaboration; faster responsiveness and time-to-market; lower risk; and most importantly, greater agility to compete and innovate in a constantly changing world.
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A digital transformation strategy is essential before attempting such a metamorphosis. And make no mistake, that’s exactly what this is. The most innovative, agile, and renowned companies don’t view digital as yet another project to complete or product to develop but as core to who they are.
Think Amazon, Tesla, Spotify, and SpaceX. Yes, these are mammoth companies with seemingly limitless resources, but they are exactly that because of their “why not?” cultures. Unafraid of failure, they question everything and figure out the “how” as they go.
As the world becomes more digital, so must organizations large and small, despite the unexpected. One survey found 70% of global executives said the pandemic will inevitably accelerate their digital transformation pace. It’s not about developing digital products as much it is leveraging digital technologies to discover challenges and opportunities and deliver customer solutions at scale.
Companies must consider how they will operate, compete, and evolve in this digital economy, rethinking operating and business models. Technology facilitates the development of a digital transformation strategy and empowers the enterprise to efficiently execute that strategy.
The right technology can uncover customer pain points and desires, even predicting future ones. Customers can be internal or external, but the mission is constant: solve the customers’ problems through innovation.
How Do You Develop a Digital Transformation Strategy?
Just as with any strategy, a digital transformation strategy is the game plan of how you plan to act. Don’t get stuck in the “discussion” trap that is more ideological than strategic.
Start by assessing your current state through an Agile lens to establish your desired end state. Then, identify potential roadblocks and opportunities in your market and among your competition. Next, clearly define the purpose, vision, and prioritized goals of the digital transformation, and finally, establish a plan of action.
Include specifics, such the technology, people, teams, and budget required to enable such transformation, but avoid fixating on the minute details.
Agile is about being flexible, respecting the unknown, looking at the big picture and granting teams autonomy to determine the fine points and their approach. Remember, leadership sets the “why” in the digital transformation strategy and teams develop the “how” to deliver.
Digital transformation must be approached with an Agile mindset, treated as any large initiative aimed at improving products, services, processes or business model.
The strategy breaks down the initiative into bite-sized pieces to be consumed by cross-functional teams who will develop and test solutions, seek feedback, and continue iterating until value is no longer achievable.
Who Should Be Involved in Creating One?
Unlike more traditional hierarchies, an Agile approach to the creation of a digital transformation strategy does not inherently lie solely with executive leadership. Instead, senior leadership is responsible for establishing and directing a digital leadership team comprised of many stakeholders across the business, typically from among those closest to the customer.
Harvard Business Review says the goal for senior leadership in an Agile organization is to “create and communicate long-term visions, set and sequence strategic priorities, and build the organizational capabilities to achieve those goals.”
It is a good idea to gain participation from different areas of the organization, building a leadership committee or board of stakeholders who will embrace and champion the digital transformation strategy as much as the Agile approach to it. They will each bring a different perspective and be the ones to garner enterprise-wide buy-in, so it is essential they are good communicators.
What Are the 4 Main Themes of a Digital Transformation Strategy?
Increasingly more organizations are solving even their biggest challenges with a digital-first approach, making digital the centerpiece of their business models. Gartner says, “That’s where the product, service, and business model are being changed and the new digital capabilities that support those are becoming core competencies.”
The goal of a digital transformation strategy is to provide an accelerated path to delivering on strategic initiatives, not through bureaucratic leadership but by enabling teams to thrive.
Companies must be able to adapt to market disruptions, shifting consumer habits, and changing competitive landscapes, just to name a few.
Many business leaders imagine adapting to the changing world of work, realizing Agile at scale, creating a culture of innovation, and making the shift from project to product. But where do you begin or progress from your current state? Addressing the following four digital transformation strategy areas is a good start.
Changing world of work
Your organization may promote a preferred work methodology, but today, what matters most is that teams have the autonomy to use the best method to accelerate strategic delivery. From waterfall and iterative work management to collaborative work and Lean-Agile delivery, one size does not fit all. Being able to adjust to changing requirements and priorities requires aligning work with the best-suited methodology.
Adapting to the changing world of work is essential and is the key to greater agility. Implementing comprehensive portfolio and work management solutions will enable your organization to support different types of work across the enterprise. It will also unify leadership and teams with a single line of sight.
Read next: The World of Work is Changing: Will You Evolve or Be Left Behind?
Creating an innovation culture
The pandemic revealed how vital it is to be able to manage disruptions. Innovation is a prerequisite to responding quickly to market opportunities and challenges to ensure business resilience, but it takes the entire enterprise, not just a few at the top. Innovation can come from anywhere, so encouraging employees to take risks to solve problems reaps rewards for both employer and employee.
Forbes says, “Nothing will propel a company further than a culture of innovation: An atmosphere that inspires employees, every hour they’re at work, to seek out innovative opportunities.”
Creating an innovation culture is more than talk; it’s tapping into collective intelligence, giving everyone equal opportunity to present ideas that solve problems and support corporate strategic objectives. Innovation software is a powerful crowdsourcing tool that provides a consolidated platform to share insights, collaborate on ideas and establish a continual source of innovation.
Read next: Premera Blue Cross Transforms their Business by Nurturing a Culture of Innovation
Realizing Agile at scale
Agile became popular in software development, but its benefits reach across the enterprise. The challenges of scaling Agile across an established organization can be discouraging. But when successful, every team is connected, working in their own way to deliver on strategy and ensure business resilience.
Agile champions lead the way by practicing Agile thinking and encouraging creativity and collaboration to solve issues. There to provide strategic input, they enable teams to deliver the highest value work first, measure, and improve.
Software solutions empower organizations to connect strategic objectives with Agile team delivery, optimizing workflows, processes, visualization, planning, and funding. Even better, they allow users to transform on their own terms and timeline – an approach that can help people buy into a digital transformation strategy.
Read next: The 7 Must-Haves for Achieving Scaling Agile Success
Making the product shift
In this era of digital transformation and quickly changing business conditions, increasingly more organizations are moving towards Agile development methods to increase delivery speed, reduce costs, and deliver on business priorities. But value realization isn’t guaranteed, especially if structures, processes, and mindsets fail to evolve.
What’s needed to achieve true organizational agility is a product shift, focusing on the ongoing delivery of real business outcomes versus one-time project deliverables. Faster time-to-market, increased revenue, greater innovation, and increased customer satisfaction are just as valuable as increased sales volume.
Software technology can help organizations orchestrate transformation, taking a modern approach to Lean-Agile delivery. It can greatly support efforts to deliver products and solutions efficiently, improve business outcomes and support strategic objectives.
Read next: The Product Model: Making the Shift from Projects to Product Delivery
How the Digital Transformation Strategy Impacts Business
Several questions arise when wondering how to move forward in your digital transformation strategy:
What drives the digital transformation strategy?
There are several drivers of the digital transformation strategy, the most obvious being the digital transformation of our world. To survive, companies must be able to adapt to anything, including a pandemic. They are hungry for solutions, pushing the digital transformation market to grow to over $1.3 trillion.
Combined with finicky consumers, the digital revolution demands companies to keep up or die. Many brands failed to modernize their business models. Convinced digital was a fad, tried-and-true approaches were sufficient or existing products were enough, plenty of once global leaders became afterthoughts.
Instead, organizations must evolve, ask questions and be ready for the unpredictable with a responsive digital transformation strategy.
What happens to businesses that don’t have a digital transformation strategy?
Financial Services, Technology and Healthcare industries are in most need of digital transformation strategy, as these are among the fastest evolving markets. For companies without a digital transformation strategy, the status quo remains. While comfortable, it will never lead to competitive innovation.
Without a strategy, it’s nearly impossible to improve business processes, develop new capabilities or modernize business models to keep pace with change.
For instance, relying on manual spreadsheets, multi-level bureaucracies and inflexible work methodologies is an innovation killer. Competitive companies leverage technology to access comprehensive, reliable data to fuel decisions and speed delivery. They connect data, processes, technologies, people and budgets across the business.
What happens to businesses that do have a digital transformation strategy?
The ultimate advantage of a digital transformation strategy is having a roadmap that keeps everyone on the same page, ensuring all teams are delivering on what matters most to the business and customers.
Transformation takes time, is constantly evolving and requires enabling technology, but it produces at least seven benefits that include being able to:
- Measure digital transformation performance and value
- Connect your digital strategy to an executable roadmap
- Master the convergence of products and technology in a connected world
- Drive innovation by creating new products and services
- Speed strategic funding and resource allocation
- Improve time-to-market and reduce cycle time
- Elevate organizational agility to operate at speed
To improve an existing strategy, approach it from an Agile perspective: if something isn’t working, try again by assessing the current and future desired state, identifying roadblocks and opportunities, defining the purpose, vision and prioritized goals, and establishing an action plan.
How can I measure ROI on digital transformation?
In one study, more than 65% of businesses said they have a digital transformation program or plan to introduce one soon. With good reason, some are still unsure of how to measure investment success.
Establishing metrics to gauge return on investment has typically been elusive but focusing on objectives and key results (OKRs) makes measuring outcomes more attainable.
Leaders should take a big-picture view to see overall performance versus focusing on individual projects or short-term initiatives. The goal is to have an Agile mindset as you approach digital transformation, one that enables you to quickly pivot strategies to respond to change and uncertainty.
By establishing a clear line of sight from strategy to delivery, how teams work is no longer as important as whether teams can continually deliver value. Companies can have confidence that work across the enterprise, no matter how teams choose to execute it, has strategic impact because delivery is tied to strategy and solutions are tied to business outcomes.
According to The Enterprisers Project, ROI best practices include:
- Setting initial (even hypothetical) metrics in advance
- Develop “micro-metrics” for Agile experiments
- Incorporate business outcomes (i.e. revenue growth and time-to-market)
- Look beyond cost savings to strategic and operational impact
- Use metrics to review and adjust regularly
Take as many risks as possible to move the needle. With an Agile approach, you can fearlessly test and measure ideas because you have a system and a digital transformation strategy in place to support such experimentation without worrying about wasted investment.
What Are the Key Trends for Digital Transformation?
Digital transformation has ramped up over the past decade as the pace of change quickens. Five trends we are seeing are:
Investment in digital transformation is accelerating
A recent McKinsey survey found that since COVID-19, companies have accelerated the digitization of their internal operations by three to four years, and the share of digital or digitally enabled products in their portfolios has accelerated by seven years.
Digital transformation is co-occurring with a workforce transformation
In their Future of Work Study 2021, Accenture reports that 83% of workers prefer a hybrid model and that 63% of high-growth companies have already adopted a “productivity anywhere” workforce model.
When organizations blend geo-flexible work environments with an Agile mindset that empowers teams to work the way they work best, there is a significant need for a software solutions that foster not only productivity during a digital transformation, but also engagement and strategic alignment.
AI and machine learning is facilitating digital transformation
CIO.com says, “Digital businesses and enterprises that are further along with their digital transformation journeys are better equipped to respond to this rapidly changing environment. At the core of this transformation is the ability to leverage data to deliver actionable insights and predictions using machine learning and artificial intelligence.”
Data and analytics are joining the digital transformation
According to CIO.com, “Many organizations are using advanced analytics now because they have completed the first few phases of their digital transformation projects and are moving on to the last frontier – tackling the data and analytics systems and processes to fully transform.”
Automation is playing a key role in enabling digital transformation
Forbes says, “As automation leads to higher customer satisfaction and employee productivity, combined with increased operational efficiency, the natural result will be a positive impact on your business’s bottom line. This makes the investment of adopting automation as part of your digital transformation well worth it.”
One of the areas where this trend has crystalized more than others is in DevOps, where teams employ automation to help ensure that value moves faster and more predictably through the value chain.
These trends highlight the need for a consolidated software platform that provides the critical line of sight leaders require to keep strategy, plans, and delivery connected. Such a platform serves as the foundation for a digital transformation strategy, enabling teams to adapt quickly without breaking their stride.
Adaptation Requires Intentional Transformation
Never have organizations been faced with so much pressure to modernize and transform into digital versions of themselves. Forward-thinking companies can better adapt to change with an Agile mindset, a supporting technology platform and partner, and a digital transformation strategy to lead the way.