What’s the value of digital transformation ?

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Let’s not be in denial : we can say whatever we want about digital transformation, when it comes resources and budget allocation it’s impossible to avoid that “what’s the value ?” question. Dealing with it is not that easy since the value of digital transformation is still an immature matter in many organizations.

• A pure ROI-driven approach is illusory regarding cultural change. Easier on a business process, operational and industrial one but that’s not what businesses usually start with.

• Sometimes I just say that digital transformation will just keep you alive and give you the right to keep on playing against your competitors.

• That leads me to a too-often overlooked dimension which, instead of asking “what are the benefits if I do it”, is “what will I lose if I don’t do it”. ROI is good but RONI (Return on non investment” can be a great eyes-opener.

A sound and structured study about this matter has been issued by the CIGREF (a long-time established and powerful french association of CIOs)

Even if the study is in french (and so will the exhibits), the content is worth having a look.

What’s digital transformation ?

The study starts with a question that many businesses don’t pay enough attention to : what is digital transformation and how to recognize it when you see it ? As a matter of fact, if lots of people talk about it, the scope and depth of projects vary a lot according to people and companies.

According to the CIGREF, digital transformation is a corporate strategy before all. A strategy that ultimately translates into digital project. Amen to that. Not only they admit that technology is second (evidence of clear-sightedness from an association with a strong IT DNA) but they also say that business strategy comes first. We still see too many transformation projects having to deal with a previously set corporate strategy. Transformation is the strategy, digital is its execution and the study states that in a very relevant way.

Transformation is the corporate strategy, digital is the way it’s being executed.

The CIGREF also starts a new but not unuseful discussion on the concept of project. Digital often means ditching old project approaches (V model) and adopting continuous delivery (agility), what goes against the way IT people used to do things for decades. That is consistent what the previous paragraph ; is transformation is the strategy then it’s not a project but a continuous activity.

The CIGREF says that 7 criteria can be used to qualify a digital project.

1°) The vision : necessarily carried by the C-Suite

2°) Operations transformation : with a process-driven approach and taking into account the relationships with the company ecosystem. I see so many digital transformation projects where processes come last or where impacting processes is strictly forbidden that the only thing I can do is applaud this point.

3°) Methods : test and learn, right to fail, disposable initiatives, experimentation, agility, collaboration.

3°) Steering : notably with appropriate  risk management. Here again I often saw ambitious visions coming with a risk-adverse policy similar to the one used for legacy operations. But since it’s about innovation and risk acceptance…

5°) Data : must add value to the project

6°) Technologies : the CIGREF states that they are only catalysts, enablers. The main fields are no surprise at all : social, mobile, cloud, analytics.

7°) Ownership by users : intuitive technologies and change management must be a part of the program.

Digital transformation is also characterized by alternative operating models.
• cycles : continuous development
• economical steering : one must think in terms of budget envelope and infer intermediary steps according to the desired burn rate instead of costing step by step.
• focus : should on the end user/
• HR : new skills, new cross-organisational skills assembly.
• projects : agile is the new normal.
I took time on this first part but I think that, before talking about the value of digital transformation one must know what digital transformation is what to leverage to achieve it.

The value of digital transformation : it’s a matter of stakeholders

Until now the value of an IT project was measured regarding the benefits in terms of process execution. End users had to fit into the mould : like the machine or the software they were here to serve the process and adapt.

There’s now a radical shift with a new user centricity (internal and external) and the need to create value for the user and not only for the organization. Ultimately, behind the idea of user experience lies the need to create value for the organization, the employee, the client and even the partners.

The CIGREF comes to this conclusion through an analysis that’s mainly economical, to which I’ll add change management and common sense. That’s something we’ve been seeing for ages : when change has no clear and significant value for a given stakeholder or even destroys value for him, either change is refused or circumvented. In the end it does not work and that’s not a matter of technology but of common sense. It’s a core issue when transforming tools and processes in the context of employee experience, what is something I already dealt with in previous posts.

Another comment : the CIGREF compares digital transformation projects with classical IT project, what may be a dangerous bias. Such an approach means digital projects are unconventional IT projects, what is a mistake : they are enterprise projects powered by IT. To some extent that even goes against what the study said before. But there’s a reason to that : the CIGREF can’t deny its IT DNA, has always talked to IT people and, to bring their audience into such a paradigm shift they must start from a well known starting point. What is confirmed later with a statement that should be posted on the wall of any IT department :

“We note that the value is not created by technology that’s only plays the role of a value catalyst”.

The value of digital transformation is measured through business cases.

The CIGREF states the the value of digital transformation can be measured by :

• offering a customer journey that increases loyalty through trust

• a better understanding of the client for a personalized experience.

• offer side services beyond the core business of the company

• improve the go-to-market time of offers.

It’s easy to see that business cases prevail over technology. But there’s something I don’t agree with : I find that employees are missing in this equation. For once that an IT approach is customer centric – and I applaud that – one must not need to serve the internal client that serves the external one. When I say that there’s no customer experience without employee experience it’s not empty words but something that one day day eventually hurts those who forgot it. I agree that the CIGREF mentions the final purpose, employees being only the means to an end, but mentioning internal alignment would have made sense here.

If the CIGREF also introduces a new way to drive costs that’s appropriate to digital transformation projects, it also states that the value of such project can be non-economical.

The value of digital transformation can be non-financial

The CIGREF proposes a series of indicators built on four pillars (data, marketing, operations, human resources), broken down concretely illustrated sub-themes into sub-themes.

Who says value says ROI and who says investment says risk. The study also proposes a new framework to assess the risks tied to digital transformation, including the risk of not doing.

The comes an analysis framework taking into account the non-financial value and the related risks.

Those who expected a strictly economical approach may be disappointed by the document. But it seems to me that the CIGREF’s approach while not overlooking cost and financial capitalization issues allow to focus on the intrinsic value of projects and provides a decision making and project management approach more reliable than a finance-only model. Since transformation is only here to power projects where the most important issue is the change of business model, organization and where the human side matters a lot, we all know that ROI-based approaches, as reassuring as they may be, rarely come true.