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Change Management, Digital Transformation, IT, IT Leadership, Leadership, Technology

Is COVID-19 driven Digital Transformation having unseen consequences?

In the middle of the pandemic many were proclaiming that COVID-19 has accelerated Digital Transformation more in 6 months then it has moved in the last 5 years. But has this had unexpected side effects?

This article explores whether the change from strategic transformation programs to immediate tactical actions is creating a legacy of fragmentation and increased technical debt.

COVID-19 swept the globe, leading to lockdowns and businesses being closed for weeks or months. The need to be able to interact with customers online had moved from an added channel to being essential, and in many cases being the only available option. Companies that lacked the capability were in danger of going out of business.

Many companies were scrambling to move services online, to develop e-commerce sites or enhance existing online sales portals, and finding ways to continue doing business through the pandemic.

69% of boards report accelerating digital business initiatives in response to COVID-19.

76% of CIOs report increased demand for new digital products or services during the pandemic, and 83% expect the demand to increase further in 2021.

Gartner – The 2021 CIO Agenda: Seize This Opportunity for Digital Business Acceleration

Before COVID-19 hit we had seen an increasing push for digital transformation, however, many companies were struggling with the massive amounts of business and cultural shift involved.

The pandemic altered this discussion and has been a catalyst for massive digital change that has forced companies to accelerate or jump into digital transformation programs without delay. Numerous articles have highlighted this.

How COVID-19 has pushed companies over the technology tipping point—and transformed business forever….

October 5, 2020 | Survey | McKinsey

Eight months into the COVID-19 pandemic, it has become apparent that digital transformation strategies have been changed and accelerated.

November 12, 2020 | CMSWire

The question we would like to investigate is whether this acceleration is all positive, or are there underlying problems caused by this new approach?

What types of Digital Transformation are being undertaken?

Let us start by exploring a recent poll we conducted on Pulse and Twitter.

Executives clearly believe that, despite the COVID-19 acceleration, we were still seeing end-to-end digital transformation. Which was surprising given the results we expected and the anecdotal comments we were hearing. Anthony McMahon, vCIO at Unisphere, New Zealand (@anthony_mcmahon) summed it up very well:

“I’m surprised by the results. Have seen plenty of companies embark on digital adoption, but that’s not the same as transformation”.

What is Digital Transformation?

Firstly, what is Digital Transformation, the Enterprisers Project define it as:

Digital transformation is the integration of digital technology into all areas of a business, fundamentally changing culture, and how you operate and deliver value to customers.

Andi Karaboutis, Group Chief Information & Digital Officer at National Grid (@AndiKaraboutis) describes it as the “Digital Sweetspot(s): customer engagement, digital product/asset lifecycle, digital employee”.

For further information see: Digital Transformation (#DX) – What is it? and also: How CIOs Can Manage Digital Transformation.

As with any poll or survey the question and responses are open to interpretation. It could be argued that putting in place online purchasing capabilities integrated into your back-end systems could be classed as end-to-end, although it should not be considered as Digital Transformation.

The articles mentioned above suggest that unless these projects also include a comprehensive strategic approach to transform the business, it is really just digital optimization.

This is further highlighted by another poll question on Pulse which highlights that only 17% of companies have a cohesive Digital Transformation strategy.

Pre-COVID a lot of Digital Transformation projects were being considered, however, due to their nature they were prone to delays, resistance, unforeseen problems, and failure.

Out of necessity, COVID-19 has forced a more practical view of Digital, reducing the scope and increasing the focus on customer facing / eCommerce capabilities and associated back-end processes, as opposed to more grandiose schemes. A “minimum viable product” to use agile terminology, but are we still seeing true transformation?

How are CIOs viewing this change in approach?

To gain greater insights into what has been going on I reached out to key people in the CIO World for their views and opinions.

Tim Crawford, CIO Strategic Advisor (@tcrawford) comments “a lot of focus starts with the front end as it touches the customer experience. But then drives the back-end changes.  Not seeing nearly as many projects focused just on DX (Digital Transformation)”.

Wayne Sadin, Transformational CIO/CDO/CTO (@waynesadin), says “I work with multiple clients, so I’ve seen ‘do as little as possible’ through ‘let’s see how much we can do.’ I’m seeing mostly #DigitalOptimization (doing what we already do better, faster, cheaper), not true #DigitalTransformation (rethinking culture, products, markets, #CX, #EX).” He goes on to say “We’re #Digitizing front-ends like mad to allow touchless, remote, socially-distanced commerce. But also automating back-end system-to-system interfaces because our ‘swivel chairs’ don’t work as well from home 😉”.

Isaac Sacolick, top Digital Transformation influencer & social CIO (@nyike) highlights that he “mostly sees companies trying to do everything at once with some strategy, little vision, and disagreements on how best to plan roadmaps. I think Covid hurt top-down collaboration and bottom-up feedback; expect many orgs to recalibrate as more come into the office”.

Sarbjeet Johal, Cloud Evangelist/Leadership (@sarbjeetjohal) says “#COVID gave us permission to be scrappy, it temporarily infused some boldness into (spend) conservative leaders. Most of that spend was tactical”.

Ed Featherston, Distinguished Technologist at Cloud Technology Partners (@efeatherston) has seen “some end-to-end transformation, but majority are knee jerk tactical solutions. Surprised at the survey results. We have seen many clients who say it has pushed them to digital transformation, but little planning or design, just ‘do it’, which to me is automatically tactical”.

In addition to the above, we are also seeing increased spending on customer facing transformation and critical associated internal pieces, but a reduction of spend on back-end systems.

The information above confirms that we are not seeing a lot of true Digital Transformation, what we are really seeing is accelerated tactical Digital Adoption, driven by critical needs, with a lack of comprehensive vision and strategy.

Future Implications

Going forward, what does this mean to these companies, does it provide a platform to build on, or has it created yet more technical debt and future problems? Was there a proper vision and strategy for the future build out across the whole company?

While it is great to see the acceleration of Digital, the tactical nature of many of these changes, and the rapid pace of change, is likely to increase what has often been referred to as “Bi-Modal IT”, a disparity between old and new approaches and architectures. Existing legacy systems are often large, cumbersome, and difficult to change, whereas new digital technologies, driven by cloud, provide greater flexibility and agility.

This disparity results in increased costs and issues of compatibility across the enterprise. For example, where new meets old becomes a problem area. That simple change to increase your digital capability suddenly becomes a massive headache, with increased work trying to integrate old and new.

It is very difficult to put a cost around these problems, as every situation is different, however, those integrations between old and new are likely to be 5x to 10x the cost of your normal integration work.

So, the key questions to be asking are:

  • Is there a Digital Transformation vision and strategy?
  • Was thought given to the next steps in Digital Transformation (after the tactical COVID-19 actions)?
  • How will you transform other areas of the company?
  • Has thought been given to the necessary cultural change?

What should be done about it?

  1. Make sure the CEO is on-board and prepared to drive this!
  2. Step back and build a proper Digital Vision and Strategy
  3. Define a Roadmap from current to the future, in manageable small projects where each delivers value
  4. Ensure the entire Exec team buy-in to the above
  5. Build it into the corporate objectives and budgets

Conclusions

It is great that we are seeing accelerated Digital Adoption, however, the very tactical nature of it with lack of proper digital vision and strategy is going to result in considerable ongoing issues that companies need to address as part of a larger Digital Transformation strategy.

I will leave you with some wise words from Wayne Sadin, Transformational CIO (@waynesadin) “Speed matters as long as you’re aimed in the right direction 😊. #NextNormal demands a coherent business strategy, driving a digital strategy, that drives your IT Strategy”.

About the author

Martin Davis

C-level executive (CIO / CDO) with 30+ years’ experience

Managing Partner, DUNELM Associates Ltd

LinkedIn: https://www.linkedin.com/in/mpdavis/

Twitter: @mcdavis10

My blog on: IT Leadership and Change Management

My blog on: Industry 4.0 & IIoT

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