The Covid-19 pandemic drove digital transformation, forcing companies to rush into the cloud to accommodate remote work. Cloud spending reached an unprecedented $65 billion in third-quarter 2020, 28 percent higher year-on-year and 3 percent higher than pre-pandemic predictions. Companies weren’t just investing in the technologies they needed in order to complete or advance digital transformation; they were investing in whatever they needed in order to survive the pandemic.
Ironically, the pandemic was also a disruptor of digital transformation. Although the flurry of cloud investments in 2020 added to companies’ digital portfolios, the pandemic may have diverted investments from what mattered long-term to what mattered short-term.
Compare it to a house under renovation. The homeowners have a long-term plan to redo the kitchen, bathroom, or front entry (digital transformation). Then a pipe breaks, floods the basement, and forces the homeowners to focus all their time and money on plumbing (the pandemic). Not only does the short-term panic distract companies from their long-term plans, but it also impacts their available resources.
Now that things are returning to some semblance of normality, it’s time to take stock of where digital transformation is today, note where it might have deviated, and reset the strategy for the crucial months ahead.
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The two sides of digital transformation
Digital transformation has traditionally been associated with the back office. Routine administrative tasks get digitized, automated, and integrated so that companies run efficiently with end-to-end cohesion. There are endless opportunities (and imperatives) for digital transformation in the back office, but that’s only half the equation.
In today’s ultra-competitive markets, made even more so by the pandemic, the customer is truly king. Companies fight hard and spend aggressively to attract customers and keep them in their ecosystems. Price points and service quality are important parts of customer engagement. In a tech-driven economy, however, digital transformation will be what attracts and compels customers.
The front-facing component of digital transformation is just as important as the back-office component. Companies need their internal processes to run on a seamless foundation of technology, but they also need their products, services, and support network — anything facing the customer — to be tech-optimized as well.
Failure to consider both sides of digital transformation doesn’t just lead to an incomplete result; it compromises the whole effort. A tech-driven company with an antiquated appearance won’t attract many customers, especially after months of lockdown sent expectations for digital experiences through the roof. At the same time, companies that focus digital transformation outward instead of inward will make a great first impression but disappoint later on.
Whatever form digital transformation takes from here forward, it needs to travel a parallel path at equal speeds: One path focused on the customers, the other focused on the company.
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Beware the piecemeal solution
A survey taken during the pandemic showed that the majority of executives believe cloud migration is now a necessity. That reveals an important level of understanding in the C-suite. What remains to be seen is how the pandemic mindset will affect any forthcoming exodus to the cloud.
In the same way that companies may neglect the front office during digital transformation, they may focus too much on discreet cloud solutions that add specific capabilities or fill certain gaps. The term “transformation” implies top-down change. That doesn’t mean companies have to reinvent the wheel, but they do need to evaluate everything they do (internally and externally) and explore how things can be improved and integrated.
Cloud investments during the pandemic flowed to the technologies that facilitated remote work. Now, they need to expand to encompass everything relevant to digital transformation — for customers, employees, and executives alike. Piecemeal investments are doomed to fail because they create a natural imbalance between strength in one area and weakness in another. Digital transformation, both philosophically and practically, is about flattening and synthesizing — bringing everything onto one level under the same umbrella.
Every company will do digital transformation a little differently, but they all need a holistic approach. Focus on the front and back end, but don’t stop there. Make digital transformation something that emanates from the core of the company.
Prioritizing digital transformation initiatives
While it’s important to be holistic, it’s also important to be realistic: Digital transformation never happens all at once. Companies should plan to transform in myriad ways. That being said, the plan should encompass a long timeline that focuses on the highest priorities first and the lesser priorities later.
How can companies pick the priorities knowing there’s so much work to be done? By evaluating various initiatives — whether they face customers, employers, or otherwise — according to three key criteria:
1. Technological value — Digital transformation isn’t about adding as much technology as possible. In fact, that’s a recipe for wasted spending and an unmanageable tech stack. A successful transformation is about adding technologies that make the tech stack more valuable and robust, not just bigger. New technologies should complement each other and work well with older technologies. They should deliver a high ROI that extends beyond the ability to offset their own cost. Finally, new technology should never be seen as a panacea, no matter how much value it adds. It’s a vital component, but don’t put outsize emphasis on technology when people and processes also matter.
2. Business value — Digital transformation is about keeping a business competitive and relevant. The end goal is strategic, not technical. Therefore, anything done in the service of digital transformation should be considered in a business context first. What will be the financial outcomes on costs, revenues, and profits? How does it affect short- and long-term business goals? What are the implications, positive or negative, for the business model? Anything that doesn’t provide clear, quantifiable or significant business value probably isn’t a priority.
3. Human value — Digital transformation should elevate the experience for customers and employees alike. Customers should find it easier, faster, and more fun to interact with a company. Likewise, employees should be more efficient, productive, informed, and effective in their jobs. Digital transformation may be tech-driven and business-focused, but the actual effects (for better or for worse) are felt by humans. Whether it’s working or not should be obvious from how people respond. Make sure they react positively by considering the human value (or lack thereof) of digital transformation from all angles.
We have reached the point in the digital transformation timeline where the rubber meets the road. Companies that take a holistic, value-oriented approach will begin to pull away from the pack and raise the bar for everyone else. Where you are now doesn’t matter. What you do next does.
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Harish Dwarkanhalli, Global Head of Applications and Data business, Wipro Limited (opens in new tab)