We continue elaborating on the four most often used cliches about data management demonstrated in Figure 1.
In the first two articles of the series, we discussed the implementation aspects of the statement “data is a company’s asset.” If data is an asset, then it should generate value for the company and its stakeholders. In the second article, we elaborated on five steps to analyze how a company can get more value of different types to sustain the company’s competitive advantage. To get value from data, a company should become “data-driven.” The third article discussed various viewpoints on a “data-driven” organization and the 7-step method to reach it. Digital transformation allows a company to become “data-driven” in practice.
In this article, we will:
- Summarize the “digital transformation” concept (Part 1)
- Demonstrate why a formalized data management capability is an integral and mandatory part of digital transformation (Part 2)
Summary of the “digital transformation” concept
If you google the term “digital transformation,” you realize that only lazy people don’t talk about it. As usual, multiple definitions and interpretations of this term exist. I compiled these views and demonstrated the summary using basic diagrams of the “Orange” data management framework. This summary gives answers to three questions:
- What does “digital transformation mean?
- Why does a company need it?
- How to implement this concept into practice?
Let’s consider the answers to these questions one by one.
What does “digital transformation” mean?
Every company has its business model. The business model demonstrates how a company delivers value to its stakeholders along business value chains, as shown in Figure 2. A business value chain is a company’s set of activities to create and deliver value to its stakeholders. The business value chain starts with providers/suppliers and ends up with customers and other stakeholders.
A company’s business model includes a set of business capabilities to enable the business value chain. Finance, customer support, and product development are examples of business capabilities. Every business capability has several constituent components such as data, technology, business processes, people, and other resources such as tangible and non-tangible assets.
Digital transformation is a change in the business model led by changes in technology.
The transformation touches all constituent components of a business capability, as shown in Figure 3. Technology requires a change in business processes. The changes in technology and business processes impact the delivery of products and services. It also influences data processing. Changes in business processes require changes in the skills of the company’s staff members who perform these processes. It means that all components of a business model are subject to transformation.
The key technologies that currently enable digital transformation are:
- Mobile phones and apps
- Cloud computing
- Internet of Things (IoT)
- Digital twins
- Artificial intelligence and machine learning
- Big data analytics
- Digital marketing and social media
- Remote work
This overview of the “digital transformation” concept leads to the following conclusions:
- Digital transformation impacts the whole business model of the company and various stakeholders. Therefore, different business processes can undergo digital transformation.
Core business processes focus on delivering value to customers. Supporting business processes enable core business processes and have various internal and external stakeholders. Finance business processes are an example. Key stakeholders of finance processes are finance staff, management, owners, and external supervisory bodies.
- Various businesses can utilize only those technologies that better match their value propositions to different stakeholders’ groups.
Why should a company need “digital transformation”?
The changes in technology are not drivers but a means for the digital transformation. Why should a company transform its business model?
The key drivers of this change are:
- Becoming more competitive in an industry by increasing speed to market with new products and services
- Increasing productivity
- Improving customer experience by improving responsiveness to customer needs and personalizing products and services
These drivers again demonstrate that various stakeholder groups realize benefits from the digital transformation of corresponding business processes.
How to implement the concept of “digital transformation” into practice?
I found a reference to six various digital transformation (DT) frameworks. However, a recent survey demonstrated that “70% of all DT initiatives do not reach their goals. Of the $1.3 trillion that was spent on DT last year, it was estimated that $900 billion went to waste.”
In my opinion, any digital transformation project should follow the simple steps applicable to any information technology-related project.
Figure 4 presents these steps:
Step 1: Identify key business drivers
The challenge starts at Step 1. A company has two options. The first option is to choose a technology and start implementing it. The second option is to answer why the company needs this technology. My belief is that a company first needs to give answers to “WHAT?” and “WHY” it wants to reach something. The technology comes later. Therefore, a company should align its digital transformation initiative with a business strategy.
Step 2: Buy-in support of top management
Any business transformation project is time- and resource-consuming. Therefore, the dedication of top management is the first success factor.
Step 3: Scope your initiative
In my opinion, this is the most crucial step in the initiative. A company should be pragmatic and realistic in its approach. Digital transformation requires a lot of resources as it impacts all spheres of the business model. Investments in the implementation of new technologies, staff development, and business process re-engineering could be massive. Therefore, the company should prioritize and limit its ambitions to a feasible scope and choose relevant factors for prioritization. The examples of these factors are the period to get a return on investment and the impact on the business profitability. Companies with various business models may profit from the digital transformation of different business processes. Figure 5 demonstrates an example of mapping between various technologies that enable digital transformation and business drivers and corresponding processes.
The example in Figure 5 leads us to the following conclusions:
- The business driver and corresponding business processes define the required technology, not vice versa.
- Various drivers and corresponding processes require different enabling technologies.
- A company should prioritize the scope of the digital transformation initiative to the drivers and processes most critical to the business.
Step 4: Define roles and accountabilities
The scope of the initiative outlines business units and roles to be involved. As for other IT-related projects, the involvement of the internal staff is crucial for the initiative. Digital transformation leads to significant changes in daily operations, required skills, and the organization’s culture. The internal staff has to be upskilled to move on with these developments.
Step 5: Prepare requirements
Digital transformation will lead to changes in various components of the business model. Therefore, a company should clearly identify the expected outcomes and requirements to various business components.
Step 6: Choose an approach and method
The required approach and methods depend on the defined scope. If the digital transformation touches the whole enterprise, then the centralized approach is required. If only one business process is subject to digital transformation, the approach and methods will differ.
Step 7: Choose appropriate IT technologies and solutions
One IT technology can be realized in various IT solutions. Let’s take as an example artificial intelligence (AI) and machine learning (ML). Multiple vendors offer various platforms to perform AI/ML operations. A company should align the chosen solution with many other aspects of the DT initiative.
Step 8: Implement digital transformation solutions
At this point, a company should start the implementation of the IT solutions in parallel with changes in business processes, training and upgrading internal staff, etc. The implementation process depends on the nature of digital transformation.
Step 9: “Go live” and bring digital transformation into the “business as usual”
This is the most critical moment as the business should start operation in the new model.
Of course, the presented methodology is only the high-level overview of various frameworks. Life is much more complex and unpredictable. What is remarkable is that the original version of this 9-step method I have developed for a data lineage business case is described in my new book “Data Lineage from a Business Perspective.” It means that digital transformation and data management have a lot in common.
We discuss this relationship in Part 2 of this article.
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