How to avoid the pitfalls of a digital transformation program

Laurence BuchananIn most of the companies I have worked with, the CIO has not had overall responsibility for digital transformation. More often than not, that responsibility has fallen either to the CMO or to a newly created chief digital officer (CDO). Research from Gartner suggests that this is a pattern and that by 2017 CMOs will be spending more on IT than CIOs.


Indeed, many CIOs today find themselves caught between two sometimes conflicting objectives. On the one hand, they are tasked with keeping the mission-critical systems of the company up and running. On the other, they need to respond to increasing demands from line of business leaders for innovation enabled by digital technology.

Today, digital technology moves at breath-taking speed. A new technology can be adopted by a critical mass of 50m users in under 60 days, creating a brand new channel for marketing, sales and customer service. Many line-of-business owners (CMOs, CSOs, CSDs, etc.) undoubtedly feel frustration that their IT departments are too slow and that they work in planning cycles that feel more like 60 months than 60 days … I often hear the phrase “all our current IT capacity is being focused on the never-ending (insert vendor) ERP upgrade.”

The barrier to entry within digital technology is relatively low, so strong temptation exists for line-of-business owners to work outside of IT. A decent creative agency will build an app for anything between US$10k and \us$100K, social networking accounts cost nothing to set up, apps like Prezi or Dropbox can be downloaded and used outside corporate IT and social media monitoring can be bought at commodity prices. Even innovation and funding can be outsourced to the crowd through networks like Kaggle, Kickstarter and Quirky.

The challenge, of course, is that driving success with digital technology (taking advantage of the opportunities that it presents whilst also mitigating the threats) demands left and right brain alignment and the breaking down of silos. Today, many digital programs suffer the symptoms of being siloed in their thinking. This can result in significant risks and wastage. I wrote about some of these in a recent post called 10 bumps in the road of a digital transformation, but to repeat just a few of those most relevant to the CIO:

  • Regulatory threats – a cool, creative app that fails to adhere to data privacy rules within the EU could (from 1 January 2015) cost 5% of global group turnover (see EU data protection laws).
  • Technical debt – the buildup of legacy code over time
  • Duplications and diseconomies of scale – the costs of online advertising spend, SaaS subscriptions, interactive agency fees being duplicated across multiple departments or business units can now run into tens of millions of dollars.
  • IT integration – behind every great online ordering app sits a lead-to-cash process. There is a significant knock-on impact of decisions that are made in the front office with no regard for the existing IT estate and businesses processes within, for example, ERP, supply chain or tax functions.
  • Cyber attacks and the potential for employees to leak sensitive information are now considered a top 10 boardroom issue by most companies.

So what should the CIO do? Some CIOs may feel more comfortable in their former role, focused on maintaining the current stack, but I would argue that it’s now impossible to ignore the impact of digital on the vast majority of businesses. Other CIOs may welcome the opportunity to reinvent their role and reposition themselves as leading the digital transformation.

Whatever path the CIO takes, engagement with other stakeholders is critical. Digital transformation is best approached as a cross-functional initiative. Frankly, I don’t really think it matters whether it is the CIO or the CMO or the CDO leading the charge, as long as they approach digital in a holistic and joined-up way, rather than simply experimenting with digital tools and tactical initiatives. In general, many would do better to stop worrying about budgets and reporting lines and start worrying about customers and competitors.

More pragmatically, there are a number of other things that a CIO can do to add value to a digital transformation program including:

  • Adopting a customer-centric way of prioritizing technology requirements, e.g., customer journey mapping
  • Gathering the existing digital technology capabilities of the company (many people are amazed by how much has already been done in pockets and silos)
  • Assessing the costs, risks and duplications of existing digital technology investments and taking action to address them
  • Understanding how much resource is currently being spent on maintenance versus innovation and starting portfolio planning to reallocate budget accordingly
  • Publishing playbooks, policies and accelerators on, for example, BYOD, security, social network usage and contracting with SaaS vendors
  • Allocating resource early to accelerate and incubate digital initiatives
  • Dealing proactively with any risks

We are long past the stage where digital can be owned by one silo of the business (whether IT or marketing). Digital technology impacts a company from top to bottom, from strategy to operations, and most companies need to frame their response accordingly. The CIO has a crucial role to play, regardless of whether they see themselves as a back-office player or as a transformation agent.


2 thoughts on “How to avoid the pitfalls of a digital transformation program

  1. Bravo Laurence. Couldn’t agree more with the sentiment and conclusion you’ve drawn.

    Increasingly there is the challenge of accelerating the transformation beyond the traditional pace of change. John Kotter’s work on how to accelerate change is worth a read (http://hbr.org/2012/11/accelerate/ar/1). Among other things he recommends the creation of a second operating model to deal with transformation. Staffed with volunteers from across the business, this group are unencumbered with the old school approach to business change.

    This isn’t to suggest that CXOs are handing over control to a band of mavericks. Simply they need to authorise and provide steer to an agile, motivated team of high performers from across IT, marketing, operations and wherever else to deliver (not just theorise about) major transformation.

    David

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