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Technology

Orchestrating a Digital Transformation


At a recent FEI Committee on Finance & IT meeting, Deloitte Partner and TM Forum Chairman David Pleasance raised the question: Are you digitizing your old business or creating a new digital business?

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Many companies make the mistake of asking “How do we change?” when they should first be asking “Can we change?” The pace of the market is accelerating with much shorter cycle times. A great strategy executed too slowly creates little value. Businesses need to embrace agility not as a business buzzword but as a core tenant that allows for faster decision-making with greater risk tolerance. There needs to be a new approach to change management.

Digitizing your old business might involve applying digital technologies to various aspects of the enterprise and introducing digital elements to the customer experience. While these actions may improve business effectiveness, they preserve the current business model and is incremental not transformational.

MIT Sloan Management Review and Deloitte 2015 global study of digital business found that maturing digital businesses are focused on integrating digital technologies, such as social, mobile, analytics and cloud, in the service of transforming how their businesses work. Meanwhile, less-mature digital businesses are focused on solving discrete business problems with individual digital technologies.

At the recent FEI Committee on Finance & IT (CFIT) meeting, hosted by Johnson and Johnson, Deloitte Partner and TM Forum Chairman David Pleasance raised the very important question: Are you digitizing your old business or creating a new digital business?

To achieve a digital business, the focus needs to be on strategy, not technology, as this is what drives digital transformation. To be sure, as Pleasance points out, true digital transformation is difficult and complex. We are not talking about a new business concept but a business revolution with new operating environments, value propositions, organizational structures and business models (ecosystems & alliances). Creating a digital business encompasses reimaging the business based on an understanding of core competencies, customer requirements and competitive differentiation. There are completely different capability requirements; not just new technology requirements but different skill sets for the new digital economy.

Collaboration is of critical importance. Success in the digital world requires collaboration, across many dimensions. While collaboration is a critical element that must be embraced, it often represents a significant cultural departure for many organizations and can significantly slow down digital transformation progress if not anticipated and carefully managed. Three key areas for collaboration include:

  • Customers – Enriching the customer experience through bundling of products & services delivered on a value sharing basis can provide considerable commercial opportunity
  • Value Chain – Establishing ecosystems to assemble the elements of the customer offering can both strengthen the value proposition and shorten delivery cycle times
  • Enterprise – Breaking functional silos and collaborating with a common market facing orientation is critical

Hand-in-hand with transformation is innovation. Innovation, in all forms, is not only a critical cornerstone of digital transformation, but must be part of the fabric of the new digital organization, not just a one-time process. Consider new sources and approaches to innovation to ensure and accelerate its development and de-risk the process. From an operations perspective, post transformation businesses require an “innovation engine” to ensure innovation is continuously refreshed and is in alignment with the changing market. It must penetrate deeply across the organization and within the culture – not a corporate “function”. Collaboration through a co-sourcing (or outsourcing) model can yield superior results; “faster, better, cheaper”.

As highlighted earlier, digital businesses require a radically different talent strategy and skill set. Transition from the traditional business can be complex and difficult… but critical to success. The talent strategy should focus on:

  • Leadership
    • From the top; CFO/ CTO/ CIO as business partners
  • Capabilities 
    • Organization, culture  
    • Talent processes, retooling (internal academy)
  • Sourcing 
    • New sources, new relationships
  • Rewards & Incentives
    • Alignment with new business models – delivering measurable results with shared accountabilities

Finance plays a crucial role in digital transformation, creating new revenue models based on value (and risk) sharing. There is increased accountability for the delivery of results. There are also new capital structures with “asset light” business models that require less capital investment and provide a higher ROI. These new models and structures allow for greater financial agility in responding to new opportunities and changing market conditions and can provide a meaningful lift in valuation when combined with resilient digital business models.

Finance leaders must become business leaders. Their role continues to shift and with great urgency. Shaping digital transformation embraces vision, architecture, execution, and operation. There must be a lead from the front mentality. Some attributes for success:

  • Pace, urgency, agility
  • Leadership development
  • Innovation
  • Collaboration management
  • Commercial acumen
  • Risk tolerance

Bringing it all together is all about Program Orchestration. It takes a symphony. Program Orchestration is really a new role with a new set of required capabilities. The old execution model in many cases is no longer sufficient. The new execution model requires a much more diverse set of capabilities

  • Advisory
  • Innovation
  • Technology
  • Talent
  • Management
  • Finance

In conclusion, collaboration is critical. Look beyond your enterprise boundaries and embrace disruption. Consider strategies that assume the current enterprise is unable to move radically and quickly enough to keep up with the market. Remember that digital transformation is all about the people. To that end, seek an execution partner, internally or externally, that can facilitate the required program orchestration, including the assembly of the necessary players. Think big, start small and scale rapidly.