Tag

Digital Transformation

Digital Initiatives Yielding Sour GRAPES? Gaps in Reality and Promises | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

GE’s search for a buyer of GE Digital, its apparent “non-core” business, and UBS’ sale of its Smart Wealth digital wealth management platform are causing the old guard to rejoice and claim that digital businesses are bogus and hogwash. Even Everest Group’s research suggests that 78 percent of enterprises fail to scale their digital initiatives, and don’t realize the benefits they envision.

It is easy to naysay the naysayers. But these developments do merit a discussion. Many enterprises are investing in digital transformation initiatives, and they have a lot to lose if they don’t do it well.

So, what is plaguing enterprises’ digital transformation agenda?

Not Moving the Revenue Needle

Most of the industrial enterprises we engage with as part of our research believe that, even in the coming two decades, 80-90 percent of their business will come from their so called “core” products. Though they acknowledge that their core products are not static and continue to be increasingly connected, software-driven, and service oriented, the incremental impact on revenue is not yet clear. Their business modeling and simulations provide numbers that are sufficient to fund digital initiatives, but are insufficient to move the revenue needle.

Digital Fatigue

Enterprises are realizing they have overdone some of their digital initiatives. Because business impact continues to be hazy, leadership is asking difficult questions. Our research suggests that 45 percent of enterprises fail to get funding for digital projects as the decision makers and purse string holders consider them vanity pursuits. Moreover, even strategic initiatives are struggling as the return on investment horizon is becoming longer as time progresses. Leadership is losing patience.

Challenges in CX to Business Attribution

Our research suggests that 89 percent of enterprises believe digital initiatives improve customer experience (CX). However, they struggle to attribute this improvement to business success. Therefore, business success becomes a secondary metric for such initiatives. Moreover, many enterprises confuse customer service – e.g., contact centers – with customer experience, which thwarts their ability to drive meaningful digital transformation.

We discuss another major reason for the gaps in digital promises versus reality in our research on digital operating models. Various enterprises assumed that digital transformation would create completely different businesses or business models for them. A prime example for comparison was about Google, a search and advertising company, getting into autonomous vehicles. Another was Amazon, an online retailer, getting into cloud services. These enterprises also assumed that they would disrupt their entrenched competition in their own and allied industries, just as Uber and Airbnb did.

Related: Important Lesson For Companies Undertaking Digital Transformation

However, I believe enterprises need such a dose of reality in order to separate the chaff from the wheat. As tech vendors, consultants, and system integrators brand everything digital, enterprises need a solid business case for digital transformation lest they spend precious money on worthless pursuits.

Enterprises’ needs of the hour are to develop a realistic digital transformation plan, rely on incubating multiple projects, be willing to fail fast, and leverage broader industry ecosystem. They must also remember that technology disruption always come with high risks.

Not acting is not an option, as the cost of doing nothing significantly outweighs the initial failures your enterprise may experience. Failing today is better than becoming irrelevant tomorrow.

What has been your digital journey experience? Please share it with me at [email protected].

Are Companies Making Progress In Digital Transformation? | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

The term “digital transformation” is now ubiquitous. Nearly every company’s leaders and board of directors see the potential of digital transformation to create new value and improve their competitive positioning. They are investing in building out capabilities to transform their business. Unfortunately, some companies build digital capabilities but don’t generate value that changes their competitive position. So, are businesses really making progress in these investments? Where are we in efforts to succeed at digital transformation? Here’s my view and what I believe must happen next.

Read more in my blog on Forbes

Important Lesson For Companies Undertaking Digital Transformation | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

By its nature, digital transformation is difficult as it’s fraught with the complexities and magnitude of change. The reason so many digital journeys don’t succeed is because the company fails to implement the operating model necessary to make the digital platform work. By operating model, I mean organizational changes, policy and process changes, talent model changes and the go-to-market changes.

Why do companies often fail to implement the operating model that’s necessary for the digital platform they build? Simply stated, they take a fractured approach to the digital journey. Although the executives say the operating model is changing, they don’t build a common vision that allows it to happen.

Read more in my blog on Forbes

IDC Lists 3 Stages of Intelligent Automation Value Chain | In the News

By | In The News

The Everest Group Banking BPO Annual Report 2018 noted that 85% of banks surveyed as part of the study said digital transformation is a priority in 2018. However, only 19% are optimizing or integrating their front-, middle-, and back-office for true digital transformation.

One innovation that is garnering attention in this digital race is robotic process automation (RPA) with its promise of automating certain processes to allow for improve customer experience, greater operational efficiency and a greater sense of accomplishment for employees.

Read more in Enterprise Innovation

How Your Company’s IT Group Must Change To Support Digital Transformation | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

For the last five years, companies experimented with digital transformation. They are now convinced that the benefits are there and convinced that if they don’t take them, their competitors will. As digital technologies become more deeply embedded in the fabric of how companies compete, it forces IT departments to shift their role to become partners aligned with the business needs and digital transformation.

Read more in my blog on Forbes

78% of Enterprises Fail to Scale and Sustain Their Digital Transformation Initiatives. Everest Group Says ‘Old School’ Operating Models are to Blame | Press Release

By | Press Releases

New Everest Group report finds enterprises are adopting digital and seeing initial success, but struggles come in scaling and sustaining the transformation effort.

As many as 78 percent of enterprises today fail to scale their digital transformation initiative and achieve the desired return on their digital investments. Despite increasing digital adoption by enterprises and reports of initial successes, enterprises are struggling to scale and sustain their transformation efforts. According to Everest Group, a misalignment between an enterprise’s digital strategy and its “old school” operating model is often to blame.

“In recent years, enterprises increasingly have been undertaking digital transformation initiatives, leveraging digital tools to improve revenue, reduce costs and enhance customer experience,” said Yugal Joshi, vice president, Information Technology Services, at Everest Group. “Enterprises are typically quite encouraged by initial successes, but the majority don’t actualize the return on investment they envisioned in the long term. The struggle comes when enterprises try to scale and sustain their transformation initiatives. Typically, one of the biggest problems lies in ‘old school’ forms of operating models. If the enterprise’s operating model is not modernized and aligned with the digital strategy, the desired returns from a transformation initiative simply cannot be achieved.”

The following findings are also symptomatic of the all-too-common misalignment of operating model to digital strategy:

  • 73 percent of enterprises failed to realize sustained returns on their digital investments.
  • 69 percent of enterprises consider organization structure as a barrier while scaling up their digital initiatives. A complex organizational structure reduces transparency and creates silos, making it difficult for organizations to sustain their digital initiatives.
  • 82 percent of enterprises do not have a culture of collaboration and innovation. Lack of 360-degree communication channels and innovation culture leads to poor adoption of any change as the organization battles fear of uncertainty.
  • 87 percent fail to implement their change management plan for digital transformation.
  • 89 percent have a narrow scope of technology investments limited to particular products or functions. This impedes the organization-wide, long-term view required for digital transformation.

Everest Group has assessed the digital transformation success and failure cases of more than 328 enterprises to arrive at the best practices that enterprises need to adopt to transform their operating model into a digital operating model. The findings and recommendations are shared in the newly released report, “Digital Services – Annual Report 2018: Future Operating Model to Scale Digital.”

In this report, Everest Group introduces a simple “FIRE” framework that describes four key characteristics of the type of operating model needed to support digital transformation:

  • F: Fluid organizational structure—the enterprise should aim to create a self-organizing, ownership-driven and skill-centric organizational structure.
  • I: Innovative systems and culture—the enterprise should enable experiments, leverage technology, crowdsource ideas, and value the taking of measured risk as an asset
  • R: Responsive-by-design workplace—the enterprise must improve communication and collaboration and digitize internal processes
  • E: Experience-centric focus—the enterprise must move beyond siloed technology investments and identify areas across the value chain where end-to-end digital transformation efforts are required.

The report also describes in detail an approach and roadmap enterprises may use to transition to a digital operation model.

***Download a complimentary 12-page abstract of the report here.***

Advice for buying or building a digital platform | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

As digital technologies mature and become applicable, they present a tremendous opportunity for companies to rethink and rearchitect their business to create better client experience, better quality results and lower costs. These opportunities are broad and extensive. At the core of all digital transformations is the assembling and perfection of a digital platform. But companies need to better understand what’s involved in digital platform. Whether the objective for the platform is as grandiose as transforming an industry or as mundane as improving a mailroom service, many companies make a big mistake when looking to build or buy a digital platform.

Let’s consider two examples of digital platforms aimed at transforming the companies’ operations and costs. A construction company built a digital platform to improve productivity and safety of several hundreds of subcontractors. The firm used geofencing technologies and implemented RFID technology and sensors into the workers’ helmets. The technology alerts supervisors if workers enter a zone they are not authorized to enter.

In another initiative, the company built a platform to improve utilization of its materials and equipment moved to different locations and even different countries. The objectives are to increase efficiencies and better monitor the life cycle of these items. RFID technology and sensors placed on the equipment and materials is, again, a key technology in the platform.

Read more in my CIO blog: https://www.cio.com/article/3293037/digital-transformation/advice-for-buying-or-building-a-digital-platform.html

CIOs Struggle with Gap in Digital Transformation Expectations and Delivery Capabilities | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

As part of our Pinnacle Model™ methodology and benchmarking, Everest Group recently conducted a study of over 200 companies on their digital transformation readiness. The study found companies’ boards of directors typically believe digital transformation is about technology, and they typically under-estimate the cost and expect results in months, not years. Those expectations are a huge gap away from the reality challenging CIOs and senior leaders leading the digital transformation. CIOs participating in our study revealed their companies were unprepared, under-funded and under-supported as to the tools, investment and commitment required to succeed. In this blog, I’ll share how to effectively communicate to your company the requirements for digital transformation to succeed.

Why Is There a Huge Gap?

The gap between expectations and delivery capabilities is because digital transformation is fundamentally different from companies’ past experiences with transformation. The technologies are disruptive and necessitate changing the organization, talent model, mind-sets, policies, processes and procedures – basically, the entire business model. Those changes are not easy. They don’t come all at once. They’re not completely known at the outset. And they unfold over a multi-year journey.

Peter Drucker advised, “If you want something new, you have to stop doing something old.” But the depth and breadth of necessary changes and the required commitment and investment for digital transformation are complicated to explain. They are hard to understand.

The digital journey requires far more resources, support, commitment and investment than anyone wants to believe. Digital technologies also take far longer to implement than people expect. For instance, in Robotic Process Automation (RPA) technology, a company can put a robot up quickly to create process improvement; but getting significant value involves more than that. Sure, a company can automate a function. But until the executives rethink the process that the robots will perform, they cannot create a meaningful improvement or breakthrough performance.

So, it’s no wonder that the boards don’t understand the extent of what is required to successfully complete a digital transformation journey. They also don’t understand that they need to fund IT transformation at the outset so that IT can successfully support the digital transformation.

As a result, most digital transformation initiatives fail (70%, according to a 2013 McKinsey & Company study. Many participants in Everest Group’s Pinnacle study revealed that, even when they understood the journey, they could not communicate it to their board, could not get funding, could not build support for it, and thus could not drive the change necessary to get it done.

How to Communicate Digital Change Requirements to Your Company

From our Pinnacle Model study, we developed an assessment vehicle (a 30-minute questionnaire) from which your company can compare its digital readiness against the broader population and against the market leaders (the Pinnacle Enterprises™). Together with a four-hour workshop, you’ll have the tools that will allow you to identify gaps, create learnings, understand what things you could do differently to improve your company’s readiness and performance and well as build road maps that allow you to systematically mature your digital readiness.

Executives that have gone through the assessment and workshop tell us it created a great tool for communicating with their board of directors and the rest of the business about the support, resources and investment necessary to allow for successful digital transformation.

It is also a supporting budgeting tool that allows you to demonstrate the value against the cost, build support for the investment required to mature digital readiness and communicate the value that the IT organization will be able to achieve or support by increasing its digital readiness.

There’s a startling fact in the 2013 McKinsey study I cited earlier: Of the “successful” 30% that didn’t report their initiatives as failures, “success” was described as either breaking even or finishing the program but not delivering the anticipated business results. Of course, no company wants to undergo the challenge, effort, and expense of transformation only to break even or remain in the same relative competitive position.

Harvard Professor John P. Kotter’s study of 100 companies that underwent transformation initiatives found more than 50% failed in the first phase (getting organizational commitment and cooperation for the initiative). The Pinnacle assessment, workshop and communication tools are very helpful in addressing these issues.

Where Most Companies Go Wrong In Digital Transformation | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

Many companies’ senior leaders and board of directors believe a company can buy digital technology, implement it and get the benefit of it in a few months. That’s an illusion. Because of the depth and breadth of change required to succeed, that belief is not realistic. The record of studies on digital transformation indicate a high failure rate, with a notable 2013 McKinsey study finding that 70% fail. That is a lot of wasted time, money and unmet expectations. In investigating why digital transformation often fail to meet expectations, I find several factors contribute to the failures. However, I believe the biggest problem is the mind-set. This is where most companies go wrong.

Read more in my blog on Forbes

85% of Banks Claim Digital Transformation as Priority, But Most Are Merely ‘Digital Washing’—Everest Group | Press Release

By | Press Releases

Banks are increasingly adopting automation, cognitive/AI, analytics and blockchain, but too many banks mistake digital projects (mostly in the front-office) for digital transformation

Everest Group reports that 85 percent of banks have digital transformation implementation as a priority for 2018, driven by the need to find efficient ways to address challenges in the industry such as cost pressures, eroding top lines, uncertainty and instability in the geopolitical environment and decreasing customer satisfaction. Unfortunately, in the rush to find digital solutions, many banks are mistaking digital projects for digital transformation.

According to Everest Group, 81 percent of banks are implementing digital projects focused primarily on their front-offices; only the remaining 19 percent are actually going for true transformation by optimizing and integrating their front-, middle- and back-office operations.

“Those 81 percent of banks who have only invested in front-end application of digital technology are engaging in what we call ‘digital washing’—claiming transformation achievements when they are in fact far, far away from true transformation,” said Manu Aggarwal, practice director at Everest Group. “True digital transformation requires connecting the dots between the front-, middle-, and back-office processes to achieve key business objectives. Moreover, it is not an isolated implementation of technology. Rather, it’s an ongoing process where changes in technology and alignment to goals need to be continuously checked.”

In examining the digital transformation strategies within the banking industry, Everest Group identified the following trends:

  • Strengthening competitive position, building market share, acquiring and retaining customers, and generating cost savings are some of the major factors for adopting digital technologies.
  • Market facing front-office processes lead the demand for adoption of digital services, mainly targeting customer experience.
  • Some of the key levers of digital adoption include Automation, cognitive computing and artificial intelligence (AI), analytics, and blockchain.
  • While the adoption for automation, AI and analytics is primarily driven by lending, retail banking, and cards and payments, most activity in blockchain is happening on the commercial banking side.

These results and other findings are explored in Everest Group’s recently published report: Banking BPO Annual Report 2018: Digital Transformation or Digital Washing: Looking Beyond the Hype. The report addresses digital washing and the key considerations for successful digital transformation. It also examines the levers of digital adoption within the banking industry, with an emphasis on automation, AI, analytics and blockchain.

***Download a complimentary 11-page abstract of the report*** (Registration required.)