Digital Transformation Explained: 3 Steps to Get Started

Digital transformation: it means different things to different people, but it’s really not that hard to understand. It really boils down to three main ingredients. First, modernizing old technology. Second, embracing software-driven value, and third, human behavior.

The first one is usually the most expensive, the second one requires the most creativity, and the third is usually the most difficult. Let’s take a closer look at each.

#1: Modernizing Old Technology

Most organizations interested in digital transformation don’t have the luxury of being a small startup who can design their business systems from scratch. No, most of us work at an organization that’s really large and has been around for a while. So, there’s usually a lot of legacy technology, business process, and organizational structure that’s either aging or downright archaic.

Have you ever worked on a team that relies on some old piece of software, or an old database, or mainframe hardware, or some other old system that not many people understand well, but it’s too important and complicated to easily and quickly replace?

We don’t like these pieces of technology, but we often can’t wean ourselves off of them. If that sounds familiar, you’ve been there. Fortunately, it’s cheaper and easier than ever to re-factor these systems in a way that doesn’t disrupt operations and the business. Whether it’s one particular piece of aging software or hardware, or an entire data center migration to the cloud, technology modernization is critical for every enterprise. 

#2: Software-Driven Value

It’s a cliché that “software is eating the world,” but it’s true. The application layer is the new frontier – whether you’re building an advanced analytics practice, a new product platform, or automating work, software, and technology services are where things get done. These services are also replacing a lot of traditional business functions. Something that used to require expensive infrastructure or a complex supply chain, now can be done with a well-designed IT system. Just as so many services and digital capabilities now live in your pocket on your phone, the same thing is happening to our data centers, supply chains, and business models. And even traditional projects and products still depend ever more heavily on your ability to leverage applications.

As disruptive as this is, it’s actually great news, because it’s an economic game-changer for organizations. Instead of having to spend money and time mining for iron ore or drilling for oil – the only raw material you need to create value are good ideas…and maybe some good facts to go along with them. But managing the changes associated with this economic shift can be challenging. Part of that challenge is that unlike traditional products or raw materials, software and its ingredients are completely invisible, and it can be hard to measure and manage something that’s hard to see. Separating good ideas from bad and scaling the ideas that work, those are more challenges.

But even if it’s hard, it’s essential that organizations accept the fact that software and technology services are the way of the future when it comes to producing value. And when you get it right it’s nothing short of amazing. Of course, the ideas and creative process required to build, deliver, and support good technology services all rely on good teams and good people.

#3: Human Behavior

Like I said, this one is the toughest. It’s also the one that gets talked about the least. After all, *digital* transformation is about technology, right? Well, only partly. Remember all that legacy technology we had to modernize? The same concept applies to human behavior. Old ways of working and “legacy” practices are usually the biggest hurdle to success with digital transformation. People invest in new tools and technology all the time, but after a year or two are left wondering why the transformation isn’t working.

To effectively use new technology, you must adopt new behavior patterns. By now, these patterns are well-known – agility, continuous workflows, DevOps, security at the source, blameless culture, automation, cross-functional teams – the list goes on. But these behaviors don’t happen on their own. And for the typical organization, they can look a lot different from what’s being done now. 

You might think new behaviors are hard because people don’t like to change, and old habits are hard to break. That’s true, and it is definitely part of what has to be addressed if you’re going to successfully transform. But the larger issue is usually how workflows through your system, and how that system is arranged. Many teams have never taken the time to visualize or measure how different projects, departments, and roles interact with each other. When you do, you often find enormous conflicts and inefficiencies. Again, this is usually the product of historical conditions and legacy momentum. Business models and management techniques that are relics of an earlier industrial era don’t work so well in the digital age. And when people are compelled to work in a system of poorly designed incentives, even if they do their very best job – chances are they won’t produce the results you want.

You must get incentives right. You must figure out alignment. You must cultivate great teams. You must keep great talent. Without these, the best technology in the world isn’t going to work for you.

And there you have it. Digital transformation in three easy steps. Well…not easy, exactly, but…at least you know what you must do.

Chris Knotts
Chris Knotts