As this Google Trends graph shows, internationally there has been a surge of interest in ‘digital transformation’ over the last year.
And you can understand why. Even in New Zealand we are seeing many well known companies exploring or making substantial changes to remain relevant in a world that is increasingly changing on the back of digitisation. Take for example Telecom’s transformation to Spark and its increased focus on consumer digital services such as Lightbox and Spotify. Similarly, the proposed mergers of Sky TV and Vodafone as well as Fairfax and APN are likely influenced, at least in part, by digital disruption impacting the business models of the respective organisations involved.
The growing consensus is that many organisations need to digitally transform their businesses or face disruption. But, discussion, trends and hype aside, I was interested to know what we are actually seeing on the ground in New Zealand and what role IT is playing in the organisations that are going through digital transformation.
What do we mean by digital transformation?
There are of course many definitions of digital transformation which can lead to confusion.
Many see converting a manual activity into a digital one, such as going paperless or replacing paper forms with electronic ones, as digital transformation. Wikipedia reinforces this view, in one section stating “digital transformation may refer to the concept of going paperless”.
Progressively though, there is a view that digital transformation needs to transform the business and even the business model in a fundamental way and that it must be focused on customers and the customer experience. It is more than simply digitising existing approaches. Take for example the definition from the Altimeter Group:
“The realignment of, or new investment in, technology and business models to more effectively engage digital customers at every touchpoint in the customer experience lifecycle.”
The MIT Center for Information Research (CISR) further refers to designing digital organisations to rethink their business strategies based on the proliferation of digital technologies that create significant threats and opportunities. These digital technologies include social, mobile, analytics, cloud and the internet of things (SMACIT).
Getting a Wellington perspective on digital transformation in New Zealand
To get some insight I spent some time with Ray Cooke, our Lean and Agile business transformation coach at Equinox IT, who has a background in Software Development Management roles. Ray works with various client organisations in Wellington to help IT and software development teams adopt new ways of working to enable transformation.
I asked Ray some probing questions…
How common place is digital transformation in New Zealand?
Ray: "Most organisations that I am working with at the moment are involved in digital transformation in one form or other."
"Many of these organisations are engaged in the simpler level of digital transformation, converting paper forms into electronic ones and automating existing manual business processes."
"However, some organisations are introducing or re-engineering existing technologies in the context of business change programmes, some of which are fundamentally changing their business models. These changes are much more disruptive and what we consider to be at the more serious end of digital transformation."
What role does IT play in helping New Zealand organisations with digital transformation?
While digital transformation initiatives are increasingly being driven by business units rather than IT departments, Ray felt that the IT function of New Zealand organisations had a fundamental role to play.
Ray: “IT departments are generally where an organisation’s digital capabilities lie. For some IT departments this capability might be entirely in-house while others are a mixture of in and out-sourced arrangements.”
“The obvious role IT departments play is in the implementation of the technology changes involved in the transformation, however, more successful digital transformations will have IT departments heavily involved from the outset in assisting in the definition of the digital transformation programmes and strategies.”
“In the current climate, having a digital strategy is a cornerstone of any organisation’s business strategy, but implementing that strategy will rely heavily on the organisation’s operational and digital delivery capabilities, both of which will be at least partly, if not entirely, in the hands of IT.”
What project work practices are required for digital transformation?
There is a growing view that traditional project approaches are too slow in a fast changing world and this was a perspective reflected by Ray.
Ray: “With the ever increasing pace of change in the world there is greater and greater emphasis on an organisation’s need to respond to that change, whether the organisation is private, public or in government. Being able to respond to change relies on an organisation’s ability to change direction.”
“The more frequently projects can deliver through to customers, the more easily we can change direction without wasting time, effort and money. We have the knowledge, skills and technology in the IT sector now to run projects that deliver high quality IT systems continuously – quite literally several times a day if we want to.”
“We need to run our projects in such a way as to take advantage of those capabilities. This is what those buzzwords (lean, agile, devops and lean startup) are all about.”
Build capability that enables organisational Agility
While many organisations in New Zealand are undertaking what they consider to be digital transformation initiatives, many are using IT to make improvements and efficiency gains to the current way of doing business. A smaller set of New Zealand organisations are digitising in a way that fundamentally transforms their business or business model.
IT must play an important role in digital transformation, and involving IT right from the digital strategy should lead to better outcomes than simply using IT for implementation of the technology aspects of the strategy (although the latter is still fundamentally important).
Finally, if an organisation has a digital strategy, and it should, then it must subsequently be able to implement and deliver on that strategy and do so in much smarter, iterative and responsive manner suitable to today’s conditions. The biggest imperative for IT and business delivery teams today is building the capability to work in ways that enable the organisation to be truly Agile so that it can rapidly and successfully transform to continuously meet the needs of its customers.
In a future post we will look at an Auckland perspective on digital transformation in New Zealand.
Brendon Livingstone is Equinox IT’s Marketing and Communication Manager and Ray Cooke is a Lean and Agile Business Transformation coach. Both are based in Wellington, New Zealand.