Digital transformation in

2019: Lessons learned the

hard way
Many organizations have embarked on the journey of digital transformation
over the past several years to sustainably reinvent themselves. The first
lessons learned have been challenging to isolate and capture -- until recently.
Here's what we know so far.
By Dion Hinchcliffe for Enterprise Web 2.0 | October 11, 2018 -- 12:11 GMT (20:11 GMT+08:00) | Topic:
Digital Transformation

Perhaps the biggest surprise of all about digital transformation isn't that large scale
change is hard. It's safe to say that is now well established and widely known. It's how
to do it repeatably and sustainably that appears to be the key.
We've also learned along the way that digital change is often more about the people
involved and affected by it than it is about the technology.

Also: 10 vendors enabling digital transformation in retail

Yet we've witnessed a growing number of challenges with technological change as
well, with the rule of thumb being the larger, older, and more distant the organization
originally was from the technology industry, the more significant the technical
challenges have been.
First, the good news: The majority of organizations have now embarked on some form
of digital transformation in the past several years. This may just be in a certain
function, like marketing or supply chain, or it might be more coordinated
transformation across functions like customer experience or digitization of products
and services. Whatever focus it takes, the challenges and top issues have increasingly
begun to form a pattern across types of transformation as well as industries and
geographies as a whole.
Digital transformation: A top business priority for
2019
We'll get to those patterns shortly. First, let's take a brief look at the current
motivations for engaging in what is otherwise a difficult, expensive, disruptive, and
distracting activity in the first place.

On reason for all the attention: On average, most organizations believe that half of
their revenue will come from digital channels by 2020. Furthermore, the World
Economic Forum estimates that the overall economic value of digital transformation
to business and society will top $100 trillion by 2025. Other similar data are easy to
find. These represent vital macroeconomic trends that are the most significant
attainable new business potential for the typical enterprise. Any way you look at it, the
largest growth opportunities that most organizations can access now is to better seize
the white space in these rapidly expanding digital markets.
Also: Flow-based organizational design accelerates digital transformation
The latest trends in digital transformation for next year reflect some particularly hard
won lessons from the past few years, on both the business and technology sides. It's
worthwhile taking the time to understand how these insights came about, as
organizations earlier in the journey can avoid making many of the same painful,
expensive, and time-consuming realizations along the way. As they say, one useful
definition of 'smart' is not making all the mistakes oneself. Wise organizations can
potentially cut years off their efforts by understanding what those ahead of them on
the journey ultimately learned.
Here's how the business and technology trends for digital transformation (DT) are
shaping up for 2019:

Digital transformation in 2019: The business trends

THE CEO DRIVES DIGITAL TRANSFORMATION
For many years, the chief information officer (CIO) -- and then also the emerging
chief digital officer (CDO) role -- had the clear leadership role in digital
transformation. The data now shows that more digitally mature organizations now
definitively have the CEO leading it (41 percent, up from 22 percent) versus the CIO
(now just 16 percent, down from 23 percent), according to the latest data from the
MIT Sloan Management Review. This is a dramatic turnaround from years past. The
reasons behind the shift are complex and nuanced, but mostly have to do with digital
transformation now being one of the top priorities of the business as a whole.
Also: Digital transformation gut check: Sorry state or natural selection?
The CEO's ability and natural role to marshal the board to get them properly behind
the effort, as well as having the ability to commit the full attention and resources of
the entire organization behind the journey, are key factors as well. The reality is that
the CIO and CDO have purviews much more centered around technology capability
itself than around changing the people, culture, and business models of the
organization. In the end, sufficient leadership has long been the issue with digital
transformation. The CEO has ultimate responsibility for and power over it all, and
perhaps as importantly, is able to bring sufficient budgets to the table like no other
single role. Consequently, expect the CEO to take the reins for overarching digital
initiatives even more in 2019.
INCREASING EDUCATION, SKILL BUILDING, AND CULTURE
CHANGE FOR DT
Because of the focus on the technology components, the people-side of the changes
required for digital transformation often go under-addressed, yet arguably are the key
success factors. That's because the people in the organization have to carry out the
digital transformation, yet are often inadequately equipped to do so from a skill,
culture, mindset, inclination, and talent perspective. Many organizations have had
their digital change initiatives crash upon the shoals of insufficient human capability
to carry them out or an inadequately enabling environment. Currently, lack of
appropriately skilled personnel ranks in the top five obstacles to digital transformation
and is reported by 39 percent of orgs. The good news is that improved organizational
focus and improved techniques for upskilling workers to support digital
transformation have been arriving. Expect to see both more in 2019. The smart digital
leader will use the resources of HR's L&D department to help drive them.
Also: The key to digital transformation: Move customers to the center
BETTER INTEGRATION OF DIGITAL INITIATIVES
The fragmented and piecemeal efforts at digital transformation of years' past are
slowly becoming part of a portfolio of more integrated digital initiatives. That's very
much not to say they are becoming one digital transformation program. The high
failure rates of large technology and business initiatives remains as true today as ever
(about 70 percent of all change efforts, not just digital.) Experienced executives now
avoid them studiously. Yet with data showing as many as 85 percent of all enterprise
decision makers believe they have about two years to better integrate their initiatives,
there's little question that coordinated efforts across the enterprise to deliver on
consistency, shared planning, economies of scale, and a common data model are key
to moving faster and producing better results. I've argued the key lesson so far is that
loosely coupled enabling capabilities like Centers of Excellence (CoEs) and beyond
are better suited to create rich but loosely-coupled collaboration among digital efforts.
This increases speed and impact individually through coordinated smaller, lower risk
efforts that aren't very dependent on each other. Expect more top-level but lightweight
integration of digital projects and programs in 2019.
NEW REGULATION OF DIGITAL MARKETS BECOMES A
HEADWIND TO BE ACTIVELY MANAGED
Freshly arrived digital regulations like GDPR are adding considerable complexity to
many digital transformation efforts, especially global ones. While some organizations
may decide simply to ignore or abandon for now those regions with expensive and/or
cumbersome regulations, it's not possible for larger organizations with commitment to
customers and partners around the world. Expect more focus on digital regulation in
2019 and to be ready to deal with it proactively to head off slowing down of digital
projects and initiatives. One additional bright light is that many of the large cloud
stack providers, including Amazon and Azure, are already putting much of the needed
the GDPR compliance capabilities right into their offerings to build upon.
Also: What enterprises will focus on for digital transformation in 2018
ADDRESSING MISSED LEADERSHIP COMMUNICATIONS
OPPORTUNITIES
Ironically, given the leadership focus on digital transformation these days, the
majority of workers currently still do not know what their organization's plans are.
Top-down communication has been identified as a stubborn gap in ensuring that
workers are aware, coordinated, and able to actively support digital change efforts at
each level of the organization. In fact, while it's long been known that good
communication improves the success rate of business initiatives, we've learned it
remains a leading challenge given the velocity, foreign nature, and complexity of
digital efforts. We've also learned this is relatively easy-to-fix missed opportunity.
Digital transformation is a team sport that requires everyone interested and able to
execute on the vision of a more digitally responsive and engaged organization
surrounded by its rich and growing digital ecosystem. Need data for proof? One
respected study found that transformation was 5.8 times more likely to be successful
when the CEO communicated a "compelling, high-level change story." From these
lessons learned, expect executives to do better in 2019 with their communications
efforts with growing help from their corporate comms, though digital leaders on the
ground can greatly help as well through bottom-up education and reverse mentoring.
MAKING DIGITAL TRANSFORMATION SCALE BETTER YET BE
MORE SUSTAINABLE
One key lesson is that the fastest way to get change to happen is to work with those
more interested and motivated in doing so. The change agents discussion in digital
transformation has been a consistent one with the many CIOs and other digital leaders
I've spoken with over the last year. Cultivating and tapping into them at scale is one
way to avoid the well-known project burn-out of overly centralized efforts, that tend
to peak and valley. And they don't scale nearly as well. Other emerging techniques for
scale and sustainability include self-service partner onboarding and developer
networks with APIs, external hackathons to trigger open innovation, and new and
improved low-code platforms for citizen developers and data scientists.
Also: Leading a successful digital transformation
Digital transformation in 2019: The tech trends
BETTER STRATEGIC ORGANIZATION AND POSTURE OF
ENTERPRISE DATA
One of the major issues holding back many initiatives, and some may even call it a
form of technical debt, is the inconsistent, fragmented, duplicated, and siloed data
landscape in the typical enterprise. I've long argued that organizations must build a
stronger data foundation to compete going forward, taking time up front to prepare, in
order to be able to go fast later. Digital transformation successes such as the one at
Nordstrom that focused on loosening parochial data ownership and encourage
enterprise data from anywhere to improve the customer experience underscores this.
While master data management and other enterprise-wide efforts tend to boil the
ocean, I believe it's now easier than ever to incrementally create a trusted and secure
data foundation for digital initiatives to build upon and execute against, with
approaches like open enterprise microservices offering one of the most viable long-
term strategies at the moment. I expect to see this become a much larger trend in
2019.
PRIORITIZING AND INVESTING IN REDUCING TECHNICAL
DEBT
IT budgets have been concealing growing amounts of technical debt in recent years,
and the overall accumulation is hindering digital transformation in most organizations
through a well-meaning but misguided legacy patchwork of shortcuts, neglected
system upgrades, and expedient solutions that wind up as technology dead ends. I've
gone as far as to say such digital off-balance sheet liabilities are one of the leading
obstacles for the CIO when it comes to digital transformation. The true size of the
debt should be assessed and understood, and the CEO and board should pay it down to
ensure better success with digital transformation.
Also: Digital transformation: think globally, act locally
UPDATING AND REFINING CLOUD STRATEGY
Upon some combination of cloud services is where virtually all digital transformation
efforts will have to flourish. Yet, despite a half-decade or more of investing in various
cloud capabilities, from private to hybrid to multicloud, enterprise are often no closer
to a clear future strategy today than when they started. This is partially no fault of
their own and is due to the rapidly evolving public cloud landscape, turning into a
bruising three way competitive battle between Amazon, Microsoft, and Google, with
new players likely to make it exciting along the way. With up to 80 percent of
enterprise already multicloud, figuring out what to transform upon is more complex
and challenging than ever. Enterprises will be grappling with much more complex and
dynamic, even in real-time, multicloud environments in 2019, which some including
myself, have called the future of IT. The reality is that organizations are often looking
for a single vendor to make it all work, even though that's no longer a possibility. For
2019, organizations will increasingly look to what I call digital transformation target
platforms to provide a primary cloud vendor that has a business and technical
blueprint to considerably accelerate digital change, along with multicloud
management tools to deal with the rest.
DELIVERING ON DIGITAL CUSTOMER EXPERIENCE FASTER
AND BETTER
Perhaps the topmost priority of most major digital transformation efforts is to improve
the customer experience, which is the leading discriminator today when it comes to
successful growth and customer retention. However, organizations have a long way to
go when it comes to scaling up their digital experience factories. However, a new
generation of experience architectures, tools, and techniques is making it possible to
go much faster to create customer, partner, and workplace experiences in an
industrialized fashion. Organizations will have to retool and restructure to realize this,
however, which will take some time. Consequently, I expect to see a great deal of
activity and investment in digital experience in 2019 given the business imperative.
SYSTEMATIC EXPERIMENTATION AND ADOPTION OF
DISRUPTIVE EMERGING TECH
In 2019, the promise of 5G will become a new leading priority, followed by artificial
intelligence (AI), machine learning, and IoT, as well as blockchain and distributed
ledger technologies. New technologies will emerge in 2019 to augment the vast and
growing list of emerging tech that the enterprise must somehow absorb to stay
relevant. Organizations are finally learning to experiment quickly, often with partners
and startups and using a powerful array of emerging techniques, begin pilots and
deploy promising technologies rapidly to enable the business. This trend will be
pronounced in 2019 as organizations get systematically better and faster at fielding
emerging technology, especially by addressing many of the items elsewhere on this
list.
Also: Digital transformation: Three ways to get it right in your business
MORE ORGANIZATIONS BET ON ANALYTICS TO THE
HIGHEST DEGREE
While the truly data-driven enterprise is still a bit of a ways off until more things are
connected (resulting in the quantified enterprise), I see a tremendous interest in data
science this year in most organizations as the dawn of an oft-predicted but now
arriving new data-driven organization seems among us. This is confirmed through the
latest research. Spending on analytics, machine learning, and data science is
increasing rapidly, with 60 percent of CIOs currently growing their budgets for it. I
expect a growth in analytics Centers of Excellence in 2019 to provide the tools and
teach the organization management data science, as well as intensive hiring and skill
building for talent, especially to support digital transformation efforts.

Make no mistake: Addressing each of these digital transformation issues is a tall

order, even for very well resourced organizations. Yet failing to do so will leave vital
competitive gaps open while missing on the full measure of the very real levels of
revenue and profitability that more assertive focus on these top digital transformation
opportunities and challenges would gain the typical organization next year. It's one of
the reasons why a new mindset is required for digital transformation, to solve
problems in digital native ways that traditional IT is not prepared or able to.
For many organizations, it's also now budget season for 2019. This means it's time to
ensure your organization is focusing on funding for the key items and strategies above
that will deliver lasting improvement to your digital transformation efforts.
Also: How digital transformation is reshaping the IT budget
Finally, I often comment on how much we don't learn from others' journeys in the
digital space. To better succeed, digital leaders should share their lessons learned and
take lessons from others. It's certainly an era fraught with tremendous opportunity and
vast challenges, yet by pooling our knowledge, I believe 2019 will be the best year yet
for digital change, transformation, and modernization efforts. Let's hope we largely
address most of the issues above for 2020.