In today’s economy, digital business transformation is not an option—it is business imperative. Many enterprises develop a false sense of transformation security by running isolated digital projects and change initiatives that are not strategically transformational. Business leaders must recognize the fundamental difference between mere change and transformation before they can lead their organizations on the journey toward authentic digital transformation.
Eighty-five percent of enterprise decision makers say they have a time frame of 2 years to make significant inroads into digital transformation or they will fall behind competitors and suffer financially.1
Fifty-six percent of chief executive officers (CEOs) say digital transformation has led to increased revenue and profits.2
While the mandate to digitize and transform is unquestionable, leaders frequently ask, “How and what do we transform?” The COBIT 2019 framework can answer these questions and help leaders not only to remove barriers, but also sustain strategic digital business transformation.
What Is Digital Business Transformation?
Digital business transformation is not about getting an organization to use a specific set of new technologies; rather, it involves understanding technology and how to use it provides value and new experiences for customers, partners, stakeholders and employees. It is about the organization’s ability to react quickly, utilize new technologies and procedures successfully, and thrive now and in the future.
“When a snake sheds its skin, it changes; when a caterpillar becomes a butterfly, it transforms.”3 Simply stated, change is focused on improving the past or the current state while transformation is forward-looking and changes or creates the future. Even though change is good, it is only a better version of the past. There are some dangerous drawbacks for organizations that fall under the illusion of transformation when, in fact, they have only implemented changes. Until business leaders, governing boards (i.e., boards of directors [BoDs]), executives and senior management understand the difference between transformation and change, they will perpetuate the illusion of transformation when, in actuality, they are only changing the past. Digital business transformation is the process of leveraging or integrating digital technology into a business—a transformation that can impact technology, culture, work environment and more. Uber for example has been able to digitally transform the taxi industry by leveraging the power of technology. Other examples are Airbnb in the hotel industry, and Skype and WhatsApp in the communication industry, just to mention a few.
Misconceptions of Digital Business Transformation
There are many misconceptions about digital business transformation. Some examples include:
- Digital business transformation can be achieved with the old mind-set and business mode—This misconception is the most perplexing because the word “transform” implies that a business process or product is no longer what it was before. A business model is an organization’s plan on how to make money or profit. A business mind-set is understanding strategy and implementing it into your business practices. A new business mind-set is doing something new (strategically) to create something different. A new mindset seeks out opportunities in their market and other markets, which can be exploited. It also remains acutely aware of potential disruptors, and how to respond to them. It is an open mind-set that adapts well to rapid transformation, and to challenges that organization might not have faced before. In today’s digital economy, organizations that want to be competitive must include digital in the heart of their business model, i.e. must have a digital business model as well as a new business mind-set in order to thrive. For example, the traditional taxi industry has been struggling to maintain high standards at low prices. Players in this industry believes (old mind-set) the taxi industry will continue to enjoy high prices and low standards (business model) and no one saw Uber coming with a new mind-set and new business model. Uber’s business model (new business model) involves collaboration with drivers who have access to a car and who want to earn money and passengers using the platform. This model uses capacity more efficiently than traditional taxis by enabling drivers to benefit from a larger share of working time and miles driven. It then coordinates drivers who offer a highly scaled and distributed transport platform. Uber empowers users (people who want to go somewhere) to book its drivers via a mobile application. Uber came with a digital business model and a new mind-set by creating a platform for drivers and riders. Transformation can only be achieved with a shift in mind-set and business model.
- Organizations need a big budget to start digital business transformation programs—Organizations with modest budgets can fund digital business transformation. Many examples indicate that big-budget digital business transformation projects eventually fail, while those undertaken with small investments in critical areas not only succeed, but also last. One example of a big-budget project failure is the British Broadcasting Corporation (BBC). In 2013, the BBC cancelled its Digital Media Initiative (DMI), which was meant to fully prepare the BBC for the on-demand digital world. The project had a budget of US$162.4 million.4
- Everyone in the organization understands digital business transformation—Experience shows that understanding varies across the enterprise regarding the focus, extent and purpose of digital business transformation programs. It is possible that everyone within an organization has a slightly different definition when it comes to digital business transformation and the focus, extent, and purpose of embarking on it. This disparity is one of the main reasons for the failure of programs. It is important for the leadership of an organization to clearly define and address this to achieve universal understanding at the enterprise.
- Business leaders often stick to what they know and what their organizations do well—Being the strongest or largest player in an industry no longer guarantees success in today's global marketplace. Remember: “What got you here won’t get you there.”5 When organizations fail to step out of their comfort or success zones and step into the transformation zone, they risk missing opportunities and becoming obsolete in an ever-changing and competitive world. No organization is immune to disruption. Motorola, Kodak, Nokia and Blackberry are examples of organizations whose business leaders failed to step out of their comfort zones. Today, many of the products for which these organizations are known have become almost obsolete.
Why Undertake Digital Business Transformation?
Most leaders recognize the benefits of digital business transformation—yet many organizations still have not undertaken it fully. Some enterprises make nonstrategic digital changes, but relatively few transform their digital businesses strategically.
The question “Why transform?” is the starting point. Many business leaders know the reasons why they need to transform their enterprises, but often they do not know how, and they do not act.
Pain Points and Trigger Events of Digital Business Transformation
Pain points and trigger events are things that an organization must pay attention to when planning a digital business transformation initiative. These factors can make the transformation initiative unsuccessful if not carefully considered and addressed:
- Organizational culture—Culture is frequently one of the most difficult challenges to the successful implementation of digital business transformation initiatives. Creating the right organizational culture is important for the success of digital business transformation. Changing organizational culture cannot happen until the leadership mind-set is aligned and leads the way toward digital business transformation.
- Resistance from management—Some members of the leadership team may not share the view of why the organization needs to embark on a digital transformation initiative. The initiative could be perceived as a threat, so the CEO must work closely with other executives until there is 100% buy-in. Only then will the leadership team be prepared to address the wider cultural challenge in the organization.
- Employee pushback (i.e., fear and/or resistance from employees)—Employees may view the changes with skepticism and fear that digital transformation might threaten their jobs. Often, employees resist the changes, either consciously or unconsciously. Also, corporate culture is designed to maintain an organization’s status quo. Most employees have witnessed failed projects and programs in the past, so it is no surprise that they might view digital transformation initiatives with skepticism. All of this leads to resistance.
- Lack of expertise to lead digitization initiatives—This happens when people without digital business transformation skill sets and capabilities lead digital business transformation initiatives.
- Lack of a digitization strategy—Starting digital initiatives without digital being integral to the business strategy is a recipe for failure.
- Lack of alignment between digital business transformation strategy and business goals, objectives—Digital business transformation initiatives often deliver less than their full potential because their objectives are unclear from the outset. Failure is also all but assured if digital transformation objectives, even when well-articulated, are not aligned to business goals and objectives.
- Lack of an innovative business environment—Innovation is the foundation for transformation. It is vital to ensure that an environment that enables and encourages innovation, effective communication, engagement and collaboration is fostered.
- Lack of vision, strategy and/or road map for transformation—Leaders must eliminate any ambiguity from the organization and create a true transformation vision, otherwise the organization will remain static. Senior executives are responsible for clarifying and communicating the overall digital transformation vision and strategy organizationwide.
- Ambiguity between transformation and change—The leadership of the organization must clearly define what change is and what transformation is, otherwise the organization may be lulled into a false sense of transformation while what they are actual doing is simply changing the past.
- Lack of engagement with customers to understand their behaviours and expectations—It is important to identify areas where the organization can differentiate itself from competitors as customer expectations change. Competition in the digital economy will be won and lost based on an organization’s understanding of its customer expectations and its ability to deliver an outstanding experience.
- Lack of a digital business transformational mind-set—True digital business transformation leadership requires the right mind-set, which often requires leaders to shift their own thinking to effectively address the challenges posed by an evolving digital economy.
Drivers and Enablers of Digital Business Transformation
Conversely, there are factors that drive and enable digital business transformation initiatives and can help ensure success. Organizations must also understand and consider these factors while implementing digital business transformation initiative.
- Innovation/innovation management—Innovation capability is key. Without it, transformation efforts are unlikely to lead to anything truly new or inspiring. Innovation occurs as humans share and exchange ideas. Leaders must accept that without the right innovation capability, efforts at digital business transformation are likely to lead to uninspiring attempts that result in doing the same things with new technology, which is neither innovative nor transformational.
- Competitiveness—Digitization presents a huge potential for entrepreneurs and for small, medium and large organizations. It provides a competitive advantage for enterprises that take full opportunity in the digital economy.
- Growth—Digital transformation is crucial to the growth and success of any organization in this digital economy.
- Customer insight and expectations—Customer expectations are being raised so high that unless organizations can satisfy those rising expectations, the demand for their offerings will dwindle.
- Value proposition—When customers are being offered a better value proposition that is digitally driven, loyalty goes out the window in favour of the new offering and the value it gives the customer.
- Organizational data—Interpretation of organizational data (internal and external) on a large scale that can be used to dramatically transform an organization’s performance is key. Collecting data is not difficult, however, many organizations struggle with interpreting data. And, unless data can be interpreted well, it has little value.
- Transformation management—Leaders must ensure that they have adequate transformation management execution capabilities within their organization. Without appropriate transformation management capabilities, orchestrating successful transformation will be fraught with difficulties.
Digital business transformation can come in many forms, and every organization has its own unique needs and priorities. Regardless of what those needs are, the right framework can help stakeholders across the business and IT come together and decide what and how to transform. This, in turn, introduces consistency into the organization (vs. chaos) and provides a common vocabulary for exploring what to transform. By agreeing on how the organization will determine what to transform, everyone will be working from the same blueprint and become familiar with the process. A common framework will not restrict innovation; on the contrary, it often opens many people to possibilities they would otherwise not have considered.
Adopting a common framework leads people away from spontaneous reactions, trendy—but not necessarily apt—technology, and tunnel vision focused exclusively on sales. No organization needs to be influenced into making decisions that encourage siloed initiatives or fail to align with the transformation strategy, road map and priorities.
COBIT 2019 addresses the appropriate objects, goals and methodology of digital business transformation.
How to Transform Digitally: COBIT 2019
In light of digital business transformation, information and technology (I&T) have critical roles in supporting, sustaining and growing business.
COBIT is a framework that provides globally accepted principles, practices, tools and models to help increase the trust in, and value from an enterprise I&T.
COBIT clearly distinguishes between the governance and management objectives. In alignment with the International Organization for Standardization (ISO)/International Electrotechnical Commission (IEC) standard ISO/IEC 38500, COBIT presents governance objectives in terms of evaluate, direct and monitor and management objectives as plan, build, run and monitor activities to achieve the enterprise objectives.6
It is good to mention that COBIT is a guide, you do not implement COBIT rather it must be adapted and adopted to develop a fit for purpose governance and management of Information and Technology solution. Technology is a means by which digital transformation is delivered.
Step 1
Establish a Digital Business Transformation team/committee led by the senior management or top-level executives. Transformation is fundamental to the organization and can impact everyone, so it is vital that the right executives are involved to ensure that no one is left out. It is also important to educate and align leadership mind-sets. This might be done via meetings or workshops that focus on the what, why and how of digital business transformation. Educating everyone within the organization helps all employees understand the need to transform and the risk that digital disruption presents. The team or committee must have a good understanding of business needs, drivers and risk. This understanding is required before embarking on the digital business transformation initiative because success takes more than technology.
Step 2
Select applicable design factors such as an enterprise strategy, enterprise goals, risk profile, the role of IT, the technology adoption strategy and enterprise size.
Step 3
Select applicable focus areas such as digital transformation or cybersecurity.
Step 4
Apply the goals cascade. Stakeholder needs must be transformed into an enterprise’s actionable strategy. The goals cascade supports metamorphosis of enterprise goals into priorities for alignment goals, which, in turn, helps in the selection of applicable governance and management objectives based on the priorities.
Step 5
Design a tailored governance system.
Step 6
Prioritize governance and management objectives based on the selected governance and management objectives in step 4.
Step 7
Select applicable components of the governance system.
Step 8
Create a transformation road map. The road map needs to be holistic, ensuring that all priority governance and management objectives are applied. By cutting back or cutting corners on some of the objectives, most enterprises will find that the implementation and outcomes are unlikely to live up to stakeholder expectations.
Digital business transformation definitions should be documented and communicated to help everyone stay aligned and mitigate the risk of misunderstanding.
Step 9
Activate transformation readiness. This step is critical, yet many organizations shift from strategy to execution without sufficiently preparing.
The current level of transformation readiness needs to be assessed based on the following readiness factors:
- Organizational culture
- Governance
- Innovation capabilities
- Digital capabilities
- Transformation management capabilities
- Organizational structure
- Any challenges or barriers that might inhibit or derail transformation efforts
Adopt a matrix (capability maturity level) to help identify where each readiness factor needs to be on the maturity scale, and agree on actions required to elevate each readiness factor from where it is now (current state) to where it needs to be (future or target state) to meet the transformation challenge. Stakeholders should be realistic and not overly ambitious, but they should not settle for a level of maturity that is inadequate and could put the transformation at risk.
Step 10
Implement and manage transformation. This is where stakeholders will begin to deploy or execute the strategy.
Conclusion
There are several benefits to be achieved by following these steps and using COBIT 2019 to address the appropriate objects, goals and methodology of digital transformation. Those benefits include:
- Achieving strategic goals and realizing business benefits
- Optimizing operations through the efficient use of technology
- Maintaining accurate, quality information that can be used to inform business decisions
- Optimizing IT service and technology cost
Planning a digital transformation strategy is an ongoing process. The right capabilities must be in place to thrive. Digital transformation requires a fundamental shift in every aspect of the enterprise—appropriate governance, mind-set, business model, capabilities and culture. Organizations that fail to get digitally connected risk exclusion from the global market.
Oluwaseyi Ojo, CEng, CRISC, CISM, CGEIT, COBIT Certified Assessor, CISSP, SABSA CSA, TOGAF 9
Is an experienced business leader and security architect with a focus on governance, quality, risk management, and compliance, and he has deep competencies in cybersecurity management, business security architecture, enterprise architecture, enterprise risk management, IT governance, project management, business continuity management, network security, cloud security, solution architecture, information security and assurance. He has been leading transformation initiatives in several organizations since 2003. He can be reached at sameoj@gmail.com or www.linkedin.com/in/sameoj/.
Endnotes
1 Morgan, B.; “40 Stats on Digital Transformation and Customer Experience,” Forbes, 13 May 2019
2 DeNisco Rayome, A.; “Report: 56% of CEOs Say Digital Transformation Has Increased Profits,” TechRepublic, 24 April 2017
3 Llewellyn, R.; “What Is Digital Transformation?” CXO Transform, 1 January 2016.
4 National Audit Office, British Broadcasting Corporation Digital Media Initiative, United Kingdom, 2014
5 Goldsmith, M.; What Got You Here Won't Get You There: How Successful People Become Even More Successful, Writers of the Roundtable Press, USA, 2011
6 ISACA, COBIT 2019 Framework: Introduction and Methodology, USA, 2018