Welcome to 2023. You’ve inherited a dynamic moment to be a leader. While challenging on many fronts, instances of market instability and disruption can also be exciting and liberating. And with generative AI poised to have a societal impact comparable to the internet in the 1990s and 2000s, we are only beginning to imagine what the future will hold. What that likely means for you is a need to accelerate your digital transformation efforts to enable a more agile, adaptive organization.
If you’re like most organizations, the digital transformation journey hasn’t been an easy one. According to Gartner, only 35 percent of Board Directors believe their organizations have achieved — or are on track to achieve — their digital transformation goals. Yet a recent study from the MIT Center for Information Systems Research (CISR) suggests that the juice is worth the squeeze: “While transformation is not easy, these companies have significantly higher financial performance with average revenue growth 17.3 percentage points and net margins of 14 percentage points above industry average — a rewarding premium.”
The question is: How do you get to the juice faster?
At EPAM, we’ve helped large enterprises across nearly every industry sector accelerate value creation from their digital transformation journeys. Following are five “truths in transformation” we’ve learned over the years.
Digital transformation is not about digitizing existing business; it’s about modernizing the way organizations create and deliver value to customers.
- Use Purpose as Your Guide. Purpose is the fundamental reason your business exists. It’s the value you provide to your customers. As you work to evolve, streamline, automate and transform the business, continuously ask yourself: How will this increase the value we can bring to our customers? Clear, practical, and easy-to-understand answers to this question should give you confidence you’re making the right strategic investments. Abstract, obtuse, or fluffy answers suggest you don’t have a clear enough sense of what you expect to gain from the investment, leaving too much room for misinterpretation in its execution.
- Work Outside-In and Inside-Out. Many organizations leap into digital transformation based on an understanding of how their business currently operates. Their focus often includes modernizing platforms, moving to the cloud, and automating processes, among other things. However, this “inside” view of the business can limit the potential value digital transformation can deliver because it misses the bigger point: Digital transformation is not about digitizing existing business; it’s about modernizing the way organizations create and deliver value to customers. Achieving this goal requires adopting both an outside-in and an inside-out mindset, with an ultimate focus on enhancing customer value.
- Close the Strategy Gap. Too much distance remains between business strategy, market strategy, product strategy, digital strategy and data strategy. Digital transformation is not just the responsibility of your technology teams, and business transformation should not be solely led by your business teams. To ensure a successful digital transformation, your leadership team must collaborate across all these areas. Organizations with technology-minded CMOs, presidents, and CEOs and business-minded CDOs, CIOs, and CTOs will move faster than those with siloed operations and responsibilities. It’s essential to bring them all on the digital transformation journey together.
- Experiment With the Practical Applications of Emerging Technologies. Many of today’s digital experiences are built using similar (if not the same) platforms and components that the competition employs. That’s why it’s critical to remain curious and creative about emerging technologies’ ability to improve your business processes and products and help differentiate the way you create and deliver value in the market. But make sure to proceed in a manner that focuses on providing real value to the customer. Proof-of-concepts should not just be technical exercises; they should be directly connected to value creation. Furthermore, if you’re not already exploring how ChatGPT and other generative AI platforms could enhance or dramatically change how you bring value to your customers, you’re falling behind. (To be clear, while similar things may have been said about the Metaverse recently — although not by me — generative AI use cases and impact are much more broadly and readily applicable to nearly every industry.)
- Remember Digital Transformation Is a Journey, not a Destination. Your organization should have a clear, compelling three- to five-year lighthouse destination; a high-level three-year roadmap of planned investments and capabilities evolution; and a detailed one-year execution plan with explicit KPIs tied to value creation. However, it’s also important to acknowledge that we are living in a truly dynamic era. You will need to update or amend your three-year roadmap, and you’ll have to be agile in your execution throughout. Technology is changing that quickly. And lastly, recognize that this journey can’t be taken alone. It requires your people. Define what digital transformation means for your business in ways that your talent can easily internalize and understand, and help your employees enjoy the journey itself rather than focusing on a finite destination point. To paraphrase the writing of Antoine de Saint-Exupéry: “If you wish to build a ship, do not divide your people into teams and send them to the forest to cut wood. Instead, teach them to long for the vast and endless sea.”
The benefits of successful digital transformation are clear, with higher net margins and revenue growth reported by companies that have achieved their transformation goals. My advice: Keep our five “truths in transformation” top of mind as you and your organization focus on creating a truly agile and adaptive organization that thrives in these dynamic and exciting times.