Don't waste millions investing in digital transformation

Business spending on digital transformation (DX) initiatives continues to rise as enterprises seek to leverage emerging technologies to achieve operational excellence and improve customer engagement.

According to a report¹ by IDC, businesses will spend $2.3 trillion a year on digital transformation in 2023, which amounts to 53% of all worldwide technology investment for the year.

The “fear of missing out” lies behind many of these spending decisions. According to a global survey by database company Couchbase², a growing number of organisations (52%) are wary that succumbing to pressure and rushing into a digital transformation project will cause it to fail.

New York-based management consulting firm AlixPartners³ found that more than half of companies' digital-transformation investments were being wasted as they simply "threw money at a problem". Another survey by McKinsey⁴ found that only 16% of organisations’ digital transformation successfully improved the business’s long-term performance.

Left unchecked, misplaced digital investments can cost organisations dearly both in terms of dollars and cents as well as their competitive positions in the market.

The problem often starts with the migration of applications to the cloud in the name of digital transformation. The cloud promises rapid provisioning and scalability, giving the business greater flexibility in rolling out new digital services to their customers.

However, organisations often fail to understand or take advantage of these capabilities, choosing instead to move existing applications lock, stock and barrel from the legacy environment to the cloud.

Organisations have to first understand which applications will thrive in the cloud and which ones may be better off running on-premises. For example, collaboration and personal productivity apps, compute-intensive big data and analytics apps, and software development tasks may take well to the cloud given its scalable resources and ubiquitous access. But some applications with high-availability and performance requirements, those involving sensitive data, or legacy apps with complex dependencies may not be suitable for, or not as easy to move to the cloud.

By understanding the different application requirements, enterprises can then identify or prioritise what they should move to the cloud, and in some cases even replace them with cloud-native applications or services that may deliver the same capabilities more effectively and cost efficiently.

Another common misstep in digital transformation is that businesses are too eager to deliver new digital capabilities to their customers as fast as possible, without giving enough thought to their back-end processes and capabilities. Cosmetic efforts like launching a new app or installing digital kiosks will not deliver lasting, significant transformation benefits.

True disruption occurs only when digitalisation goes deep enough to impact processes and business models. And businesses will need to have an effective way to monitor this impact.

Critical to the success of a digital transformation project is the implementation of relevant metrics and feedback channels to assess the effectiveness of the digitalisation effort. This will enable businesses to diagnose failure early and make corrections, or kill projects that do not seem as if they will deliver the promised benefits.

Another effective tool for assessing the impact of digitalisation is the use of predictive analytics to provide insights into potential outcomes.

By leveraging past and present data to make strategic predictions about future events, predictive analytics can support the transformation journey in many innovative ways.

For example, when developing a digital strategy for retail, predictive analytics can be used to identify product trends and the potential impact of price changes. This enables the business to align procurement and pricing strategies to desired outcomes and increase the chances of success for the digitalisation project.

Predictive analytics can also be used in project management, taking into account different parameters and project interdependencies to give teams a more realistic schedule which can be adjusted to changing conditions.

Finally, by some estimates, 50%⁵ of today’s workforce will become obsolete as companies step up their digitalisation efforts. Investing in new skills in analytics and design will be just as critical as other technical capabilities. Additionally, new digital roles in project management and agile implementation will be essential if organisations want to make an adequate return on their transformation into truly digital entities.

By making use of these capabilities, and by being mindful of the common pitfalls in digital transformation, businesses can avoid wasting millions and look to achieve solid benefits from their digitalisation efforts.

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1 Worldwide Semiannual Digital Transformation Spending Guide.

2 Are Organizations Realizing Their Digital Revolutions? Couchbase Cio Survey 2018

3 Achieving Profitable Growth Consumer Products - Practical Digital Transformation, June 12, 2019

4 Unlocking success in digital transformations,  2018 McKinsey & Company

5 Jobs Lost, Jobs Gained: Workforce Transitions In A Time Of Automation, McKinsey&Company, December 2017