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Going Boldly into the Brave New World of Digital Transformation

Guest Author

Today's blog post is a Q&A session with influencer, internationally recognized analyst, and founder of CXOTalk, Michael Krigsman.

Digital innovation disrupts industries and fundamentally changes the way we do business. For instance, in 2018, IT-as-a-service comprised more than a third of IT spending, and Gartner predicts that by 2020, artificial intelligence (AI) will create more jobs than it eliminates.

To Michael Krigsman, internationally-recognized analyst and founder of CXOTalk, this upheaval means big changes for IT. The way we approach business today, he says, is being turned on its head by new demands from internal and external customers. We’re at a crossroads where innovative technologies and new business models are overtaking traditional approaches, creating significant pressure and challenges for tech infrastructure and the people who manage it.

We invited Michael to share more insights about digital transformation, especially how it’s impacting IT infrastructure and roles within IT departments. And he knows his way around the topic; he’s written more than 1,000 articles on tech innovation, has been named the #1 CIO influencer among industry analysts, and ranks among the top four most mentioned IT leaders on Twitter.

Let’s start with the big picture. Can you talk a little bit about the dominant drivers in digital transformation today?

Digital transformation refers to the way an organization responds to changes in its environment. Consumer expectations have changed. Competition has changed. Startups with new business models are challenging established companies in significant ways. And so, digital transformation is an organization's response to what is going on in and around its environment, including the internal changes the company must make.

For established organizations, these changes often mean dismantling departmental silos and transforming how staff communicate and share information. The goal is developing a new relationship with customers and enabling the organization to speak with a single voice. We see varying degrees of digital transformation by industry and company size.

In some industries, like retail, external circumstances have forced them to make dramatic changes. A number of retailers have done it successfully, but others have been slow to respond and, therefore, are really suffering. Look at Toys R Us as an example of a large retailer going out of business.

To get a little more specific, how does AI play into digital transformation?

I recently discussed this question with Paul Daugherty, Chief Innovation and Technology Officer at Accenture. I asked him what's different about AI today.

Paul said that you need three things to take full advantage of AI: computing power, lots of data, and meaningful algorithms. As processing speeds increase and the amount of data we collect increases exponentially, the algorithms we create will produce increasingly rich predictions.

So, as we digitally transform and collect more data, we accelerate the impact of AI. For example, in marketing, we see personalized offers all the time, such as when an eCommerce site suggests product recommendations. If AI is done right, the offer makes sense and you say, “Oh, that’s interesting. I should look at that.”

In another dramatic example, we see important uses of AI in medicine. I recently interviewed one of the pioneers of augmented and virtual reality, who is using these new technologies in surgery and telemedicine to provide access to healthcare and medical education in parts of the world that have traditionally been underserved due to their location and economics.

What is happening in IT, and what do people in IT need in terms of infrastructure to support digital transformation?

The obvious answer is that there’s a set of enabling technologies. But the real question is: Does this technology live on-premise or in the cloud? Depending on where that data lives, it's going to require different skill sets. If you're building these resources in-house, then you're going to need infrastructure people to build it, manage it, and run it.

However, we know that the broader trend is for companies to outsource significant parts of their computing to the cloud, and fewer database administrators are needed in-house. This development leads to an important question for somebody that works in this area of IT: “What should I do?"

To answer this question, we need to remember that digital transformation is driven by a relentless focus on the customer; so that's a great place to start. To align more closely with both internal and external customers, IT must become more agile and adaptable than ever before. The bottom line is that IT folks need to develop an entirely new mentality, and that's difficult for many people.

How do they transition into a different role and a different mindset?

There’s no magic bullet. There are going to be people who can’t do that—they just don't have the emotional flexibility. Change is both an emotional and psychological response to the world: I do things one way today, but I need to do things differently tomorrow.

The best companies will help guide, mentor, and provide training. For example, I’ve been looking at “citizen development” lately, which is a set of development tools that experienced end users can use to do basic automation. It’s great because it pushes the workload for basic application functions onto the users, which frees up IT’s time, and the users get exactly what they want.

You could use folks who already have a technology background to support users’ citizen development projects. That's just one example of repurposing skills to a higher-value function. Instead of doing system or database administration, they're now supporting people. Anytime you have somebody helping business users achieve their goals more directly, that’s going to be a higher-value activity.

We’ve talked a little about it already, but what are the risks to IT from digital transformation?

The real risk for IT is one of relevancy. If users are going around IT and buying all kinds of solutions, what does that say about IT? There’s a big message that IT isn’t giving users what they need. The risk is that if IT is not sufficiently agile, or they don't involve users in the decision-making process, then users may not get what they want. That’s how IT becomes marginalized.

Then how is the role of IT evolving? When end users buy and use their own tools and systems, things like data integration and security remain the ultimate province of IT. A departmental user who’s buying a SaaS tool most likely won’t have the skills or permissions to integrate corporate data into the platform successfully. So, data integration is certainly one of the key roles that IT needs to retain as its own.

As I see it, IT is under pressure because it must simultaneously innovate, sustain operational excellence, and save money—that’s what they’re being told to do. “We need you to keep the lights on, keep the systems running. We want you to innovate and, at the same time, cut your budget and do all this magic with less money than you did before.”

These three goals are in conflict and almost mutually exclusive, but the modern CIO mandate involves them all.

Because this process of digital transformation is unique for each business, are many of them looking for help determining a roadmap to get there? Can they do it on their own or do they need external guidance?

To begin with, digital transformation projects are really business transformation projects and we should think about them that way. These projects relate to business models and customer experience. The solution that enables all these things. The right infrastructure to support these cloud, mobile, AI, and data initiatives can help us give a more personalized service and a better quality experience for our customers.

So, get help if you need it, and you probably will. Sometimes companies hire chief digital officers to take responsibility. Just be aware that the goal of the Chief Digital Officer (CDO) should be to eventually make her or his role obsolete. You don’t have born-in-the-cloud companies with CDOs because they're already digital from the ground up. Once a company is sufficiently down the digital path, it should no longer need a CDO.

As markets and consumers continue to change, companies may reach a point of conflict between established operational processes and new business models needed to satisfy evolving consumer expectations.

Being committed to digital transformation means making investments that may have low ROI in the short term but will pay off nicely in the future. Many companies find that form of innovation to be hard even though these investments are essential.

Learn more about how to manage a business through digital transformation from Oracle CEO Safra Catz.

 

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