Piecing together the digital transformation puzzle

Times are tough for businesses, with economic growth faltering, costs rising and hi-tech advances seemingly revolutionising whole industries every other week. It’s little wonder that, when faced with such harsh conditions, many firms choose the ‘if it ain’t broke, don’t fix it’ approach to digital transformation. After all, studies indicate that 70% of such projects fail to achieve their objectives.

Seasoned C-suite decision-makers can sometimes turn from tigers to mice where digital tech is concerned. But a timorous attitude to a firm’s strategic tech needs at this level can prove costly to the business in the long run. There certainly are risks in undertaking any big project, but the risks of not adjusting to the changing world around you in a timely fashion are often underestimated.

Kicking the can down the road can result in a far harder task for a business once it does take belated action, because it may need to overcome years of digital underinvestment. Similarly, halfheartedly attempting a transformation and only partly finishing the job can cause more headaches than doing nothing. 

With all this in mind, how should a business meet the moment?

Doing nothing is not the answer

Stephen Andriole, professor of business technology at the Villanova University School of Business in Pennsylvania, has a stark message for any business leader who ignores their company’s changing environment.

“Once upon a time, ‘if it ain’t broke, don’t fix it’ is how Kodak and BlackBerry felt – and look how things turned out for them,” he says. 

Andriole also warns against badging incremental improvements as disruptive changes, stressing that “upgrading legacy applications is not digital transformation. It never was and never will be.”

Bharat Mistry, technical director for cybersecurity firm Trend Micro Europe in the UK and Ireland, adds that entering a transformation without total commitment from the top down is asking for trouble.

“Without the necessary planning, budget and resources, any such project is doomed to fail,” he says. 

Mistry recommends setting tangible and, more crucially, achievable objectives at the outset. He adds that it’s important to build some flexibility into the plan, because anything to do with tech can change quickly – as shown by the recent leaps in the capability of generative artificial intelligence.

The case for change

While companies may be reluctant to make changes for what might seem like the sake of it, they must recognise that adjustments do need to happen in the digital sphere as part of doing business.

Relying on complex legacy tech can cause huge problems for a firm as it becomes more reliant on external systems that may well be on a different development cycle from that of the business. Small tweaks to those third-party systems can cause a domino effect that might disrupt its operations for several weeks were the integration to fail suddenly.

And that’s before considering the ramifications of failing to adapt your IT to a world where cybercriminals are constantly probing for weaknesses. Even if you can maintain strong defences, there’s still the risk of losing ground to competitors that are more willing and able to adapt to their evolving online environment. In highly competitive industries, having the latest digital integration, or offering the best technical support, can make the difference between landing a prized client and losing it to a more able rival.

The HR aspects

People, the old saying goes, are at the heart of any project’s success. Allocating the right team to a digital transformation can make all the difference.

Mistry notes that an organisation’s inability to retain key leaders and project managers is a significant cause of failure in digital transformations. 

“Having the right senior stakeholders has a big impact on the success of any programme,” he says. “We often see good intentions at the beginning. But, when these people leave the company and their replacements have a different vision and strategy, the programme could be halted or distorted to accommodate the new vision. This leads to a lose-lose situation.”

Not following through with a transformation can be costly, particularly if the plan isn’t codified and written down beforehand. Should your organisation lose a critical mass of institutional knowledge through attrition, the absence of a clear and complete strategy can leave a complex set of problems for incoming new project teams to grapple with. 

A transformation in limbo, where a new set of leaders and managers are scratching around for information at a crucial juncture of the project before they can take things any further, is clearly a highly undesirable scenario. 

As Tim Hood, vice-president for EMEA and Asia Pacific at software firm Hyland, says: “The breaking point for many businesses comes when some of their systems have got to a stage where they’re simply no longer able to function.”

The most effective business leaders don’t fear digital tech; they embrace it and understand its strategic importance. They will ensure that their firms’ adaptations to its advances are both timely and well planned and resourced that such an outcome should be all but impossible.

Back in 1996, US chocolate giant Hershey’s rolled out an all-new enterprise resource planning system, supplanting much of its ageing IT at a stroke. This system’s rapid implementation and subsequent failure meant that the firm couldn’t process $100m (£63m) worth of orders, even though it held all the required stock. 

Many of the problems that Hershey’s faced more than a quarter of a century ago still plague businesses today. How can they replace their legacy tech quickly without breaking something important in the process? 

Conversely, businesses that are too circumspect about modernising their IT are also endangering themselves. During the Covid crisis, firms that failed to digitalise put themselves at risk of being left behind. The risk is even greater today, warns Stephen Andriole, professor of business technology at Villanova University, Pennsylvania.

“Companies that still have a ton of legacy applications are in deep trouble,” he says. “Those that say ‘we can upgrade next year’ are in trouble because the pace of technological change is so rapid. When you add generative AI into this, they’re dangerously out of position.”

In May, the House of Commons public accounts committee reported that many of the government’s digital services were reliant on outmoded, unsupported legacy IT. The committee’s Tackling Defra’s Ageing Digital Services report concluded that there was “no clear plan” to modernise these or the data critical to service provision. One might expect to see such problems in the public sector, but these are rife in business too.

Shaking off a legacy mindset

Perhaps counterintuitively, one of the key considerations for any organisation facing such problems isn’t really about the technology. First and foremost, its leaders must take a step back and look at the wider business with a critical eye. 

That’s the view of Jaco Vermeulen, a seasoned chief technology officer who has served in senior interim roles at Park Holidays and the Post Office and is now CTO at consultancy BML Digital. He stresses that it’s crucial for firms to analyse how they have ended up in the situation they’re in and what they need to change to escape it. Part of doing this is accepting that tech investments must be treated as a core strategic concern. 

The ‘if it ain’t broke, don’t fix it’ maxim is a “very dogmatic approach”, Vermeulen says. “The ‘we’re making profits, so why must we invest in tech?’ approach is the sign of a legacy mindset, where technology is seen as something sitting in a corner, rather a critical part of the business.”

It’s vital, then, to create processes where organisations can, as objectively as possible, identify which systems they do or don’t need – and where modernising applications will actually add value.

“You need to understand why you’re migrating,” says Simon Bain, CEO of OmniIndex, a specialist in big data analytics. “If you know this, you can optimise your workflow and eliminate weaknesses. If you don’t, you’re at risk of paying to lift and shift your failings from one system to another.”

Dave Cartwright, CISO of Santander International, observes that most businesses are using “far too many security tools. We know this because we seldom use many of them. Why would we have four or five systems – usually with lots of overlapping functionality – and use 20% of each of them? Why not have two or three and use half or more of their functionality?” 

Rationalising your applications in such a way means that you’ll need to spend less time and money on user training and maintenance, he adds. You can then devote more attention to the reduced suite of systems and start using these more smartly.

Small, agile steps

When modernising and migrating systems, it’s important to take an incremental approach with business value in mind at each stage. Picture a firm running old applications in a relatively obscure language, painfully aware of skills shortages. It may be tempted to try to leapfrog the problem with an automated line-by-line conversion to a newer language – Java, say. But that would oversimplify the problem and the code itself could still be procedural and monolithic, restricting the benefits of the transformation. 

Unfortunately, there aren’t any real shortcuts, but keeping an end goal in sight with small steps – such as rehosting the code and wrapping it up as services, so it can still be used while you keep working on it – may help.

Ultimately, it’s worth remembering that technology is merely a tool and it needs to fulfil a business function. It cannot be separated from operations, stresses Vermeulen, who adds: “Those two parts need to be brought together to understand what is actually being used, how critical it is and what impact modifications will have. Then you can start to design in increments.” 

When it comes to deciding whether a cloud migration is appropriate, he says: “In some instances, you might think: let’s keep it on premises, because certain processing levels might be better retained there.”

Any firm that enacts sweeping changes without considering such factors is at risk of entrenching old methods, merely mimicking legacy functionality and behaviour with their new technology. 

“That would disrupt the business to the nth degree, because people simply can’t absorb that level of change in one go,” Vermeulen says. 

It’s much better instead to build the foundations carefully first and then deal with all the shiny new stuff. In short, it’s a case of ‘proceed with caution, but be quick about it’.

The need to keep on top of changing business circumstances vexes every organisation, which makes digital transformation a necessary, if occasionally burdensome, task to tackle. 

“If you don’t reinvent your company constantly, you are basically in a standstill – and a standstill is basically going backwards.” So says Thilo Rockmann, CEO of LzLabs, a provider of software designed to transform a business’s existing IT into a modern computing environment. 

Digital transformations often benefit from the insights provided by external experts. The problem is that the sheer breadth of choice on offer in this market can be overwhelming, with each supplier offering something different from the competition while claiming that its solution is the only one that will solve all of a client’s problems. While external expertise can certainly help, finding the right external expertise – and then working out how to dovetail this with the business – is another matter entirely. “I don’t think a one-size-fits-all solution is the best solution,” Rockmann says.

It is unlikely to be the best match for a specialised business that has carved a niche over several years, especially if that firm is operating on mainframe systems that have had layer upon layer of complexity added over successive eras of tech, talent and strategy.

“It’s hard, when you have an established business model, to think about how to renew your company,” he stresses. 

When LzLabs surveyed businesses in 2021, 96% of respondents said that mainframes were crucial to their operations – a testament, in part, to the complexities of modernisation and migration.

Working better together

Rather than looking solely at what external suppliers are offering in terms of the product, it’s worth considering the relationship that can be built between an organisation and its provider when enacting a digital transformation. Partnership, rather than transaction, is key when rewiring how an organisation works from the inside out. 

“Search for a supplier of a size that’s not too overwhelming for you. You may not be successful otherwise,” warns Rockmann, who stresses that big blue-chip companies are far from the only capable providers. “There are lots of smaller businesses, especially in Europe.” 

Also consider how the provider might fit in with the business and how it operates, he adds. A good cultural match can be as important as expertise.

Establishing a partnership of equals

It’s important to assess the level of expertise within the business and consider how skilled and knowledgeable employees can interact with external knowledge providers to achieve the most effective transformation possible. Capitalising on the know-how of insiders and experts is vital to the project’s success, according to Rockmann. Doing so will enable leaders to think about how best to explain to the provider why they’re making big changes and what elements of the firm’s operations they want to retain to ensure that they get the most from the project. 

“It’s a little bit of bringing the old world and the new world together,” he says. “In my experience, it’s important to have people who understand the business deeply intertwined in the effort. It’s nigh-on impossible to enact a successful digital transformation without staff buy-in and support.” 

Any external provider must be able to ask its partner’s employees about their daily work to figure out the best way to integrate or overhaul digital services for the business. Those conversations could, if they’re not properly foregrounded, be tricky. 

It’s crucial to remember that the partnership between the organisation and external provider also involves employees. One of the issues that LzLabs sees repeated across the sector is firms undertaking transformations without communicating clearly to their staff why these are happening and what effect, if any, these will have on their roles. People often fear being replaced at the end of any digital transformation, rather than recognising its potential to free up their time to work smarter. 

Just because providers may market themselves as one-stop shops for digital transformation, it doesn’t mean that an organisation has to rely on a single external partner, Rockmann suggests. The use of multiple providers can offer the skills and expertise that one larger generalist may not be able to offer. As long as the organisation can align these providers at the start of the project to ensure that they’re in lockstep, it shouldn’t be a case of ‘too many cooks’.

Rockmann points out that a larger generalist provider would buy in the specialist skills needed anyway. It may be better for your organisation to have direct contact with those experts, rather than having an indirect relationship refracted through multiple layers. After all, he says, “the devil is in the detail”.

Unless you’re a hapless travelling salesman in a Kafka novella, words such as metamorphosis, reform and transformation are likely to have generally positive connotations. But radical change isn’t necessarily a good thing. It often takes a psychological toll and/or engenders subconscious resistance, even if we want it to happen. 

Workers at the coalface don’t usually have much choice in the tech they have to use. If sweepingly ambitious digital transformation projects are imposed from on high, there’s a risk that they may feel alienated by the decisions affecting them. A common key factor in the failure of so many such initiatives is the absence of effective change management. 

To stand any chance of success, those leading digital transformations must ensure that employees are also invested in the effort, stresses Tavier Taylor, chief information officer at the Chartered Management Institute (CMI). 

“If that key step doesn’t happen from the start, the project has already failed,” she warns.

Andrew Duncan, CEO and managing partner at Infosys Consulting, agrees. While business leaders will always take ownership of such projects, communicating the plan and its desired outcomes to the whole organisation at the outset, it’s equally important that teams at all levels feel proprietorial too, he says. 

“Most crucially, an environment of trust must exist so that everyone feels that they are in it together and can influence the end state,” Duncan stresses. “Mass communication can’t be the only vehicle here. It needs to be personalised and delivered not only by top executives but also by managers and team leaders.”

No wonder it’s so often stated that the cultural element of a digital transformation is the hardest to get right. Putting people first, with all their different ambitions and anxieties, can be much tougher than swapping one software licence for another or shifting workloads to the cloud. So how can business leaders ensure that everyone in the organisation is on board with the process?

The importance of plain speaking

Authenticity is a key factor in the success of a transformation, says Sophie Grant, principal strategy consultant at Peldon Rose, a specialist in workplace design. She warns that, if big changes are communicated in “a way that isn’t authentic, you’ll probably end up pushing more people away”.

To minimise this risk, leaders should be as clear about their intentions as possible, avoiding any alienating management-speak. For instance, Taylor jettisoned the jargon and badged the CMI’s transformation project as a “business improvement plan”, because “that’s exactly what it was”.

The communications strategy for the transformation involved identifying “workplace champions” in the institute who would keep others updated on its progress. As the programme was implemented, Taylor and her team held open Q&A sessions enabling employees to submit their queries about the project. 

They then focused on processes, understanding exactly how people operated and communicating the likely effects of the transformation on their work. Here, the provision of ongoing training and support was key to reassuring people and helping them to understand that they were being involved in all new developments. 

Taylor’s team also established a “programme management office” that could receive employees’ suggestions and resolve any issues raised, using face-to-face meetings if necessary. The project’s steering committee would review every suggestion and, as long it was within reason (“no Space Shuttles”, says Taylor), weigh up the business case for it.

Addressing concerns about job security

Understandably, many people will be less worried about the technical side of the transformation than they are about its impact on their work. 

“The most resistance to change is illustrated by questions such as ‘will I still have a job at the end of the process?’ And ‘how does management know the right choices are being made?’” notes Hans Tesselaar, executive director at the Banking Industry Architecture Network.

The answers to such questions may not be easy, he adds. But, because one of the main goals of a transformation is usually to improve efficiency and cut costs, it’s important to be honest about how the project will affect the workforce. If there are to be cuts, the organisation can overcome concerns by offering retraining and job reallocation, “from back office to front office”.

Keith Woolley, CIO at the University of Bristol, believes it’s vital for technologically minded leaders to design new systems that are a “magnet and not a mandate”. 

He adds that “it can easily be forgotten that the team developing the change is also a critical stakeholder, which is going through a cultural change of its own. My first task was to embrace the hearts and minds of my team to motivate all members and empower them to make the technological changes required by our organisation.”

By doing so, Woolley says, his team’s clear sense of purpose “became infectious to those who used the technology, enabling the modernisation and the adoption of the solutions we needed”.