Digital transformation has become an essential part of business success. Yet, organizations still struggle with getting it right.
According to TEKsystems’ 2023 State of Digital Transformation, 41% of organizations’ digital transformation (DX) initiatives have failed to achieve their desired outcomes. Another study, the 2023 State of the Intelligent Information Management Industry, turned up similar numbers, finding that one-third of companies have yet to achieve significant success with their DX efforts.
Those who are falling short may have missed signs indicating the need to tack and set a new course. But the signs are there, for those who take the time to look.
To that end, CIO.com asked a half-dozen longtime IT leaders — current and former CIOs as well as consultants and executive advisers — to share the questions they think CIOs should ask themselves to determine whether they’re sailing to success or about to dash onto the rocks. They came up with the following 10.
1. Is this initiative about optimization or about growth and disruption?
“A lot of times when somebody is asked what they’re doing for transformation, they say, ‘I’m moving my workloads to cloud’ or ‘I’m moving to cloud-native development.’ That’s not digital transformation. Digital transformation is when you’re helping the company grow and disrupt,” says Anant Adya, an executive vice president of cloud services company Infosys Cobalt.
For example, an initiative should enable the company to grow its revenue or it should improve customer and worker experiences, Adya says.
Consequently, CIOs need to be clear on the outcomes their initiatives will deliver and that they can measure and report on those outcomes in top- and/or bottom-line figures.
As a case in point, Adya cites a transformation initiative undertaken by a healthcare payor, who wanted to add more customers to grow. The company used technology to cut the time it took to onboard new customers from about nine months to just two, thereby enabling much more rapid growth.
2. Am I using data to drive my transformation strategy?
Or put another way: “Do I have a data-driven process for identifying and prioritizing digital transformation programs?” Adya asks.
Adya says many executives answer no.
Despite leadership teams calling to be data-driven, studies find that most are not. Infosys’ Digital Radar 2023 report found that only 5% of enterprises currently have or are implementing a live data approach.
Consequently, Adya says most executives have a herd mentality, thinking, for example, “Everyone is moving to Kubernetes, so I should, too.”
“They should be asking, ‘Is this the right thing to do for my organization or my company?’ And that can only be answered by the data,” Adya says. “Use the data you have and try to be specific to understand the problem you’re trying to solve.”
Adya again points to the healthcare payor, which analyzed 10 years’ worth of data, identifying the length of time it took to realize revenue from new customers and linking it back to the time it took to onboard them.
3. Is my strategy organized around problems to solve, or technologies?
CIOs who organize transformation workstreams around problems to solve are on the right track, says David Rogers, a faculty member at Columbia Business School and author of The Digital Transformation Roadmap (2023) and The Digital Transformation Playbook (2016).
“Every successful digital transformation I’ve seen is organized around a strategy problem to solve or a growth opportunity,” he adds.
The idea, Rogers explains, is to have a standing team working on areas that are persistently challenging to the enterprise so the team can truly focus on transforming it, bringing improvements over time. An omnichannel retailer, for example, would want a team organized around order fulfilment, an area where retailers are constantly challenged to do better to meet customer expectations and best their competitors at doing so. The team can then work on whatever it takes to solve the problems in this area, Rogers says, “whether it’s coming up with new processes, people, training, robotics, anything that can improve it.” That gives the team a business outcome to reach, not merely IT functionalities to deliver.
4. Am I engaging people on the front lines to formulate DX plans?
According to Rogers, the answer should be yes.
“You need people on the front lines, because it is the business units who have people out there talking to customers every day,” he says, adding that while C-suite support for transformation is crucial, the front-line perspectives offered by lower-tier employees are those that can identify where change is needed and can truly impact the business.
“Your transformation should not be planned entirely from the top by the leadership team,” he explains. “You need to organize your transformation to both surface and support ideas for new digital initiatives that are coming from business units, from customer-facing teams and from functions like HR.”
5. Am I identifying and using the right business metrics to measure progress?
Most CIOs have moved beyond using traditional IT metrics like uptime and application availability to determine whether a tech-driven initiative is successful. Still, there’s no guarantee that CIOs use the most appropriate metrics for measuring progress on a DX program, says Venu Lambu, CEO of Randstad Digital, a digital enablement partner.
“It’s important to have the technology KPIs linked to business outcomes,” he explains. If your business wants to have faster time to market, improved customer engagement, or increased customer retention, those are what CIOs should measure to determine success.
“The question to ask is, ‘Am I measuring value and how am I doing it?’” says Raj Iyer, global head of public sector at ServiceNow and former US Army CIO. “Digital transformation is all about measuring value, and it’s about measuring value in terms of what matters to the business.”
6. Do I have a DX budget and completion timeline?
An affirmative answer to either of those indicates a problem, as experts stress that transformation isn’t a task to undertake and complete but an operational and strategic imperative that should be woven into all the organization does.
Rogers acknowledges the challenges of that, saying “the constancy of transformation is the hardest thing for companies.” That’s particularly true for established organizations, which aren’t good at change due to their size and complexity.
That’s why, Rogers says, many digital-native companies no longer have the advantage they once had when it comes to successful DX.
“Now it’s not companies [which started] pre-digital era versus digital natives. Today it’s about established companies versus not,” he adds.
This is not an insurmountable situation. Rogers in his latest book profiled established companies that are DX leaders and identified elements they have in common.
“They have a defined vision of where they’re going and why, and why they in particular should pursue that path. They have the discipline of picking the problems that matter most, and they’re good at validating ventures iteratively,” he says.
Other distinguishing points: DX is not treated as a project with its own budget, or even an IT program led by the CIO.
“Where I’ve seen it work is where it’s really led by the business and IT is a critical supporting function or where it’s the two in close partnership,” Rogers says.
7 Is transformation companywide?
CIOs should similarly be examining whether transformation is happening across the organization or is it only occurring in pockets.
“Too often operational dysfunction or functional siloes get in the way of successful, enterprise-wide transformation. We often see firms invest in digital transformation for some functions but not others as quickly, which results in a capability and experience gap that can be evident to customers, stakeholders, and internally as well,” explains Atif Zaim, national managing principal for advisory at professional services firm KPMG US.
“Imagine you use a seamless, user-friendly app to purchase a new product, but then have a challenging and outdated customer service experience when you need to make a return,” Zaim says, noting that for the company “this sort of incremental approach yields incremental innovation and increases cost with minimal ROI.”
It’s a common scenario. He cites KMPG’s 2022 report Enterprise Innovation: The vision-execution gap, which found that 69% of respondents blamed operational dysfunction on “a siloed innovation mentality.”
“CIOs must take a holistic approach to understanding where roadblocks or challenges might exist in an organization. A transformation might start with their IT team, but they must engage teams from across the business to promote new ideas, provide funding, and celebrate success,” he says. “CIOs also can ask themselves about their role in enhancing the digital acumen of non-IT leaders. When digital proficiency extends beyond IT-focused roles at the leadership level, the benefits from digital transformation are more pronounced.”
8: Is all my talent ready — and am I making the right moves on this front?
CIOs should first ask themselves whether they’re hiring people with the mindset and background to drive change or just hiring for tech skills?
Rogers says CIOs need people who are comfortable collaborating with those different than themselves, making decisions on data, and working with ambiguity.
“Those aren’t technical skills, so if you’re just focused on acquiring the right tech skills, you’ll be limited in your ability to deliver impact,” he adds.
At the same time, Lambu says CIOs still need their workers to have the tech skills required for current and future DX initiatives and must recognize that the need to upskill is as constant as transformation itself.
Moreover, CIOs must enable that continuous training at a much faster pace than in the past, he says, adding that tech leaders must also confirm that their partners are taking a similar approach to ensure all vendors supporting the company are equally capable of keeping pace.
Greg Taffet, managing partner and CIO with Taffet Associates, agrees, but goes one step further, saying CIOs should ensure the skills brought by their partners complement their in-house skills.
For example, Taffet says, CIOs typically select implementation partners assuming they’ll bring the necessary skills and then train the IT staff during the implementation process. But CIOs may overestimate the skills or the staff’s available time for learning. The vendors, too, may miscalculate the existing in-house skills and underestimate what skills they need to bring to the engagement.
“So matching up [who brings what skills] at the very beginning is critical to the success of any transformation initiative. Otherwise, you won’t have 100% of the needed skills,” Taffet adds.
9. How much time do I have to be successful?
Laserfiche CIO Thomas Phelps puts it this way: “The question I’d ask is, ‘How much runway do I have for this initiative, and what are the competitive pressures?’ Because that question leads to the budget question and the resource questions. If I need to get there in six months versus two years, that impacts the budgets and resources I need to allocate and culturally whether the organization can change fast enough to get there as well. The worst thing to do in a transformation effort is to underestimate the level of resources needed. That’s why there are situations where there are starts and stops or initiatives that don’t pay off or fail.”
Phelps, who is also executive chair at Innovate@UCLA, a technology leadership organization, continues, saying, “It’s important to understand the why, the context around the timeframe and the objectives of the initiative and to propose what’s realistic for the organization. Then as CIO you can give the executive sponsor and stakeholders options.”
10. What’s holding up DX?
This one question could uncover a lot of issues, experts say.
For example, the organization may have policies — either in IT or in other functional areas — that are outdated or too restrictive and thus hindering the transformation or the speed of DX. Those policies could be constricting security measures or cumbersome approvals for piloting new technologies such as generative AI.
“You’ve got to have policies that get you to yes,” ServiceNow’s Iyer says.
Iyer came across such scenarios when he was Army CIO, pointing to policies that made sharing data difficult and, thus, slowed down change. So the Army revamped data protection policies and implemented improved identity and access controls. Those changes “made the data much freer and available” while ensuring required privacy and security standards.
Stakeholders can also be sources of holdup, Taffet says, explaining that he worked with one company where a single stakeholder’s requirement demand was proving impossible to address within an existing initiative.
“Adding this one requirement would have knocked out a lot of other functionality,” Taffet says, adding that the stakeholder’s demand was about resisting change and focusing on his department’s needs rather than the company’s strategic goals.
The CIO in such situations can lay out for the whole management team the tradeoffs in business terms, showing what will be lost in order to meet such demands.
“It’s about mentoring on what the options are and getting others through the decision-making,” Taffet says. “As CIOs, we need to supply the right information so they can determine what’s the right way to go forward.”
Digital Transformation, IT Leadership, IT Strategy