Digital transformation. Digitalization. Digitization. Three business terms in common use today that describe the differences in scope of the organizational digital effort, in this case in order of decreasing scope. Unfortunately, the first word of the term “digital transformation” seems to receive all the attention, with the second word left to scrabble for the scraps. This could be because digital technology efforts are already difficult enough if they are considered in a corporate context rather than as a silo, while the associated transformation efforts—largely involving people and business transformation—are even more difficult. For technology efforts however, forgoing the people component readily results in the expectations of the investment not being met.
The distinction between the scope of the three previous terms is important from a governance context, as it drives the nature of the oversight required. In this case, a board, concerned not only with compliance, but also with the organization’s sustainability as part of an approved corporate strategy, would generally be more interested in the scope and impact of digital transformation and less in digitization.
Given that a board is concerned with an organization’s sustainability and competitiveness, it is particularly interested in the alignment between business and IT, the associated capital and operating costs, and the (strategic) benefits this investment and expenditure would enable. It would also be interested in ensuring that the capability exists to properly leverage the investment to benefit stakeholders such as shareholders, customers, employees and regulators. Note that the latter 2 sentences have implications for the organization’s entire operating model—people, process and technology—and its business model.
The value created by digital transformation materializes in the organization’s business model in the way the organization makes its money. So, if an organization’s operating model becomes more efficient—resulting in lower operating costs per unit of sales or per product/service sold—shareholders will see this as increasing profitability. If digital transformation results in greater integration across the organization, then customers will see this in the consistent way the enterprise communicates with its customers across all its channels, whether branch, kiosk, telephone, mobile, Internet or other.
My recent Journal article helps bring it all together for the practitioner, illustrating how the operating model, people, the business model and measures of success are all key components of the oversight of digital transformation, and the relationships between them in the context of the organization’s strategic milieu. It ultimately explains why digital transformation demands quality oversight at the micro, meso and macro levels and describes steps that help protect the organization from sub-optimal digital transformation decisions that could hamper rather than grow the organization’s competitiveness and sustainability.
Read Guy Pearce's recent Journal article:
"Enhancing the Board’s Readiness for Digital Transformation Governance," ISACA Journal, volume 5, 2019.