Feature Story

Digital Transformation: Dispatches from the Front Lines

A Cisco research study among IT and business decision-makers reveals the current state and future challenges of their transformation journeys.

Digital transformation. If you haven’t gotten started, your company’s probably in trouble.

But what is the current state of digital transformation? How is it being managed at the executive level? What are the goals? And is digital transformation even the term technology and business leaders use to define it?

“I would call it – well it is a buzzword. It is the same thing that we have been doing for the past 20 years or 30 years.... The key difference in digital transformation in the new part of the buzzword is that you are using technologies to drive new ways of doing business in a completely different way that wasn’t possible before."

That was a decision-maker from a Chicago-based enterprise who was interviewed by Cisco. Buzzword or not, the goal of the study was to gain a better understanding of digital transformation — by speaking directly to the people implementing it on the frontlines of disruption and competition.

So Cisco set up focus groups in Seattle, Chicago, and New York. And interviewed a total of 48 senior-level business and IT decision-makers, from both mid-market and enterprise-sized organizations and from a range of industries.

Each organization had to have major digital transformation initiatives underway or, at the least, be planning to implement them within six months.

As a result, respondents ranged from one Chicago mid-market executive who described his/her company as “probably a dinosaur in this environment, just going from paper to screen.”

To a Seattle executive who saw IT taking on a more strategic role: “If you have the right people together and an understanding of what the tool can do for you then it’s explosive, very powerful.”

All agreed that digital transformation is critical in environments where disruption can arise seemingly out of nowhere. A Chicago enterprise leader put it this way:

“Looking at all of the industries that have been Uber’d and continue to be Uber’d, where change is coming orthogonal to where you suspect it to be...a lot of other businesses are getting disrupted completely because of technology.”

Business or IT, It’s all about the Customer

Throughout the focus groups, a key theme emerged: technology change must align closely with customer demands, and reflect a clear understanding of business outcomes.

A decision-maker from a New York enterprise said:

“We talk to our customers and see what their needs are and how we can create an efficiency based on what those needs are, what they’re doing today, look at those processes today.”

If we don’t have the right business sponsorship in the room for this project, then I am not going to move forward because it will not succeed.As a result, in many organizations the business units are taking the lead in driving innovation. As a New York enterprise leader phrased it:

“It’s all about the business. You need business leadership. As a matter of fact, I would argue with you that it’s business-led IT. It needs to be business-led. It needs to be linked to the strategic plan.”

The real success, however, results when IT and business units are in lockstep. In some organizations IT employees are sitting in with business units, to gain a direct picture of their needs and challenges.

These business analysts ensure that the overall strategy integrates thinking from both sides of the fence, as a Seattle enterprise executive expressed: “In our case, we have business analysts that plug into the different functional areas of the business. We ask to get an understanding of what their needs are and their challenges, and come back with solutions.”

In many organizations, that IT-BU integration is critical to the success of any digital transformation initiative. As a Chicago enterprise leader emphasized: “Basically I’m going to say that if we don’t have the right business sponsorship in the room for this project, then I am not going to move forward because it will not succeed.”

But when business outcomes are clearly defined upfront, true transformation ensues, as a Chicago enterprise leader said: “The research process starts with: What is the outcome that we want? What is the outcome that we expect to achieve here? Is it increased revenue? Is it a new line of business? Is it half the headcount to do the same work? I mean that’s transformative.”

What Digital Transformation Will Do for You

But what are the core reasons for continuing to drive digital transformation? An important driver is the changing digital behaviors of employees and customers. To remain competitive, companies must keep pace. So, improving both workforce and customer experiences looms large in any digital transformation effort.

“What can you do that’s going to make that experience better? ... It’s always the customer experience for us,” said a mid-market executive in Seattle.

Improved customer experience, combined with greater efficiency and competitive differentiation, were seen as the key to savings and higher profits. However, the study respondents stressed that there are plenty of obstacles on the road to success.

Chief among them were cost, even when long-time savings justified initial investments in digital transformation; a lack of skilled IT resources, which force many organizations to seek help from outside vendors; and time, with some fearing that once a project is finally completed, it is in danger of being outdated.

Many study participants also warned that it was hard to justify new investments when measurements and projections of the expected savings and benefits were often murky. And it’s no surprise that cybersecurity loomed as a major worry, especially in healthcare and finance.

Of course, digital transformation is as much about culture as about technology. Outmoded mindsets, rigid thinking, and lack of collaboration can derail any initiative.

As one mid-market New York executive complained: “Our CEO and every executive there, they’re not really in tune with new technology in their industry because our industry has been doing the same thing the same way for so long.”

And a participant from a Chicago enterprise complained that a culture of innovation was not consistent in that organization: “We have kind of an innovative engineering department that works on new product development. They are way ahead of the curve, but they are a very small part of the company. They’re not the culture of the whole company, but I see pockets of laggards and pockets of innovators.”

Beyond the Pitfalls, Key Takeaways to Transformation Success

But how do organizations transcend these obstacles and drive digital transformation consistently? Here are some best practices that emerged from the survey. All come down to a better integration between IT and the business side:

Embrace Technology: Organizations that culturally embrace technology as an enabler across both business and IT are far more successful with their Digital Transformation efforts.

Involve IT Early: Organizations that encourage IT involvement from the onset of any Digital Transformation initiatives are able to maximize their efforts.

Collaborate Closely: Once IT and business collaborate at the highest levels, Digital Transformation is about more than just the technology. It’s about true business transformation.