CEO of Avenga, coordinating all of the digital transformation champion`s global and regional teams and ensuring the highest standards.
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When talking to top management representatives from the old economy, you can almost be certain that most of their organizations are well into their digital transformations by now. Many of them even proudly point out their achievements in this area — and rightfully so. By now, just about everybody knows that to be successful in the future, businesses have to become more digital and, in many cases, even develop completely new digital business models.
However, once you dig deeper, many executives are willing to admit — at least in private — that their transformation processes are not going as well as originally planned. The story seems to repeat itself: Promising progress and quick wins in the beginning are regularly followed by dramatic slowdowns and sometimes even complete standstills.
I've noticed that in most cases, this is because companies were focusing on only one aspect of their transformation: new products, new processes or new technology. This can go well for some time, but to reach digital excellence and become a true digital leader, all three aspects may need to be tackled and improved simultaneously. They are inseparably intertwined, and as the famous saying goes, "A chain is only as strong as its weakest link." Therefore, let’s see how traditional organizations can master the triad of digital transformation and lay the foundation for a successful future.
New Digital Products And Services
Many enterprises without digital DNA start their digital transformations at the front end. In most cases, this is the right way to go because these kinds of projects are comparatively easy to realize and have high internal and external visibility, meaning their successes can function as motivation throughout the whole company. What’s more, the customer experience is a decisive competitive factor today, so developing new offerings and putting customers’ needs and wants first can create significant strategic advantages.
However, no user interface is an island, and to simplify and speed up processes, you usually must access systems in the back end. This makes things complicated because these solutions are primarily geared to guarantee the smooth running of day-to-day business as well as compliance with legal requirements. To complete these tasks, the IT infrastructure often reflects complex internal processes and organizational dependencies. If the user interfaces align with these established processes to extract data, the user experience is often negatively impacted.
There are numerous helpful and proven quick fixes, like API management platforms and even the lightweight API gateway that we made available that's specially designed to support building and operating API-driven web projects. But despite the great successes they can enable, they are more of a bridge technology. In the long run, you generally cannot avoid transforming a monolithic IT landscape into one based on microservices and APIs so that you can continuously build and scale new offerings.
Technology Modernization
The aforementioned legacy systems all too often make it difficult to develop engaging digital products. They also do not ideally support new technologies such as AI or big data analytics, and they suffer from poor integration capabilities with new digital solutions. Other drivers to update the existing IT infrastructure include high and steadily growing maintenance costs and security issues, as well as dwindling expertise — for instance, due to retiring developers who have knowledge in certain required programming languages.
With this said, throwing out legacy systems and redeveloping everything from scratch is typically not an option because the knowledge contained in the IT infrastructure is often mission-critical and cannot be replaced. This means that during the digitization of core processes such as enterprise resource planning, customer relationship management or manufacturing execution, the processes and IT systems must continue to remain stable and support day-to-day business with consistent quality. It's a challenge that is commonly compared to open-heart surgery.
Process Enabling And Flexibilization
As if all of this weren’t enough, don't forget about the readjustment of organizational structures in addition to the technological perspective. Nine times out of 10, the complicated software you find in the back end mirrors the reality and needs of the organization it serves. So if the software is (unnecessarily) complicated, the company structure often is as well, and it is nearly impossible to straighten out one without doing the same to the other.
In this context, the dissolution of corporate boundaries and the networking of corporate divisions that previously operated in isolation are top priorities. An important result of such reorganization projects is a uniform data basis and data governance that further advance data-based business models and the automation of business processes.
In-House Or Outsourcing
As a rule of thumb, you can say that your company has reached digital excellence when there is a sustainable business model in place, unnecessary costs are at a minimum, business processes run smoothly and departments work productively across the company. Other criteria include improved availability and reliability of applications, quick developments of new offerings, greater IT security, more satisfied customers, and, of course, a greater attractiveness as an employer.
There is no hard-and-fast rule on the extent to which companies can go down this path by themselves. But even many that are well on their way struggle to manage the multitude of tasks that inevitably accompany the triad of improving products, technology and processes at the same time. I've found that in most cases, the shortage of IT specialists is simply too great and the time pressure to drive digitization is too high. That’s why external support and new strategic partnerships are important prerequisites for most traditional companies in finding their way into the digital era.
When looking for the right partner, the obvious minimum requirements are technical expertise, professional understanding and extensive experience with similar projects. However, another crucial point to consider is whether a partner is able and willing to pass on their knowledge and experience to your internal IT department. Keep in mind that this is the basic prerequisite for your organization to be able to take the reins into its own hands again when everything is said and done.
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