Digital Transformation

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Digital Transformation

by James G. Barr

Docid: 00018021

Publication Date: 2204

Publication Type: TUTORIAL

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Digital transformation (DT) is the utilization of digital technologies
(basically, any electronic system or device that generates, stores, or
processes data) to create new products,
services, or processes or to enhance existing ones. DT projects are aimed at streamlining enterprise
operations, gaining new operational capabilities, reducing operational
expenses (especially personnel costs), and developing business
opportunities. DT efforts may be as simple as transforming an analog
process into a digital one or as ambitious as transforming a 1990s-era
“brick-and-mortar” establishment into a current-day e-commerce business.

Executive Summary

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Although a popular IT topic, digital transformation (DT) is
hard to define. At its most elemental, DT is the utilization of digital technologies
(basically, any electronic system or device that generates, stores, or
processes data¹) to create new
products, services, or processes or enhance existing ones. But beyond that definition, digital transformation, in practice, is
whatever its enterprise adopter says it is. It may be as simple as
transforming an analog process into a digital one or as ambitious as
transforming a 1990s-era “brick-and-mortar” establishment into a current-day
e-commerce business.

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The only thing you know for sure is that a comprehensive digital
transformation agenda when planned, funded, and implemented properly
can:

Streamline enterprise operations
Produce new operational capabilities
Reduce operational expenses, especially personnel costs
Provide new business opportunities

DT Projects

For perspective, some common digital transformation initiatives are:

Enabling employees to work from home or other remote location, thereby
satisfying individual needs and expanding the roster of potential
staffers.
Substituting a software solution for time- and labor-intensive manual
activities, improving productivity.²
Migrating information systems and applications from an on-premise data
center to the cloud, relieving an enterprise of some of its local IT and
security responsibilities.
Abandoning traditional advertising methods like direct mail in favor
of social media promotion, generating greater product and service
exposure for less money.
Leveraging digital twin technology to study and reengineer factory and
warehouse operations, testing workflow theories without disrupting
production.
Using 3D printing technology to prototype new or upgraded products and
devices, expediting the development and testing cycles.
Converting from VCR-based video surveillance to IP digital video,
allowing fewer guards to monitor more space.
Outfitting systems with smart sensors to facilitate remote maintenance
and management, cutting down on expensive site visits.
Creating mobile apps to encourage customer-company communication,
fostering more sales and increasing customer lifetime value.³

Individual DT projects are often combined into an overall digital
transformation campaign, which can be finite in scope and duration or
periodically renewed as new digital technologies emerge and mature,
providing new transformation openings.

DT Market

Reflecting the present popularity of digital transformation, research
firm Markets and Markets predicts that the DT market will grow from $521.5
billion in 2021 to $1,247.5 billion by 2026, at a compound annual growth
rate (CAGR) of 19.1 percent during the forecast period.

Major DT growth factors include:

Increased investments in digital marketing
Support for remote work environments
Integration of leading digital technologies, especially machine learning
(ML)

Prominent DT players include:

Microsoft
IBM
SAP
Oracle
Google⁴

Digital Transformation Drivers

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Digital transformation is a movement that seeks to reinvent or revitalize
enterprise operations through the application of digital technology. Below are some of today’s major DT drivers.

Process Automation

Process automation is the transformation of manual or
hands-on business processes into software-driven processes, usually using
robotic process automation (RPA). The Association for Intelligent
Information Management (AIIM) defines RPA as “the term used for software
tools that partially or fully automate human activities that are manual,
rule-based, and repetitive. [RPA] tools are not replacements for the
underlying business applications; rather, they simply automate the already
manual tasks of human workers.”⁵

Remote Work

For today’s "knowledge worker," basically, anyone who works primarily with a
computer, the era of remote work
has arrived. Enabled by decades of digital innovations – from portable
dial-up computer terminals, fax machines, and personal computers to the
Internet, smartphones, and the cloud – today’s global information
infrastructure allows millions of employees to work full-time (remote
work) or part-time (hybrid work) from their home or other non-enterprise
location.

Figure 1. Working Digitally Anywhere, Anytime

Source: Pixabay

Relatively new digital technologies like virtual private networks (VPNs) and
two-factor authentication have helped render remote work both productive and
secure.

Data Analytics

Using software to analyze data is an old practice. However, the use of
the Internet combined with the ability of modern enterprise applications
to extract and store millions upon millions of financial and other
records has greatly expanded the volume and breadth of data available,
creating a challenge that is now being met by Big Data Analytics. The
distinction is not simply that analytics have become bigger and better,
but that they are fundamentally different.

Describing this change as it began to fully emerge, a 2012 Harvard
Business Review assessment offered the following example: “Booksellers in
physical stores could always track which books sold and which did not. If
they had a loyalty program, they could tie some of those purchases to
individual customers. And that was about it. Once shopping moved online,
though, the understanding of customers increased dramatically. Online
retailers could track not only what customers bought, but also what else
they looked at; how they navigated through the site; how much they were
influenced by promotions, reviews, and page layouts; and similarities
across individuals and groups. Before long, they developed algorithms to
predict what books individual customers would like to read next –
algorithms that performed better every time the customer responded to or
ignored a recommendation.”⁶

Edge Computing

One of the newest of today’s transformative digital technologies, edge
computing involves the positioning of compute, storage, and networking
resources proximate to the end users they serve and the various devices
these end users employ.

The impetus behind edge computing was the realization that some data,
like that generated by autonomous automobile sensors, must be processed
immediately. It cannot be shuttled to a cloud repository, processed by a
backend analytics package, and returned to an automotive steering system –
at least not in time to prevent an accident. The data must be processed on
the spot, or “at the network edge.” The situation is analogous to a
paramedic attending an accident victim. The paramedic can relay the
patient’s vital signs to the hospital, but must act immediately to stop
any major bleeding.

Autonomic Computing

Analogous to the autonomic nervous system that automatically regulates
most human bodily functions, digital-based autonomic computing, aka
self-adaptive computing, promises a major transformation in the way IT
systems, especially remote systems, are maintained and managed. Autonomic
systems are:

Self-configuring – They can “dynamically adapt to changing
environments,” usually according to established IT policies.
Self-healing – They can “discover, diagnose, and react to
disruptions,” initiating policy-based corrective actions.
Self-optimizing – They can “monitor and tune resources
automatically,” most commonly by reallocating resources to accommodate
changing workloads.
Self-protecting – They can “anticipate, detect, identity, and
protect against threats from anywhere, [including cyber threats]”⁷

Legal Metrology

One area where digital transformation offers considerable potential is
“legal metrology,” or “the application of legal requirements to
measurements and measuring instruments.”⁸

As explained by analysts Katya Delak, Bob Hanisch, and Chuck Ehrlich,
“Legal metrology relies on a set of tests, calibrations, and method
assurances through a variety of established protocols. In some cases,
calibrations are done by hand.” This operation “might include paper
documents, hard copy files, file scans, and nowadays digital files stored
locally or remotely on a cloud-like system. In all, considerable
variability exists in how data is collected, stored, maintained, and
managed.

With that as background, “[The] process could certainly be streamlined,
where many steps could be transformed to be carried out on digital
systems. Similar enabling technologies that support constructs like smart
factories could be used to enable a digitalization of the processes that
support legal metrology, thus facilitating testing, calibration,
certification, and reverification processes. Digital technologies could
also help simplify the management of the supporting data and
documentation, making it more accessible to users and more easily
searchable and revisable when appropriate.”⁹

Enterprise Search

In addition to legal metrology, a more familiar topic, enterprise search,
has become a crucial candidate for digital transformation. Enterprise
search is the practice of “identifying and enabling specific content from
multiple enterprise … sources”¹⁰ such as files, databases,
e-mail repositories, calendars, intranets, etc. The term is used to
describe software that searches for information within the enterprise –
software that might be transformed through the addition of “natural
language querying, automatic relevance tuning, and content recommendation
engines,”¹¹ according to analyst Isaac Sakolick.

As for return on investment, Sakolick contends that “[it’s] hard to think
of another technology with a wider scope of customer and employee-facing
use cases – from revenue generation in e-commerce systems to efficiencies
in manufacturing. Plus, many IT departments can find cost savings by
consolidating legacy search index implementations. So this year’s trend
will be to dust the cobwebs off poor search experiences, clunky data
integrations, and algorithms driven by heuristics and replace them with
more intelligent search capabilities.”¹²

Security and Continuity

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Although digital transformation is often regarded as the key to
enterprise growth and competitiveness, there are two significant
downsides: security and business continuity.

Consider, for example, the Internet of Things (IoT), a key DT enabler.
While the IoT offers unprecedented opportunities to build smart homes,
smart buildings, indeed, smart cities, the IoT also offers a fantastically
rich growth medium for the development and propagation of malicious
software including ransomware and other malware that can disrupt enterprise
operations on a scale previously unimagined.

This does not mean that IoT – and other high-risk technologies – should
be avoided. It means that DT advocates should ensure that security
planning is front-and-center when planning a digital transformation
project.

In a similar vein, the effect of digital transformation is to change how
business functions are performed. Since a business
continuity plan provides for the continued operation or rapid recovery
of an enterprise’s critical business functions in the event of a disaster
or other major disruption, the enterprise business continuity plan and its disaster recovery and incident response plans should
be reviewed and revised prior to bringing a new DT project online.

Recommendations

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Despite the value of digital transformation – particularly to an
enterprise’s bottom line – DT operations are often conducted in a
haphazard fashion as a series of one-off projects with no central
coordination or management, or even digital tools to measure DT progress.
To help maximize the return on digital transformation investment, the
enterprise CEO should consider the following:

Appoint a DT Planning Team

The Digital Transformation Planning Team would be responsible for:

Highlighting DT opportunities, like business process reengineering.
Identifying the relevant digital technologies, like robotic process
automation.
Cooperating with the CIO to mature, procure or develop the required
technologies.
Establishing a set of digital transformation development plans.
Ensuring the execution of these DT plans.
Measuring the impact of the plans in terms of revenue, savings, and
new business opportunities
Reporting the status of digital transformation in the enterprise to
senior management.

Perform an Information Technology “Uplift”

While is might be considered placing the cart before the horse, analysts
Nathan Furr, Andrew Shipilov, Didier Rouillard, and Antoine Hemon-Laurens
recommend doing an “IT uplift,” observing that “[for] many [enterprises],
digital transformation starts with upgrading the [enterprise’s] IT
infrastructure as well as mobile infrastructure, data lakes, and the
cloud. Essentially, this is an opportunity to use budget allocated to
‘digital initiatives’ to modernize IT and communications platforms within
the enterprise.”¹³ From the standpoint of digital transformation, an IT uplift will help
pre-position the enterprise for certain DT projects, thereby reducing any
opposition to DT investment.

“Upskill” the DT Talent Pool

Analysts Linda A. Hill, Ann Le Cam, Sunand Menon, and Emily Tedards
remind us that digital transformation involves understanding the
enterprise workforce, specifically, the

“Digital natives, who grew up with digital tools.
“Digital immigrants, who are open to learning and changing.
“Digital refugees, who avoid digital tools they view as
unsettling or scary.”

With respect to the immigrant and refugee elements, a major component of
digital transformation is education, which includes attending to any
apprehension about what DT means “to me.” Also, “leaders must be empathic
about the stress employees feel as they grapple with the complexity and
change that comes with digital transformation,” including the real
potential for job loss.¹⁴

Embrace a Digital Transformation Framework

According to the Boston Consulting Group, only 30 percent of enterprises
successfully navigate their digital transformation. That’s why analyst
Cynthia Harvey suggests using a recognized and respected digital
transformation framework, from organizations like the Massachusetts
Institute of Technology, the Boston Consulting Group, PwC, and Gartner.¹⁵

Web Links

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Continuity Central: http://www.continuitycentral.com/
SANS Institute: http://www.sans.org/
US National Institute of Standards and Technology: http://www.nist.gov/

References

¹ “Teach with Digital Technologies.” State Government of
Victoria, Australia. 2019.

² “What Is Robotic Process Automation?” AIIM. 2019.

³ Cynthia Harvey. “Digital Transformation Guide: Definition,
Types & Strategy.” eWeek | TechnologyAdvice. September 10, 2021.

⁴ “Digital Transformation Market by Technology (Cloud
Computing, Big Data and Analytics, Mobility/Social Media, Cybersecurity,
AI, and IoT), Deployment Type, Organization Size, Vertical (BFSI, Retail,
Education), and Region – Global Forecast to 2026.” MarketsandMarkets.
November 2021.

⁵ “What Is Robotic Process Automation?” AIIM. 2019.

⁶ Andrew McAfee and Erik Brynjolfsson. “Big Data: The
Management Revolution.” Harvard Business Review. October 2012.

⁷ “An Architectural Blueprint for Autonomic Computing.” IBM
Corporation. June 2005:4-5.

⁸ “What Is Legal Metrology?” International Organization of
Legal Metrology. 2021.

⁹ Katya Delak, Bob Hanisch, and Chuck Ehrlich. “Why the Recent
Global Attention on Digital Transformation in (Legal) Metrology?" Measurement Matters, Vol. 11, Issue 4. October 2021.

¹⁰ “Enterprise Search Market Is Going to Boom | Microsoft,
Attivio, Google.” Digital Journal Inc. January 4, 2022.

¹¹ Issac Sakolick. “Top 5 Digital Transformation Trends in
2022.” TechTarget. May 4, 2022.

¹² Ibid.

¹³ Nathan Furr, Andrew Shipilov, Didier Rouillard, and Antoine
Hemon-Laurens. “The 4 Pillars of Successful Digital Transformations.”
Harvard Business Review. January 26, 2022.

¹⁴ Linda A. Hill, Ann Le Cam, Sunand Menon, and Emily Tedards.
“Digital Transformation: A New Roadmap for Success.” Harvard Business
School. February 7, 2022.

¹⁵ Cynthia Harvey. “Digital Transformation Guide: Definition,
Types & Strategy.” eWeek | TechnologyAdvice. September 10, 2021.

About the Author

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James G. Barr is a leading business continuity analyst
and business writer with more than 40 years’ IT experience. A member of
“Who’s Who in Finance and Industry,” Mr. Barr has designed, developed, and
deployed business continuity plans for a number of Fortune 500 firms. He
is the author of several books, including How to Succeed in Business
BY Really Trying, a member of Faulkner’s Advisory Panel, and a
senior editor for Faulkner’s Security Management Practices.
Mr. Barr can be reached via e-mail at jgbarr@faulkner.com.

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