Digital transformation is NOT about technology
Indian IT Services companies all seem to be riding on the "digital transformation" wave. But what is digital transformation? And what do these companies mean by "digital transformation"?
The resemblance is uncanny. Taken together, this bouquet of “mid tier IT Services firms” has not performed very differently from the “big four” as far as quarterly results are concerned. Most companies have seen flat, or mildly positive, profit growth; and flat, or mildly positive revenue growth.
Everyone seems to be talking about digital (though some might use different words for it).
(emphasis added now)
A few years back, this quote, initially attributed to Duke University professor Dan Ariely was making the rounds:
Our theory is that at different points of time in life, different things become “teenage sex”. Things that people claim to do, think others are doing, but don’t really have a clue of what it is. The teenage sex of early 2010s was big data. Later on in the decade, perhaps, we had “AI” and “ML”. Data science appeared and disappeared somewhere at this point in time.
And there is good reason to think that the teenage sex of 2020 is “digital transformation”. We’re sure you have been forwarded this image (or a version of it) on WhatsApp at least once:
So what really is digital transformation, and what do Indian IT Services mean when they say they are doing “digital transformation” (or just “digital”)? The latter is possibly the easier question so we will address that first.
We did a Google News search for “<big Indian IT company> digital transformation”. We found a few deals. What are these deals about? Let us look at a few of them. All emphases are ours.
American investment management company Vanguard said it would partner with Infosys to digitally transform the company’s operations.
The US-headquartered company said the partnership would deliver a technology-driven approach to plan administration and fundamentally reshape the corporate retirement plan experience for its sponsors and participants.
Infosys will assume day-to-day operations supporting Vanguard’s DC (defined contribution) record keeping business.
Infosys will implement a new, state-of-the-art, comprehensive, utility-focused, commercial-off-the-shelf Customer Service System (CSS) that will help Con Edison's strategic aspiration to deliver an improved customer service experience through a modern, flexible and efficient system.
[…] Infosys will provide end-to-end program management, business process blueprint, design, development, testing, deployment and post go-live stabilization support services.
As a part of the tie-up, India’s second-largest IT services firm will support LANXESS in its IT infrastructure digitisation strategy and enable its global workforce spread across 33 countries using a secure and fully managed modern workplace, according to a company statement.
Infosys will set up end-user centric modern workplace, which supports multi-lingual artificial intelligence-powered service desk operating from Europe and India for the LANXESS’s workforce, the statement added.
As part of the program, the company transformed and migrated 3 years of historical data comprising 4 billion finance documents and spanning over 100 entities and 6 global manufacturing sites, achieving a data compression of more than 60 percent. TCS leveraged its Secure Borderless Workspaces™ (SBWS™) operating model to successfully switch over to the new solution during the COVID-19 lockdowns, setting a new industry benchmark in minimizing the downtime to less than 2 days.
The new platform’s embedded data analytics have improved analytics efficiencies across the organization by 10 percent.
This is more of a “self-deal”.
Bhanumurthy B.M, President and Chief Operating Officer, Wipro said that as a provider of digital transformation services to some of the world’s most impactful businesses, it is critical that the company’s own core systems and technologies are running on intelligent and modern platforms that encompass the needs of the future.
Mindtree will apply agile and DevOps concepts to help Gardena develop and deploy SAP applications at a faster pace to meet the business demands of the digital age. This partnership contributes to the company's goal of transitioning from a shared services center to a DevOps-enabled product IT operating model.
And here is the Economic Times presenting a bigger picture:
With the pandemic impacting all aspects of life, businesses across varied global markets have suddenly realised the need to shift their services and offerings online.
Analysts have said IT budgets of organisations would be spent on saving costs and transitioning to online in the next two to four quarters.
Let’s stop here, since all this should make it clear what Indian IT services companies (and people who comment about them) think about digital transformation. It seems like a combination of some or all of:
Shifting business online
Shift operations to the cloud
Apply agile concepts
End to end program management
Take on day-to-day operations
This list is not exhaustive.
Doesn’t this look uncannily similar to the bread and butter of what IT Services business should be like? Mint had a nice comprehensive piece about digital, which we possibly covered last month. That piece, however, stops short of talking about “digital transformation”.
So what, really, is digital transformation?
David L Rogers, a Professor at Columbia Business School, author of The Digital Transformation Playbook, and a subscriber of this newsletter, says
“Digital transformation is NOT about technology. It’s about strategy, leadership and new ways of thinking”
Here is an article in the Harvard Business Review (possibly paywalled for you) that talks about the same thing.
A recent survey of directors, CEOs, and senior executives found that digital transformation (DT) risk is their #1 concern in 2019. Yet 70% of all DT initiatives do not reach their goals. Of the $1.3 trillion that was spent on DT last year, it was estimated that $900 billion went to waste. Why do some DT efforts succeed and others fail?
Fundamentally, it’s because most digital technologies provide possibilities for efficiency gains and customer intimacy. But if people lack the right mindset to change and the current organizational practices are flawed, DT will simply magnify those flaws.
For those not willing to exhaust one of the two monthly paywall-free articles on HBR to read this, the five lessons this talks about are
Figure out your business strategy
Design customer experience from the outside in
Recognise employees’ fear of being replaced
Bring Silicon Valley start-up culture inside
Notice that it is all about “strategy” and “customers” and “management”, and NOT about technology. Technology comes afterwards. Instead, when technology companies lead the “transformation” we get the sort of list we saw earlier. Moving things online and all that.
In any case, a quick search on Google Trends shows that interest in digital transformation in India doubled between early March (when the pandemic hit us) and late April.
In the longer scheme of things, though, this doubling isn’t as significant - the graph also shows that interest in the topic has fallen off the peak since. And if we look at the “linked queries” we find that two of the top three are “what is digital transformation” and “digital transformation meaning”.
Doing things differently is different from doing different things. In some ways, what Indian IT services seem to offer as part of “digital transformation” seems to be in the “doing things differently” realm. Real digital transformation, it appears, is about “doing different things”.
This article nicely explains the difference between digitisation, digitalisation and digital transformation (given how similar all these sound, it’s not surprising that people can’t tell one from the other).
Digitalisation is about applying technology into the existing business. Digital transformation means doing things in a new, digital way. Digital transformation is a broader term than digitalisation. Digitisation and digitalisation are parts of a digital transformation. Digital transformation includes all aspects of business, like customer understanding & touch points, growth strategy, enterprise mobile applications, process digitisation, worker enablement, performance, new business models, and more. It leads to an entirely new market, as well as new customer and business realities.
So the next time a company claims that they are doing a “digital transformation”, check if they are just talking about opening an Instagram account.