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What digital transformation really means

Galen Gruman | June 16, 2016
The periodically hot term is hot again, but most people don't understand where its real power lies.

Digital transformation, aka DX, is hot -- and if you're not doing it, your company will die and you will lose your CIO or IT leadership job. You'll -- shudder -- be disrupted! Or fail the wrong side of the Innovator's Dilemma. That's the message over the last few months from consultants, pundits, and of course vendors.

But wait -- wasn't digital transformation hot in the late 1990s and again in the mid-2000s? Indeed it was. It's hot again, mainly for the wrong reasons. That is, vendors want you to buy stuff because IT has been cutting back.

There is a very good reason to invest in digital transformation. But it's not the digital transformation you're usually sold.

First, here's a typical definition of digital transformation that means the same things consultants and vendors have been saying for years: keep up with new technologies, and use them -- only the technologies have changed:

Digital transformation is the application of digital technologies to fundamentally impact all aspects of business and society.

If your company has not been applying digital technologies over the last 40 years, you don't exist. The time-share, mainframe, departmental computing, client-server, PC, ERP, Internet, cloud, and mobile eras are all old news today. You already use some of these, of course. If anything, most of these eras coexist in your technology stack.

But the adoption of these technologies doesn't mean you're digitally transformed, even if you are digitized. Most of these technologies have been applied to existing processes: to digitize or computerize those processes, mainly for efficiency. Paper forms became electronic forms, cash became bits, paper documents became PDFs and HTML pages, sales transaction logs and invoices became sales-force automation and ERP. The underlying nature, at least to start, was the same, but now digital only.

An ugly word is at the root of digital transformation

What should digital transformation mean? The key is in an ugly word that "transformation" weakly implies: "fungibility."

Fungibility means the ability for something to be changed. That's not the same as the ability to change something; fungibility is an intrinsic characteristic, not a force imposed by an external source. Transformation is the act of making substantive change; fungibility is the intrinsic ability to be substantively changed.

Some digital transformation proponents have long recognized that digital transformation is more than digitization. They start with that definition I quoted, but continue along these lines, which comes from Isaac Sacolick, global CIO and a managing director at Greenwich Associates, an advisory services to the financial services industry, whom I've long known from joint conference work.

Digitally transformed businesses typically develop an ecosystem that blur the lines between supply chain, partner, customer, crowd, and employee and both strategy and execution are heavily influenced by this ecosystem.


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