Striking The Right Balance: Digital Transformation Versus IT-Led Transformation

Nikhil Chaturvedi

The question of how digital transformation (DX) is different from traditional IT-led transformation (IT-LX) crops up often. Several people insist that even traditional ERP implementations provided process transformation, increase in productivity, greater user convenience, automatic notifications through email and mobile SMS, and so on. They are absolutely right. Businesses have gained significantly even with IT-LX in the last 15 years. However, there is something new and special about DX. So, what is new in DX, and what extra gains can it offer to business beyond those made possible through IT-LX?

Based on my experience as a CIO and at a leading software company, there is a difference in the outreach of DX and that of IT-LX. While IT-LX could synergize only people and information systems. DX combines people, information systems, and objects. It facilitates the merger of the digital world with the physical world (encompassing a wide range of objects like manufacturing equipment, refrigerators, cameras, vehicles, sensors, and so forth), with an objective to achieve business benefits.

Hearing the signals

People and objects used to talk to information systems earlier, as well. They were capable of sending signals. However, our information systems were not able to listen to them. With digitalization, our information systems are able to better hear, comprehend, assimilate, and analyze those signals now.

Whenever you are in a dilemma about the type of transformation under discussion, please check if the transformation is leading to change in business models and/or reimagining of business processes and/or drastically improving the workstyle of end users. If yes, it is DX. If not, it is just IT-LX.

New digital technologies like the Internet of Things (IoT), artificial intelligence (AI), machine learning (ML), robotics, and blockchain are providing us with a new set of levers. The examples below show what DX is making possible, over and above what IT-LX provides.

  • Digital technologies enabling new business models

Pay-per-use contracts and outcome-based contracts are revolutionizing the existing business models. Using IoT solutions, precise and real-time measurements from sensors can be read and processed. Hence, gas companies can offer services-based contracts rather than product-based sales contracts to their customers. A leading industrial machinery company (manufacturing pumps and compressors) has started to provide usage-based contracts to chemical and other manufacturing companies, rather than just selling equipment. This transformation from a product-based to a service-based business model has been made possible through DX.

  • Digital technologies enabling new business processes

Digital technologies like AI and ML have the potential to improve the efficiency of repetitive processes. The process of resume matching against job description documents is one such example. Traditional IT-LX still needed manual intervention, wherein ERP systems were just providing data for HR talent management employees to sift through the resumes. Future improvements through ML will reduce scope of error while matching various resume shortlisting criteria. Likewise, efficiency in the invoice-to-payment matching process has significantly increased through automated comparison using ML.

  • Digital technologies enabling a new work style

Digital technologies will be truly adopted and appreciated by employees only if they can make a substantial change to their working comfort and efficiency. Mobile user interfaces and apps have been revolutionizing the work style since the beginning of this decade. However, they were limited to providing information or simple transactions. Digital technologies are expected to take it to the next level. For instance, staff-free retail stores will revolutionize the way customers shop and the way retail companies plan the deployment of their staff. This is possible through the remote sensing of mobile phones of customers entering the store, remote sensing of items picked up through a maze of smart cameras, and automatic deduction of payment through m-commerce.

With the help of machine learning, smart cameras can scan the personal protective equipment (PPE) worn by plant employees, and this information can be processed to highlight whether the PPEs are of suitable size and grade. This will take employee safety to a greater level. This was not possible in the traditional IT-LX.

Reskilling required for DX

To cope up with the capability requirements in the digital age, employees need to possess knowledge of a wider variety of technologies. Organizations need to develop strategies around “learning” rather than “training.” With a plethora of self-learning resources available on the Internet, continuous learning of new technologies is easier. In our team, we have adopted a multi-pronged learning strategy, with a special focus on “rotation” program, wherein field people from country offices get to spend three to four weeks with solution development teams. The results have been very encouraging towards learning new technologies.

Expectations for true business transformation

DX is a natural evolution of IT-LX but has a much wider scope of work. Company boards expect IT and lines of business to leverage DX and contribute towards business growth. Most organizations are developing bi-modal teams to strike the right balance between IT-LX and DX. Various approaches are being tried out, as it is a learning phase for all. What are your plans for upskilling and driving digital agenda in your organization?

For more on innovation, IT, and business growth, see 2018 Predictions, Pt. 4: Emerging Digital Technologies Will Make An Impact On Business.

Nikhil Chaturvedi

About Nikhil Chaturvedi

Nikhil Chaturvedi is a vice president in the SAP Industries & Digital Leadership team and is based in Tokyo. Earlier, he has worked as Group CIO for JSW Group managing its steel, power, cement, and ports businesses.