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Why digital transformation challenges long-held beliefs about strategy

'Digital assets' are in constant flux but leaders still believe that long-term planning is the essence of strategy, writes David J Harding.

In my last article, I highlighted the criticality of gaining consensus on what digital transformation actually means to everyone before embarking on digital transformation activities. Despite a myriad of definitions and perceptions, I suggested that the one thing everyone involved in a digital transformation has in common are ‘digital assets,’ defined in terms of data.

The fact that these digital assets, and the technologies that underpin them, are in constant flux – what I call the ‘adaptive digital loop’ – means that the ability to manage continuous change replaces long-term planning as the critical driver of success, I argued.

However, organisations planning to manage this continuous flux still need to make allowances for longer-term projects that help develop their baseline capabilities, such as partnership development or infrastructure builds. So, how can digital leaders manage this apparent duality of managing continuous change while completing longer-term projects?

True digital transformation requires an acceptance that not everything can be planned months or years in advance. (Photo by Mihai Todoran / Shutterstock).

The first task is to escape the mindset that defines IT as being separate from the business. This dualism has shaped perceptions of IT for decades – casting IT departments as perpetually ‘failing’ to keep up with ever-changing ‘business’ requirements – and has set the debate around IT leadership: do companies need a CIO or ‘just’ an IT director? Should this person report to the CFO (a sure sign that IT is perceived as just another cost centre) or does the CIO ‘deserve’ a place on the board?

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This distinction between IT and ‘the business’ is being eroded by the drivers of digital transformation. Take cloud computing: cloud technologies have enabled decentralisation of IT products and services to the extent where business leaders can increase ownership their IT needs when developing new IT-enabled capabilities. This blurs traditional ‘boundaries’ between ‘the business’ and the IT function, and between business strategy and an enabling IT strategy. These are becoming one and the same, commonly referred to as a digital business strategy. 

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Digital strategy: managing dynamic and passive initiatives

A more useful distinction is between dynamic and passive initiatives. Dynamic initiatives, those that deliver incremental change, are needed when responding to high priority and rapidly changing demands; these tend to be delivered through ‘agile’ methods and deliver new rapid-fire capabilities. Passive initiatives are slower moving and cost-heavy, delivering longer-term, static capabilities (e.g. infrastructure) or those that require significant business change (e.g. ERP systems).

Digital business leaders need practices and capabilities that allow them to manage both active and passive initiatives simultaneously.

Digital business leaders need practices and capabilities that allow them to manage both active and passive initiatives simultaneously. The field of programme management offers various concepts, such as programme identification, definition, evolving outcomes and ‘islands’ of stability, that lend themselves well to defining and managing both dynamic and passive changes.

However, functional heads (including those in the IT function) and end-users rarely come together on a pre-planned, frequent basis to develop their response to these dual demands. Cross-functional stakeholders (including users) need to develop capabilities and environments where they can collaboratively design and then constantly monitor and readjust long-term digital transformation objectives and priorities and timeframes for their dynamic and passive digital initiatives.

As part of this monitor/adjust capability, joint teams will need to agree on how current disparate initiatives may actually complement or hinder the journey towards mutually agreed digital transformation objectives. And business leaders must also be accepting of the need to not only reshape (or even cancel) recently launched initiatives, but also to reprioritise efforts, and refresh long-term objectives on a more frequent basis, up to a point where the constraints enshrined in annual budget must also be tackled.

This approach challenges the very nature of traditional annual budgetary planning and spend across the entire business. What scale of budgetary replanning can organisations tolerate within a given financial year, considering that digital transformation programme priorities could change every quarter, at least?

Suffice to say, organisations truly considering a shake-up in their approach to digital transformation programme capabilities will have to experiment and ‘hone’ these skills over time. Gaining agreement to this will not be easy. Getting on the same page with a constantly changing and never-ending digital transformation programme, as an alternative to static business objectives, challenges engrained teachings and beliefs about strategy.

While this appears to be a ‘big ask,’ digital leaders should weigh the costs of such radical and fundamental changes against the penalties of failure.

Professor David J Harding is a business management consultant and executive coaching professional at The Harding Method with over 25 years of IT enabled business transformation experience.