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What’s IT got to do with digital transformation?

December 20, 2021

As tongue-in-cheek as the question in the headline might seem to some, I’ve come to realize that it’s not at all clear to many people what IT really has to do with digital transformation. Sure, most will acknowledge that computers are involved somehow, but for many, the term “IT” evokes a whole slew of connotations. These mostly point to IT being a necessary evil that sits in the basement, is run by nerds, never delivers any real value, and costs too much.

Whatever value creation activities people perceive that their organization is involved in, IT sure doesn’t play any major role in it. I’m not claiming that managers, leaders, and other stakeholders, if asked directly, would come across as clueless. What I am claiming is that on an emotional level, this is where many people are.

A real-world connection

One of the clearest examples I’ve come across was when I, a few years ago, worked with a public transportation company. In their every fiber, their perception of what their value-creating activities were included things like printing timetables, driving busses and trains, and maintaining bus stops and rails. Only, they didn’t. Most of these activities were carried out by subcontractors. Increasingly, the company added value to the actual transportation services by collecting, analyzing, and disseminating information using IT. They provided real-time location information, payment services, online travel planners, a website, etc. In short, they provided digital services that facilitated the use of traditional physical services.

Yet they lacked, for example, even rudimentary skills in IT architecture (the budding realization of which was the reason I was there). They had not considered this and similar skillsets to be required for their value creation.

They have since thoroughly embraced IT as the digitalization enabler it is, however, many companies haven’t.

What is digital transformation?

Let’s take a step back and define digital transformation. What do we mean by that? At the most basic level, anything we use computers for is “digital”. We have been digitalizing aspects of physical reality since computers were invented. These days when we talk about digital transformation we mean something radically different. It begins with quantum leaps in our ability to collect, manage, analyze, and exchange information, brought about by exponentially growing technology capabilities that include cloud computing, ubiquitous and fast internet connectivity, mobile devices, AI, and machine learning. This explosion of potentiality is the foundation for new heights of value creation.

Digital transformation happens when the changed behavior among customers and employees exploiting the technology leads to realizing these values. Without this last crucial step, it’s just more computers.

Two types of value creation

We distinguish between two main types of value creation for an organization. The first type has to do with advancing operational efficiency. This has been going on for decades, but all the goodies of contemporary IT brings enormous potential to automate most aspects of rote routines. Data quality, security, availability, and compliance can be massively increased.

The second type has to do with creating new services, business models, even whole industries, that cater to the emerging digital habits of existing and new customers. This has been a potential for the last 20 years or so, famously exploited by companies like Netflix, Facebook, and Spotify. But now, any organization that wants to interact with anyone will increasingly have to do so using digital channels and services. To be relevant today and tomorrow means to be digitally savvy. If you’re not, you’re dead.

Conclusion

This brings us back to the question posed in the beginning. What’s IT got to do with any of this? Just to remind ourselves of what IT means: Information Technology. Technology to manipulate information. And we’ve seen that it is precisely this technology that underpins digitalization. So we must now conclude that anything we want to achieve must have an IT component.

The emotional shift required by leaders and followers alike is that IT is now always part of everything we do. We need to find new and better ways of integrating IT in customer interactions, business development, and initiatives to improve operational efficiency. No longer can Business and IT fight it out on either side of a wall. Thoughts on how this could change will be forthcoming in future blog posts.

 One of my clients has renamed IT to BT: Business Technology. That seems about right!


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