Digital transformation has been the tech industry’s buzzword in recent years — and for good reason. During the pandemic, a huge number of businesses survived by radically transforming their business to operate online. However, has the hype gone too far? A more in-depth analysis reveals the real story with digital transformation is far more complex.
There is no shortage of reports showing that digital transformation is taking place at lightning speed — according to McKinsey & Company, the pandemic has accelerated this change by seven years. Similarly, the Boston Consulting Group (BCG) found that 96% of surveyed businesses expected to accelerate execution of some transformation projects over the next 24 months. However, in the same analysis, BCG also found that 76% of those businesses planned to slow down at least some of their digital transformation projects over the same time period. Another surprising study found that among South African enterprises, 66% of respondents reported that digital transformation had gone backwards in their organisations, and a further 20% said this slow down had been significant.
What is going on?
While the overall levels of digital transformation have been impressive, the nature of this shift has changed. The BCG report found that transformation efforts were being refocused into improving existing IT functioning. Budgets were also being reallocated to cybersecurity, automation, cloud migration, artificial intelligence, machine learning, analytics and crowdsourced innovation. In contrast, organisations planned to reduce their investment in risk management, supply chain management and human resources.
A further issue is that the ability of a company to engage in meaningful digital transformation during the pandemic depended on existing ‘digital readiness’. The study in South Africa found that remote work undermined transformation efforts, and that IT budgets were dedicated to facilitating remote work rather than higher-level tech investment (e.g., AI and ML). This suggests that less digitally prepared organisations had to put their efforts into survival rather than enabling true transformation.
Many businesses simply cannot afford to keep investing in transformation activities during such uncertain economic times. According to research by HFS Research and KPMG, 60% of enterprise tech leaders felt that COVID-19 had accelerated digital transformation, but only 13% planned to increase investment in emerging technology in response.
Selective digital transformation
With the high cost of digital transformation, many businesses are using a selective approach by focusing on tech that provides fast return on investment. According to the HFS & KPMG report, hybrid and multi-cloud computing are seen as the most important post-pandemic investments.
Customer experience futurist, Blake Morgan, has warned against, ‘Digital transformation for transformation sake.’ It is easy to be caught up in the transformational buzz and be swayed by over-hyped technologies. However, more modest efforts focused on specific products and/or processes can be more effective, particularly for smaller businesses unlikely to make the next breakthrough in AI or ML. Finally, remember that digital transformation is about people, not technology. Buying a new tech solution is unlikely to future-proof your organisation without a dedicated and adaptable talent pool to utilise it.
The extent of digital transformation during the pandemic has been incredible — no one is denying this — and in the long term we will all benefit from it. However, it is easy to forget that the developments by big tech companies and innovative start-ups do not reflect the wider industry, and that quieter, targeted change is just as important.