A friend in a senior position recently confided in me that digitalisation has disappointed many of his colleagues and their respective management. As a practitioner who believes in the value that IT strategy and digitalisation can bring to organisations large and small, I was disappointed to hear this.

Classic IT consulting delivers results through projects using a defined methodology and framework, while IT Strategy and Digitalisation consulting takes into account the current economic situation and needs to understand the desired future economic positioning of a client. Once this is understood, it is necessary to weave a new profitable blanket for the client, using both information technology and data. Depending on the desired outcome, this can be achieved either through specific projects or as a completely new value creation activity.

CIOs (Chief Information Officers; sometimes called CDOs) need to focus on two goals: cost effectiveness, achieved through the so-called ‘digital project‘, which focuses mainly on automating manual processes. Digital Value Creation, on the other hand, is where innovative value is created through digital transformation. Both are important to a company’s future, but Digital Projects are seen as business-as-usual, while Digital Value Creation is something people want to be associated with.

In terms of the digital innovation required for digital value creation, there has been a lot of hope in the past that the CIO would focus on digital transformation. This led to mismatched expectations, as CIOs still have to focus on the day-to-day business, which requires a lot of bandwidth and a focus on cost efficiency and productivity.

Now, I would estimate that at least 80% of CIO organisations are efficient/very efficient in business as usual and attuned to delivering projects on time and on budget, but lack critical skills and capabilities to deliver transformational value. This is not their problem alone, as another source of lost hope is unsatisfactory digital value creation budgets and illusory timelines. Where the C-Suite expected a quick turnaround, value chain partners were not ready or had not even started what is in reality a DNA change.

The way forward

We are in the midst of the Fourth Industrial Revolution, which spans the entire supply chain. The promises of digital transformation embedded in Industry 4.0 are:

• New plateaus of productivity
• Accelerated product innovation/time to market
• Improved quality
• Maximum flexibility.

Simplification: Digital projects support better productivity and quality, while digital value creation targets time-to-market and flexibility. Companies that want to succeed in the future will need to master both practices. As mentioned, the majority are excellent at Digital Projects, but the winners will need to be smart about digital innovation and transforming their ecosystem. As this will tie up scarce resources, it is therefore imperative to exploit every opportunity for a standardised approach.
Such an approach is outlined below:

Start with the honest conversation: Invite your C-Suite to share what is currently driving the business and agree on either an evolutionary or revolutionary approach. Evolution will lead to digital projects where automation, removing the human element, robotic processes, etc. will be discussed. When it becomes clear that core margins are eroding over time and that productivity improvements are not delivering measurable profitability, it is time to rethink in terms of digital value creation. The good news is that both approaches benefit from a common framework based on three pillars.

Continue with the problem statement. The most important factor is that you are able to identify the real underlying problem! The problem is that people tend to get comfortable in stable situations. This can obscure the real problem and lead to superficial problem statements. For digital projects this may even work as they tend to deliver incremental improvements. For digital innovation, it will lead to disaster and even more disappointment in the minds of decision makers.
So don’t stop until you are 100% satisfied that the real problem has emerged and is on everyone’s mind. Either peel back the onion by asking “why” one too many times, or challenge the team until everyone agrees that the real problem has been identified. Avoid any form of groupthink. A good idea is to think backwards from the customer (the C in B2B2C) and state what value your company’s product or service will add. Then validate by thinking forward and being honest about whether this will create better value for the customer.

Next, ensure solution diversity: This is where the experience and lateral knowledge of the team plays an important role. On the one hand, you need to know the ‘mainstream’ solution, but members of your team also need to have been exposed to innovative solutions. Be able to evaluate even the most innovative solution and break it down to how it will ultimately improve your business. Push the boundaries of what the business can take. Where possible, create a differentiator.
This is another crucial step on the way to a digitalised future, and my own experience is that a critical success factor is understanding all the angles, such as how a solution is built/coded/architected, what its architectural impact is on the existing landscape, how future-proof it is – technologically and process-wise. Chose/use an economic model to prove success (ROI, NPV, etc.) while ensuring a total cost of ownership (TCO) calculation and measurement. Finally, how will the solution change your organisation and how will you manage the change? The list goes on…

Finally: Holistic execution. Leaders implicitly have this at the back of their minds, but I think it is important to repeat this mantra. If you want to create a winning solution: People, Process and Systems!

People: Find a healthy mix of experience and enthusiasm. Identify a champion for the initiative. Lead with a personal touch and be authentic. Make sure everyone is on board with the vision.
Process: Map the current process and model the process to be. Support the process: Process follows standards. Core (value differentiating) process: Functionality follows process. If a supporting process needs to change, redesign it with stakeholders. If a core process appears to need change, stop: Stop, go back to the business and assess the need. Re-evaluate your problem statement.
Systems: Choose the best fit with a good degree of configurability. Golden rules: Stay as close as possible to the standards provided by the leaders, and configuration is better than customisation.

A final quick word on the general methodologies of waterfall vs. agile. I believe that an agile approach is better for digital value creation, where the final product and its features are not known at the beginning. The team is constantly learning and adapting, so it is the right methodology. Digital projects, on the other hand, can be based on a specified waterfall. However, here it is very important to master the agile manifesto, as digital projects hardly come alone, and a sprint/scrum-based approach will increase effectiveness and productivity across multiple jobs. My advice: if you go agile, be honest about the need to fail early.

Conclusion: Work the problem and work it hard until you are sure of the true problem statements, create a solution space that includes all the traditional and innovative solutions you can think of, then finally work with a trusted team, ensure the right processes and execute the system implementation rigorously.
But start the journey with the honest discussion and set expectations accordingly.
If you follow this simple logic, you will become a master of digital projects and digital value creation, as the two come together to create the differentiating competitive advantage of the future.

Do you agree? I look forward to hearing your reaction!