Finance Derivative article by CGI's Daren Rudd, "The Problem with Digital Transformation"

Summary: Daren Rudd, Head of Business, Technology, Innovation Consulting and Insurance at CGI in the UK writes in Finance Derivative (UK) about the problem with digital transformation. Business leaders are under “unrelenting” pressure to digitally transform their businesses. However, Daren thinks that the term itself “creates confusion and switches off the very people who need to buy into the goals we are trying to achieve.” Rudd believes that words matter, and that getting them wrong can sow confusion. For example, when the word “digital,” is used, a change program sets the expectation of a technology-led activity, when in fact, digital transformation is “a people-focused activity.” In addition, while digital transformation projects need direction to be successful, their endpoints are not fixed since change is continuous. 

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The problem with digital transformation

The pressure on leaders to digitally transform their businesses is unrelenting. However, I think the term itself creates confusion and switches off the very people who need to buy into the goals we are trying to achieve. The phrase might seem a straightforward way to group up change projects, so why does it matter what we call it? The teams involved know what they are doing, right? If you are involved in a digital transformation program, ask yourself how often you find yourself explaining what it is actually achieving.

In my experience, words matter. When we get them wrong, it sows confusion. We waste time explaining what we mean, making things harder than they need to be. Digital transformation in the insurance industry is already hard enough, without making things more difficult.

The Project Phoenix problem

In my early career, I worked on “Project Phoenix.” Honestly, to this day I could not tell you what it was meant to deliver. What I heard constantly though, from both technical and business teams was, “don’t worry, Project Phoenix will solve that.” In the end, it failed, as it became bloated with additional scope and a lack of focus on a specific problem. The name obscured the purpose. It became a dumping ground for problems, hopes, expectations and broken dreams. Ultimately, no one was happy as everyone had a different view of what it was meant to achieve.

Words aid or obscure intent and meaning. They align or disperse the direction of a team’s energy, and change programs need a lot of focused energy to succeed.

What we really mean by digital

By using the word digital, a change program immediately sets the expectation that this is a technology-led activity. While technology is, of course, involved, when you dissect digital transformation, it is really a people-focused activity. The outcomes are about changing the way business works to make life easier for people, whether that is customers, clients, patients, staff, or suppliers.

We spend much of our time explaining to business stakeholders that digital transformation is really about people, processes and product. This tells me we are using the wrong words. This risks teams losing focus on their purpose, becoming too wrapped up with the technology, rather than the people and their why. It is why we end up with voice-activated toasters.

We need to talk about transformation

Transformation suggests there is a fixed endpoint, like a caterpillar transforming into a butterfly. Unfortunately, in this analogy, after the butterfly transforms, it is stuck as a butterfly until it dies. It cannot continue to adapt. While a change project needs direction to be successful, the endpoint isn’t fixed. Your market, customers and competitors will continue to change, so a fixed endpoint 3-5 years is going to be an issue. What our transformation programs should be doing is creating a business that can adapt more easily to a world that changes at an ever-increasing pace.

Do you know your why?

We need to understand why we are doing all this digital transformation. A recent survey suggested that 92% of companies struggle to understand and define the benefits of their change projects – that figure still blows my mind.

To be successful, it is important to explain simply and clearly how we are making people’s lives better. It isn’t always about the financial results, the softer side of why we do things is just as important. Making something a joy to use is hard to define, but it has made Apple the most valuable company in the world.

If this is about business change, then change the business

Too often “digital transformation” just adds a layer of new technology over existing products and processes, or in other words, digital lipstick on legacy pigs. That isn’t transforming, that’s just putting roller skates on the caterpillar. And as an industry, we have been doing that for too long now.

Those original products and processes were constrained by what we could do with the technology at the time (often still relying on a lot of paper and brains). They were also designed at a time when changing slowly was good enough. It isn’t anymore. Organizations need to really question if they are thinking hard enough about reimaging their customer propositions.

Be like water, keep it fluid

We also run into problems when using the term “digital transformation” as the board is likely to hear this as an IT project which will finish and then they are “digital ready.” Today, business and technology are intrinsically linked. The ability to change and shift (and the ongoing investment required to support that) is going to be a constant – not a one-off transformation project.

The reality is what we are doing is a much more fundamental change to business principles and ways of operating and thinking. We can see with the recent noise around the potential impact of GPT4 and other large language models, it is hard to predict how that change will emerge, so being an adaptable organization will be the key competitive advantage.

Let’s talk business, not digital business

Using the word digital, which sounds like an “IT” word, puts a technical focus on the change discussion when we will actually be discussing people, products and processes. All business of scale relies on technology, even if it is a legacy built back in the 70s. Fundamentally, technology exists to deliver value for the business, and today the two are symbiotic.

Technology is now implicit in business. An adaptable business that is fit for the future is one that understands there is no separation between business and technology, and there is no separate discussion about business strategy and technology strategy. So, let’s just talk business.

So, if not digital transformation, then what?

Ultimately, this is not really about the phrase we use, but the intent we put behind the phrase and the importance of avoiding the “Project Phoenix” trap of your digital change program becoming a bucket for anything and everything we wish was better.

Taking a nod from the Jobs to Be Done framework, the job in many cases is to create a constantly adaptable business. At CGI we call it being fit for the future – which will mean something different for each business. My perspective is we should use fewer catchy terms and more words. We should use terms that talk about the problem we are looking to solve in a way that the whole business understands. Then, use more words and descriptions when we move on to the next problem to solve.

Not as slick as digital transformation, but in my view, definitely more effective.

This article originally appeared on May 23, 2023 in Finance Derivative, a global financial and business analysis magazine covering the financial industry, international business and the global economy.