Digital Transformation vs. IT Transformation: Confuse Them at your Peril

Digital transformation has been all the rage for half a decade now, but to this day, people are still confused about the specifics.

IT transformation, on the other hand, is easier to understand. After all, it is clearly about technology. It includes changing various governance processes and revamping organizational silos to be sure, but all such changes center on technology.

Basically, enterprise IT typically sucks in so many ways that if we can make it all suck less, we can count such a transformation in the win column.

Digital transformation, in contrast, centers on the customer. Not that technology isn’t important to digital transformation, of course. As we say at Intellyx, digital transformation is software-empowered and customer-driven.

Given that technology plays an essential role in digital transformation, you might wonder whether digital transformation is really just customer-focused IT transformation.

The differences between the two types of transformation, however, are far deeper – as are the complex interrelationships between the two.

Attempting one without the other may be risky. Confusing them is riskier still.

Clearing up the Differences

At Intellyx, we define digital transformation as strategic business transformation where customer preferences and behavior drive enterprise technology decisions. It is an end-to-end transformation across the enterprise that impacts all parts of the organization in order to adopt change itself as a core competency.

IT transformation is a bit easier to define. Here’s a definition from TechTarget SearchCIO: “IT transformation is a complete overhaul of an organization’s information technology (IT) systems. IT transformation can involve changes to network architecture, hardware, software and how data is stored and accessed.”

Of all the various ways these definitions differ, there are three main differences between IT transformation and digital transformation:

• IT transformation focuses on IT priorities, while digital transformation focuses on customer priorities.
• The only people who really care about IT transformation are in IT. Everybody – both inside a company as well as its customers, partners, vendors, etc. – cares about digital transformation.
• IT transformation has a clear, well-defined end state. Digital transformation is an ongoing process of dealing better with change over time, and thus has no end state.

Can One be Successful without the Other?

In many cases, the two forms of transformation go hand-in-hand. Sometimes customer priorities are IT priorities, after all. But that doesn’t mean it’s impossible to do one without the other.

Whether digital transformation can be successful for an enterprise that hasn’t undergone (or is currently undertaking) IT transformation depends on just how bad the pre-transformation IT organization has become.

It is certainly within the realm of possibility that an IT organization is fully up to the task of supporting a digital transformation initiative without the need for its own transformation. That being said, in my decades of experience working with enterprise IT organizations, I’ve yet to see such an IT shop. In fact, my skeptical side might even suggest that ‘enterprise IT’ is merely a euphemism for ‘screwed up IT.’

If your IT organization falls into the ‘screwed up’ category – as the vast majority do – then the limitations of your IT organization will impede or torpedo your digital transformation efforts.

Can We Skip Digital Transformation Altogether?

Asking the opposite question: whether IT transformation can be successful without digital transformation, has a subtler answer.

You might conclude from the discussion above that an enterprise should complete its IT transformation before embarking on its digital efforts. In practice, however, without digital’s strategic focus on the customer, IT transformation invariably ends up focusing on more tactical goals like cost savings and risk mitigation.

There’s nothing wrong with saving money or lowering risks, of course – but such thinking falls into the ‘IT doesn’t matter’ camp of the early 2000s, where IT was nothing but a tactical cost center. The end result: given the leg up digital transformation will give your competition, your company will save money all the way to an early grave.

The other pitfall that can doom IT transformation in the absence of its digital counterpart is an inappropriate categorization of a tactical technology choice as strategic.

This is a familiar pattern: IT gets all worked up about this technology or that and convinces business leaders that it is the panacea that will cure all of the organization’s ills.

From client/server and 4GLs to cloud computing, microservices, and even blockchain, the decades-long history of technology masquerading as business strategy has led enterprises down one tech rat hole or another, eventually bringing them further away from a successful business strategy rather than closer to one.

No matter how well IT transforms itself, no technology will solve the ills of the business by itself.

When IT Transformation Masquerades as Digital Transformation

Some enterprises fall into the trap of believing that the IT transformation they are planning is actually the same thing as digital transformation, or at the least, will accomplish the same goals.

This confusion arises in large part from misinformation. Certain incumbent technology vendors define digital transformation in terms of technology, in order to sell more of their invariably overpriced gear to unsuspecting IT execs.

Take, for example, HPE’s technology-centric definition of digital transformation: “Digital transformation is the process of integrating digital technology into all aspects of business, requiring fundamental changes in technology, culture, operations, and value delivery.” Without a mention of the customer, this definition is more of IT transformation than digital transformation.

Without the strategic focus on customer preferences combined with the ongoing march toward greater business agility, such technology efforts will end up lacking a strategic direction. Companies that have fallen into this trap may have migrated much of their IT to the cloud in order to save money, only to find that the cost savings are elusive and other, more strategic benefits are difficult to pin down.

The broader the IT transformation is, the greater these strategic risks become. Executives who have bought into the ‘software is eating the world’ mantra, yet focus their transformation efforts on IT rather than customer-driven digital transformation, may very well find that software ends up driving their business – but customers end up seeing little benefit.

As consumers, we run into this situation all the time. For example, big companies that add online chat capabilities to their customer service, but the people responding to chat tell customers to call customer service to solve their problems.

Adding the chat capability may have looked like part of a digital transformation to the executives that made the decision, but they failed to take into account the customer experience. To make matters worse, not only did the digital effort fail to achieve its goals, but they didn’t even save any money in the bargain.

Digital Transformation Should Drive IT Transformation

What, then, is the proper relationship between our two transformations? Digital transformation should drive IT transformation, of course.

With the proper digital transformation priorities in place, the IT organization now has a lodestar to follow. To meet the ever-changing desires of customers, IT must become a product-centric, rather than a project-centric organization.

Remember as well that digital transformation requires an end-to-end reorganization to align the business with customer priorities. IT must both support and participate in this realignment.

While Agile software development approaches have achieved a measure of success in IT, they have always run afoul of how best to involve stakeholders in the process. As part of digital transformation, the business should undergo its own Agile transformation, thus rethinking the distinction between ‘business stakeholder’ and ‘development team,’ much as DevOps revamps the notions of ‘dev’ and ‘ops.’

Within the transforming IT organization, end-to-end realignment on customer needs also moves the IT shop away from the bimodal IT trap. It no longer makes any sense to separate IT into two parts, relegating one part of the organization to the ‘slow’ mode.

Instead, when digital transformation drives IT transformation, the entire IT organization – slow as well as fast, legacy as well as modern, on-premises as well as cloud-based – moves away from such archaic siloed distinctions.

In this context, hybrid IT takes on new meaning – not simply as a way of running workloads in multiple environments, but also as a means of bringing customer-centricity to infrastructure decision-making in the form of application-centric workloads that meet changing customer demands as a matter of policy.

The Intellyx Take

By properly connecting digital and IT transformation, IT is finally able to achieve what it has long desired: a seat at the business table.

Not by chucking buzzwords over the wall, screaming ‘microservices are the next business strategy!’ or whatever – but rather by aligning all its efforts with digital’s customer priorities.

Get this right, and IT will end up taking a proactive approach where technology-led innovation becomes an integral part of the ‘change as core competency’ part of the digital business strategy.

Copyright © Intellyx LLC. Intellyx publishes the Agile Digital Transformation Roadmap poster, advises companies on their digital transformation initiatives, and helps vendors communicate their agility stories. As of the time of writing, none of the organizations mentioned in this article are Intellyx customers. Image credit: Tomasz Baranowski.