A recent study by US-based Tufts University and published in the Harvard Business Review compared the digital direction and progress of 50 separate countries. It labelled Australia as a ‘stall out’ nation – a category for countries that have achieved a high level of evolution in the past but are losing momentum and risk falling behind.
This is not surprising, many Australian enterprises are failing to ‘digitally transform at the core.’ They are paying lip service to digital transformation, innovating only at the edge and introducing digital projects that often run alongside core business initiatives.
IT chiefs gathered in Sydney and Melbourne recently for two roundtable luncheons to discuss the challenges they face in digitally transforming their businesses and why rolling out new IT initiatives at the edge is simply not enough. The luncheons were sponsored by Amazon Web Services (AWS) and DXC Technology.
Businesses have been using digital services to improve the end user experience without fundamentally changing their core processes or business models for a long time. This may be an entirely valid approach although some businesses are recognising that modern digital services, combined with the scalability of hyperscale cloud platforms, are enabling radically different business processes to be adopted and fundamentally new business models to be created, says AWS’ ANZ CTO, Rodney Haywood.
“This may leave the businesses that have not changed their core processes or business models exposed to disruption,” says Haywood.
Paul Gibbs, regional director of security and AWS practice at DXC Technology, says enterprises are looking to accelerate sustainable change within business systems and they require more flexibility and agility.
“A strategy of only addressing the requirement with ‘edge’ systems development for digital transformation has a limited set of use cases. Success in such a strategy assumes all of the benefits can be achieved with a simple set of integration points and typically suit specific new benefits to the end user such as the 3D visualisation of a workspace or of componentry in the manufacturing process,” says Gibbs.
Deploying an ‘edge system’ largely falls short of the transformational steps that are needed in complex business models, he says.
“Many of the core systems underpinning enterprise business processes have built solid foundations of data and logic over the years. Today they may be restricted by platform characteristics alone or by the limited set of controls in accessing these systems, and/or unable to deliver the information at a time when decision makers can act on it,” Gibbs says.
“Without timely delivery of data and logic into the business process, the decisions to act can either slow or stop. This offers up perfect reasons for people to invent ways to circumvent the systems and invites business owners to shy away from investing further with information technology to aid new ways of collaboration for business benefits.”
Carsales is a digital business at its core and effectively been entirely online from its inception, says CIO Jason Blackman.
“Transformation is a bit of a dirty word at Carsales because for us, it is just part of our culture. For instance, we aim for continuous improvement to serve our customers. So we are always pushing forward, innovating as much as possible (at the edge where needed) because we have a healthy paranoia keeping us motivated to continue to deliver world-class products,” he says.
Blackman says innovating at the edge is great but it doesn’t always have to be pure innovation to deliver tangible business benefits. He says Carsales’ focus is on the customer and sometimes that means delivering the ‘technically mundane’ because it’s precisely what the customer needs or wants.
“That’s not a problem because we are here first for the customer not the technology. There are other benefits to continuously promoting and pushing innovation through; you either learn not to do something or you end up developing some new benefit for the customer that they didn’t even think they needed,” he says.
Financial services organisation, FlexiGroup has a continuous digital transformation program, says group chief operations officer, Peter Lirantzis.
“It’s not a separate program, it’s not about IT and we don’t just digitise what is already there,” he says. “We redesign and optimise from a customer’s perspective, analysing each touch point and the associated friction points,” Lirantzis says.
Understanding your customers’ journeys is critical, he says.
“Sitting with your customers at each stage and understanding the process at that particular point in time is critical in unlocking the opportunities to reinvent the new and improved. When you have completed a project, start painting again. It’s like painting The Harbour Bridge,” he says.
“Develop a rhythm and framework to move quickly and efficiently through this so as customer expectations, new regulations and technologies change, you’ll be on the front foot. At FlexiGroup, we have developed a new business model in the cloud for our Ireland business from the ground up, starting with no customers and a blank sheet of paper. The business was born digital using the Salesforce platform as the backbone,” he says.
In its legacy environment, FlexiGroup started work at the edge (front end), which has set a high benchmark and resulted in the need to digitally transform its core platforms, Lirantzis adds.
“The easiest way for us was to modernise the core systems and rethink processes not just automate what was already there. We are currently in the process of moving through a third integration at the edge,” he says.
Meanwhile, another IT chief at a workforce management organisation says his company started its digital transformation journey three years ago and is in the middle of its second cloud migration.
“We have the benefit of being a relatively young company and have been very much cloud/software-as-service since inception. We have innovated and transformed at the core but now we are looking at a second wave of work on the core to achieve greater scalability and reliability, as well as looking at businesses and processes on the edge that need a refresh,” he says.
He adds that if you are providing some incremental improvements at the edge, you are “probably not making a big difference to the company.”
“If you are only innovating at the edge, someone else is probably looking to do something transformative or disruptive in your industry and if that isn’t you, then you may be in trouble. And if you think this isn’t the case, you are just being complacent,” he says.
A move to the cloud
Integration services, developer tools and other functionality offered in the public cloud provides new ways to deliver digital transformation initiatives, says DXC’s Gibbs.
“We recently worked with a client to move its core analytics system from proprietary software to an open source system in a secure, public cloud environment. The new platform provided enhanced functionality, an improved presentation layer, and greater fidelity on securing levels of access to data.
“The attributes of the data varied, based on stages in the processes held in the core system, and could be released to user groups as the processes matured,” he says. “This new analytics platform transformed the business by making it possible for new participants in the program to gain access to the results and insights faster than before.”
Carsales’ Blackman says organisations can innovate without being in the cloud but cloud infrastructure does provide a level of speed and flexibility when building and implementing new products.
“If you want speed, flexibility and agility in pursuing digital transformation and innovation, then it will come to you easier if you consider the public cloud (infrastructure-as-a-service) as your first choice,” Blackman says.
“We had a cloud-first strategy initially – many years ago – but now that we are more comfortable, it’s moved to a cloud-only strategy.”
Get your culture right
Attendees at both roundtable events agreed that there are cultural challenges that need to be overcome when business processes are being digitised.
“The first that comes to my mind is getting your people structure right,” says Carsales’ Blackman. “Self-contained autonomous teams have certainly worked for us. No longer does a team wait for system admin staff to approve paperwork so they can push the button on new product features. The team has control themselves.”
A second challenge is making sure ‘don’t just move your legacy to the cloud,’ says Blackman.
“You may get some benefits but you certainly won’t maximise your ability to move quickly. We have a policy of ‘sun setting our legacy’ and working towards it at every step of the roadmaps of our products. This keeps the bulk of our systems up to date and doesn’t hold us back. If, at any stage, a system starts to hold us back and it’s no longer suitable for enhancement, it is then considered legacy and we begin to take action to decommission it,” he says.
IT teams need to understand even if you think you have communicated your digital transformation plans, some people in the organisation won’t hear your message, said one IT chief.
“Within IT, there may also be individuals that are no longer needed or need to upskill to remain relevant. This requires some sensitive but necessary discussions with certain staff members otherwise the company won’t be doing the right thing. These staff also may not be getting the direction that they need to advance their careers.”
Culture matters as organisations migrate to the cloud, says AWS’ Haywood. This is reflected in the fact that customers of all sizes are excited about creating new business models and are increasingly exploring new ways of working. They are embracing the principles of agility and lean working, ‘DevOps’ culture, often used by start-ups, and embedding them into their cultures to enable experimentation and a ‘fail fast’ mentality, he says.
“We have already seen this kind of cultural shift happening with customers like Qantas, to support the airline’s flight planning agility; Origin Energy applying it to help create new business models around fixed usage billing; or Fugro Roames with its electricity asset mapping strategy.
“These larger companies are now really innovating in exciting ways using AWS,” he says.