September 15, 2017 | Interview

"The digital transformation isn't purely an IT project!"

The vast majority of top managers reckon their IT is not capable of keeping pace with the digital transformation. Almost 70 percent view digital labs with skepticism. These are two of the findings of a survey conducted by A.T. Kearney and the Fraunhofer-Institut für Angewandte Informationstechnik FIT into the position and demands being made on IT in the digital age.

We have spoken with Prof. Röglinger of FIT about the findings.

Prof. Röglinger, why are so many top managers still skeptical as regards the digital transformation?

The increasing level of digitalization means that businesses are often facing radical change. In order to be able to guarantee sustainable value creation in the long term, they are being forced to modify their strategy, processes, IT and corporate culture—more often than not from the ground up. This is something most top managers are very aware of.

Surprisingly, many top managers, and particularly CIOs of multinational corporations, have made it clear that it’s their IT departments that are not capable of keeping pace with the digital transformation. They frequently admit to being in the dark as regards digitalization and having the right IT setup. While more than 70 percent of those surveyed in our study do already have a digital agenda, they frequently fallen down when it comes to implementing it. But it’s also plainly obvious that the blame can’t simply be passed to the people in IT alone—the operating departments also need to transform. But without IT, nothing works anymore in today’s digital world.

 

So why are digital labs in particular viewed with such skepticism?

Labs are often set up to be saviors and beacons—but more as think tanks and not as drivers of a higher-level transformation. In such cases, the whole thing frequently falls down when it comes to integrating the ideas into production. Nevertheless, there are a number of successful lab models out there in the field. In such labs, disruptive ideas are typically not only conceived, but also developed and trialed in the marketplace. However, attempting to transform an entire company from within a disintegrated ideas factory holds few prospects of success.

 

In that case, are “synergies” the magic formula that labs should be following?

Whatever the case, they need integrated collaboration and operations models. Operations and IT departments must merge more extensively and intensively with one another. Concepts such as integrated solution teams, in which IT and operations specialists jointly assume responsibility for an IT solution throughout its entire product lifecycle, are in my view highly promising.

 

Against this background: What are the key demands on IT in the digital age?

Above all, I believe we need to focus our attention on a modular IT infrastructure and architecture. Modular approaches allow enterprises to participate in digital ecosystems while taking into account standardized interfaces and modern data-protection and data-security concepts.

For instance, the application of agile software development, DevOps, design thinking or microservices is taking on an increasingly important role in all areas of IT management. These tools can increase the speed and agility of IT performance. Here, too, all areas of the IT setup must always be considered and developed in an integrated manner. The operations and IT people must merge together more ex- and intensively; IT initiatives undertaken without the involvement of integrated solution teams are often doomed to failure.

 

How do companies manage to integrate the digital transformation into their business model and use it to generate fresh value added?

First of all, the digital transformation isn’t purely an IT project! Companies that task only their IT department with implementing digitalization will fail. Fortunately, that’s something the CIOs surveyed are aware of. Of course digitalization is a technology-driven phenomenon, but whether a business is successful in the digital economy or not will not be decided by technologies. It’s the level of creativity with which existing and new technologies are combined and implemented that determines the success of a digital transformation.

 

So what does this mean in practical terms?

Practically speaking, this not only demands mobilization of the entire firm, but also a complete rethink at all levels—including management. The processes and structures already in place, the application systems, data management and the technologies deployed must be refocused to the requirements of new business models (e.g. based on smart products and services).

Another important factor in ensuring the success of the transformation is the networking of ecosystems. The majority of our study participants want a modular IT infrastructure. This enables them to be involved in digital ecosystems, so that they can offer products and services that are competitive.

 

Does the restraint shown so far in respect of digitalization also reflect a deficiency in corporate culture?

Yes, definitely. It’s often the soft components, such as the corporate culture, that are holding back the digital transformation. And yet it’s precisely this transformation that makes such high demands on the corporate culture. Above all, the companies see a need for action in respect of the digital mindset: 70 percent of the respondents demand (further) training in digitalization and a mind-blowing 90 percent locate the need for qualification not just with the workforce, but also at middle and top management levels. More courage to make changes, continuous questioning of oneself and a better feel for digital business requirements are what’s called for.

 

How’s it look with the employees? Is the training they have received up to scratch or do we need to start a digital qualification offensive?

There’s still far too little innovative and disruptive thinking going on that facilitates the development of new business models. Key to this are sound IT skills in the various business units as well as networking within digital ecosystems. In any event, one of the biggest challenges is to overcome the silo mentality.

But generally speaking, it’s not the technology that’s the limiting factor. It’s far more a case of having to promote a digital mindset and the digital skills of the workforce—an area in which there’s still a great deal to be done. But it is doable.

 

Prof. Maximilian Röglinger is Professor of Information Systems and Value-based Business Process Management at the University of Bayreuth, Germany. He also serves as Deputy Academic Director of the Research Center Finance & Information Management (FIM) and works in a leading position with the Project Group Business & Information Systems Engineering of the Fraunhofer FIT. The best way to reach Prof. Röglinger is by email, at maximilian.roeglinger@fim-rc.de.