The Myth of Digital Transformation

At the moment Digital Transformation (sometimes also called Digitalization or just Digital) is a prevalent term used on the Internet, in research and various industries. The behemoths of the consulting business have shaped offerings around Digital Transformation (e.g. Accenture, PWC, CapGemini, McKinsey) and established research organizations have embraced the theme (e.g. MIT Center for Digital Business, Digital Business Initiative of Stanford Graduate School of Business). Of course, the big IT research and advisory companies picked up the topic too (e.g. Gartner, Forrester).

In essence, all the ideas, concepts and approaches of Digital Transformation can be summarized as follows:

  • The leverage of technologies like cloud computing, data analytics, mobile apps, APIs, social media platforms, machine learning, Internet of things, smart & connected devices, etc.
  • The leverage of concepts and approaches like DevOps, agile software development, pace layering, bimodal IT, etc.
  • The usage of those technologies, concepts and approaches to design and implement new business models

Although the term is widespread used, I’m amazed that it isn’t put into some kind of perspective and therefore often conveyed and hailed as a new concept.

When I was reading various books, articles, posts on the topic, the idea struck me that Digital Transformation is essentially a just specific pattern of business and IT alignment and therefore isn’t a new concept. Hence, I revisited the fundamentals of strategic business and IT alignment to verify my idea.

Eventually, I contend that the concept of Digital Transformation isn’t fundamentally new. It is a specific perspective of the problem how to align strategic choices of the business and IT domain effectively. This can be proved by mapping the ideas, concepts and approaches of digital transformation to the Strategic Alignment Model of J.C. Henderson and N. Venkatraman in 1992 – a model that is nearly 25 years old and still valid.

Introduction of the Strategic Alignment Model

J. C. Henderson and N. Venkatraman developed the Strategic Alignment Model to support the strategic management of evolving IT in 1993. It consists of four fundamental parts: Business Strategy, IT Strategy, Organizational Infrastructure and Processes, and IT Infrastructure and Processes. The parts are discrete and contain categories of strategic choices.

strategicalignmentmodel

The Business Strategy and IT Strategy make up the external domain: An outward-oriented view on how the organization differentiates from its competitors. The Organizational Infrastructure and Processes, and IS Infrastructure and Processes represent the internal domain: An internal view on the set strategic choices that can be leveraged within the organization.

In addition, the Business Strategy and Organizational Onfrastructure and Processes are focusing on the business and thus represent the business domain. The IT Strategy and IT Infrastructure and Processes zoom in on IT aspects and therefore represent the IT domain.

Although the domains and parts of the model are self-contained, they interrelate with each other. In fact, the effective management of business and IT requires to balance all strategic choices within each part. In particular, the alignment of the external and internal domains is called strategic fit and the alignment of the business and IT domains is named functional integration.

Each part of the model contains three categories of strategic choices. Although some of the names seem to be odd today, the scope and contents of each category are still consistent.

The Business Strategy groups strategic choices with respect to the scope and distinctive competencies of the business, and the Business Governance. The former deals with all aspects of a business model including for example customer segments, value propositions, channels, customer relationships, etc. (cp. with the Business Model Canvas from A. Osterwalder and  Y. Pigneur). The latter category called Business Governance is quite confusing: It deals with make-or-buy choices as part of the business strategy – an aspect that could also be included in a business model.

The IT Strategy is similar to the Business Strategy part but it has a distinct focus on the IT domain. The Technology Scope deals with the deliberately-defined compilation of information technologies which support current and future business strategies. The Systemic Competencies are the IT-related capabilities that support the business strategy by contributing a distinctive, competitive advantage to the organization.

As part of the internal and business domain, the Organizational Infrastructure and Processes define how the business should work and what business-related skills are required within the organization. This part consists of administrative functions, (business) processes and (business) skills. Today the term business architecture could be a more appropriate name for this part.

The last part is the internal and IT-related domain called IS Infrastructure and Processes. It consists of (IT) Architectures, (IT) Processes and (IT) Skills, and essentially describes how the IT should work, what applications and infrastructure components are deployed and which skills are required in the internal IT-related domain.

In order to effectively manage business and IT coherently, an organization has to balance all strategic choices within each category, part and domain. As there are a lot of combinations across all strategic choices possible, J. C. Henderson and N. Venkatraman postulate to focus on the cross-domain relationships. Particularly, they suggest four common pattern which describe the fundamental sequence in which the four parts should be aligned:

  1. Strategic Execution: Business Strategy  Organizational Infrastructure and Processes  IS Infrastructure and Processes
  2. Technology Transformation: Business Strategy IT Strategy IS Infrastructure and Processes
  3. Competitive Potential: IT Strategy  Business Strategy  Organizational Infrastructure and Processes
  4. Service Level: IT strategy IS Infrastructure and Processes  Organizational Infrastructure and Processes

Of course, those pattern just represent general guidelines of how to align all strategic choices according to the defined sequence. Actually, a lot of other dependencies and trade-offs between the strategic choices have to be considered.

Mapping of the Digital Transformation Concepts to the Strategic Alignment Model

The ideas, concepts and approaches of Digital Transformation can be mapped to the Strategic Alignment Model as shown in the following figure.

strategicalignmentmodelmapping

If an organization wants to leverage technologies like cloud computing, data analytics, mobile apps, APIs, etc., the Technology Scope of the IT Strategy is the main category to start with. Essentially, the technologies which are available in the market have to be identified, analyzed and evaluated. Any technology that supports the current business strategy or could potentially shape the design of a new business strategy (or business model) should be included within scope of technologies.

The idea to leverage concepts and approaches like DevOps, agile software development, pace layering, bimodal IT, etc. can be assigned to the category Systemic Competencies of the IT Strategy. Along the lines of the Technology Scope, any IT-related capability that supports the current business strategy or could potentially enable a new business strategy should be a strategic competency of the organization.

Of course the selection of strategic technologies and capabilities is only a starting point. If an organization wants to embrace and master a technology a change activity is required to learn the new technology, build up the skills and make the technology generally available within the organization. Analogous IT-related capabilities have to be build up or enhanced by implementing a change process within the organization. Think of both categories as the initial trigger on the strategic level to introduce a specific technology or capability to the organization.

The usage of technologies and capabilities to design and implement new business models is clearly related to the part Business Strategy. The Business Scope, Distinct Competencies and Business Governance (that is to say the business model) should consider and work with all technologies and capabilities defined within the IT Strategy. Of course, as with the IT Strategy, this is just the starting point and a business model has to be implemented eventually.

The latter aspect of Digital Transformation also indicates the primary pattern of aligning the all the strategic choices: Competitive potential. The IT Strategy including the Technology Scope and Systemic Competencies is the enabler for the business: IT could enhance or facilitate business models and thus the Business Strategy.

strategicalignmentmodelcompetitivepotential

Certainly there are a lot of other dependencies in relation to the IS Infrastructure and Processes that is to say the internal, IT-related part but the pattern prescribes the fundamental sequence in which the parts should be aligned.

Conclusion

The concept of Digital Transformation isn’t fundamentally new. It is a specific perspective of strategic business and IT alignment. The ideas, concepts and approaches of Digital Transformation smoothly fit into the components of the Strategic Alignment Model – a model which is nearly 25 years old. Therefore, within any conversation you should pay attention to way Digital Transformation is explained and positioned. In either case challenge your interlocutor (or the book, article or post you’re reading) by simply asking: What is essentially new to the concept of Digital Transformation?

In addition, there are further implications that should be considered. Firstly, as Digital Transformation is fundamentally just a specific perspective of strategic business and IT alignment, all the existing concepts, frameworks and tools could (actually should) be considered and reused. Thus, if you have to deal with Digital Transformation, you should have a look at the fund of knowledge that is already available. The following figure illustrates some building blocks that could be leveraged to support the effective alignment of business and IT.

strategicalignmenttoolbox

Please note that further sources in relation to the shown concepts, frameworks and tools are available on the following knowledge base pages: Business Strategy and Business ModelsIT Strategy and Governance, Enterprise Architecture Management, Pattern and Good Practices.

Secondly, if there is anything new to the concept of Digital Transformation, it is related to new combinations of technologies, capabilities and business models that enable an organization to accomplish a goal that wasn’t possible before. A new and effective combination can be considered as a pattern of specific, strategic choices and their successful implementation. Therefore, if you have to deal with Digital Transformation look after those patterns and try to figure out whether you could reuse a specific pattern. A good example is the book by G. Westerman, D. Bonnet and A. McAfee: Leading Digital – Turning Technology into Business Transformation. Although they aren’t describing those patterns explicitly, the book contains some interesting case studies about organizations and companies successfully implementing those combinations. The authors were also involved in several empirical studies verifying the effectiveness of implementing ‘digital pattern’. Nevertheless, the concept and approach for analyzing and implementing those patterns aren’t new – it is essentially business and IT alignment.

Thirdly, the methods for delivering the pattern are available but what’s currently unavailable is an approach for documenting the ‘digital pattern’ in a structured and detailed way. I’m thinking of a structure which has to be described up to the level of an enterprise architecture model (see for example the ArchiMate standard) and that elaborates on the objectives and trade-offs of each pattern.

Fourthly, it is amazing to see that the Strategic Alignment Model – which was developed by J. C. Henderson and N. Venkatraman nearly 25 years ago – is still valid and thus can be used today. Some names sound odd but the semantics and logic are still substantive.

What do you think about Digital Transformation? Do you know common ‘digital pattern’? Did you already find your pattern that supports your organization effectively?

Sound off in the comments!

References

Henderson, J.C.; Venkatraman, N. : Strategic alignment – Leveraging information technology for transforming organizations. In: IBM Systems Journal, Vol. 32, No. 1, 1991.

Osterwalder, A.; Pigneur, Y.: Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers. John Wiley & Sons, 2010.

Westerman, G.; Bonnet, D. ; McAfee, A.: Leading Digital – Turning Technology into Business Transformation. Harvard Business Review Press, 2014.

Upcoming Events by Microsoft and AWS

The behemoths of public cloud computing, AWS and Microsoft, continue to lure developers and architects to their cloud platform by offering free virtual events.

Microsoft announced AzureCon, a virtual event that will take place on September 29, 2015 (9:00 a.m. PDT). AzureCon relies on last year’s AzureConf and will include live, interactive and on-demand sessions. You can watch the content live or on-demand after the event.

AWS will host re:Invent 2015 from October 6 – 9, 2015. If you can’t make it to Las Vegas, you can watch the live streams. Of course, you can watch the sessions after the events too.

I highly recommend both events because they support the effective knowledge transfer and are a great opportunity to hear about the latest innovations in the public cloud arena. Therefore, mark your calender and save the links!

The Links and Knowledge We Have to Share

Recently I found an interesting article by Hossein Derakhshan titled ‘The Web We Have to Save‘. Hossein was sentenced to jail because he blogged on Iran-related topics and motivated other Iranians to start blogging. After he spend six years in jail, he was abruptly pardoned and freed. During the time in jail he actually missed major events like social media and the raise of companies like Facebook, Instragram, WhatsApp, Youtube, etc. Thus, he was confronted with a major shift how the Web developed so far and it is used today.
In his article he elaborates on his experiences with social media and compares the current usage of the Web with the one he used to know. He argues that a few social media companies dominate the way and type of information people access over the Internet. Hossein criticizes the vast devaluation of the hyperlink because the major social media companies constrain the usage of links on their platforms. Some of them are even constrain the usage of external links and manipulate user traffic to stick to their platform. He concludes that we experience a decline of diversity and opinions on the Web today.
Although Hossein’s experience and conclusion isn’t new – I’m observing the same movement for a while – I really think that he put this development brilliantly into words. I share his observations but I’m not sure about the magnitude of this trend. Maybe I’m biased in favour of information technology because that was (and still is) the main motivation for me to get access to some network and share information, experiences, software, games, knowledge etc. with people around the world. I still remember the 1980s when this access was only provided by some local bulletin board systems (BBS) and companies like CompuServe. Meanwhile the technologies evolved, especially the Internet and Web led to disruptive changes in almost every domain.
‘Information at your fingertips‘ was concept that was presented by Bill Gates initially in 1994. Today, I think this concept is real but the current Web is developing even beyond the fundamental idea behind this concept. Nowadays we can access so much information that we need dedicated technologies like search engines, data analysis tools, etc. to guide us through the vast amount of information. Otherwise there is still so much valuable information (and therefore knowledge too) available in books, journals, newspapers, etc. that is not directly accessible via the Internet or Web.
In addition to Hossein’s observations, I think of two related trends. First, information that is not available on the Internet or Web, is assumed to not exist. Therefore, it is simply ignored and sometimes concepts, ideas, etc. are developed twice without any notice. I’ve observed this attitude in the domain of computer science and particularly information systems management. Second, the proliferation of information doesn’t correlate with the quality of information. The quality of information is, of course, defined by the consumer but overall I wonder whether really all the information has some value. I’m specifically thinking of all the data that is produced and uploaded on social media platforms. Nevertheless, at least the ad industry is paying a lot of money for such data… On the other hand, I really believe that there is value in technologies like for example big data or the Internet of Things that isn’t directly related to advertising.
In summary, I draw the following conclusions. First, respect the free Internet/Web and appreciate the freedom of speech and opinion. Don’t take both for granted. There’s still restriction, censorship and arbitrariness. Second, consider the existing knowledge beyond the Web. Each domain has, of course, its own history and nature of knowledge sources. Nevertheless, keep in mind that the Web is definitely not the only one. Third, support the communication and collaboration beyond the major social media companies and therefore the freedom of links. There is something beyond those social media platform. Fourth, I should revive my blog. Although it’s not dealing with political topics, it supports all the conclusions mentioned above. Of course, the scope is focussed on the domain of architectural change management but that’s fine. Therefore, subscribe and watch out for updates!

The Open Group released ArchiMate 2.1

Actually ArchiMate 2.1 is a specification maintenance release incorporating comments, corrections and clarification issues which were raised since version 2.0.
For further details with respect to the changes refer to this official blog post by The Open Group. In addition a detailed listing of the changes is available as a dedicated document.
Only hours after the release, vendors of flexible EAM tools announced support to version 2.1… ;-)

The Open Group Introduced New Standards Supporting Risk Management

At the latest The Open Group conference in London the Security Forum introduced version 2.0 of the Risk Taxonomy (O-RT) technical standard and released the new technical standard Risk Analysis (O-RA). The new version of the Risk Taxonomy standard incorporates some minor updates based on the feedback by practitioners that have been using it. As a companion to it, the Risk Analysis standard provides a process framework that supports FAIR-based risk analysis.
For further details refer to the official blog posts by The Open Group that summarize both standards quite good (part I, partII).
I’ve added both standards to the knowledge base section IT Strategy and Governance.

Upcoming Tweet Jam on the Convergence of Emerging Technologies hosted by The Open Group

At first Gartner picked up the thought and named it ‘The Nexus of Forces’. IDC coined the term ‘third platform’ and The Open Group established a new forum named ‘Platform 3.0’. All of them recognized that there are several (emerging) technologies that are likely to converge in the future and potentially change the way businesses and people engage with each other. The lists and names of the technologies in scope differ depending on the organizations named before. In general they refer to the following technologies: social media, cloud computing, mobile computing, Internet of things and processing of big data.

From the perspective of the discipline of enterprise architecture management this convergence raises the question if (major) architectural changes are required to cope with this development.

To encourage knowledge exchange on this question, The Open Group will host a tweet jam on Thursday, June 6 at 9:00 a.m. PT/12:00 p.m. ET/5:00 p.m. GMT (see this blog post).

Please find below an initial set of links suggested for further reading.

Gartner

IDC

The Open Group

The Open Group Released a Business Reference Model for the Natural Resources Industry

The Exploration, Mining, Metals and Minerals (EMMM) Forum of The Open Group developed a business reference model that has been approved as an Open Group Technical Standard (see The Open Group Blog post here). The reference model focuses on the natural resources industry, i.e. the high-level business processes of different mining organisations dealing with all metals and minerals. It consists of a documentation describing the concepts and definitions of the reference model and a model poster providing an abstract one-page-view of the model. These deliverables are available for download from The Open Group Bookstore (see here).