Some truths about digital transformation

Mark Kerry, Vice President, Arqitek explains that an architectural approach and continuous transformation can simultaneously be both about what a business needs and how those needs can be fulfilled digitally so that business and technology are seen as co-existing and inseparable.

It remains the case that most financial institutions in the MEA region are struggling with the notion of digital transformation (DX).  We mention MEA in particular but the struggle is a global one.  According to IDC, Direct DX investment is growing at 17.5% CAGR and expected to approach $7.4 trillion over the years 2020 to 2023.  Meanwhile, many observers note the high failure rates – typically stating failure rates in excess of 70%.

Failure is attributed to many factors.  We might consider the importantance of executive commitment or of internal alignment.  But there are four factors which we suggest are more fundamental:

1/ Digital is not only about front-end services transformation.  Digital is about end-end transformation to deliver seamless services at far lower costs of transaction.

2/ The enterprise must architect to realise this transformation.  Only an enterprise which has optimized Business-IT alignment systematically and with a truly agile approach is ready for the digital era.

3/ Transformation can no longer be considered to be a one-off program of activity or even an annual planning activity.  Transformation should be performed on a continuous basis.

4/ Once we recognize that transformation is a continuous process then we recognize that it should itself be automated.

Another way of thinking about this is to recognise that the paper-based digital transformation plan and the multi-year program of initiatives are themselves pre-digital artifacts.

Digital Canvas: The Foundation for the Digital Financial Institution

The digital approach to digital transformation is many respects already understood and documented.  The issue is that the necessity of bringing these approaches into the transformation effort has not been realised.  Transformation Management Offices (TMO) are focusing their effort on delivering the program (‘how’ do we build).  However, these offices must also be in control of the architecture (‘what’ are we building).

From an architecture perspective the right starting point is the Digital Canvas.  The Digital Canvas has its origins in the Business Capability Map.  It is a mapping of what a business does to reach its objectives.  However, the Digital Canvas mapping is presented through the lens of digital.  A high level view of the Digital Canvas is shown in the figure.  You will see that the figure identifies all the digital domains that might exist within the financial institution spanning from front-end channels to core business and the back office.  However, it also identifies the digital ‘enablers’ which must also be established.  The Digital Canvas recognises that for the enterprise to be digital, for example, the management of IT itself must be digital.  Consider the fact that for most enterprises right now this is not the case.  IT is typically managed through a collection of spreadsheets and manual processes!

When developed for a particular business we are able to identify what the business does.  We can then layer a view of how the identified capabilities are automated through technology.  This representation of Business and IT becomes a vehicle for a new level of collaboration across the enterprise.  For the first time we are simultaneously exposing both what the business needs and how those needs are fulfilled digitally.  Business and technology are seen as co-existing and inseparable. However, the approach goes far deeper than that.

If we now consider the idea of continuous transformation we recognize that we must turn to the Agile paradigm.  We must transform using an Agile approach that evolves with the enterprise.  The Scaled Agile Framework® (SAFe®) provides a basis for doing this. 

When we examine SAFe we see that it recognizes the criticality of the architecture.  It refers to the Architecture Runway wherein the idea is that new increments must land cleanly in the architecture.  This is an important clue because in MEA we rarely see the TMO embracing Enterprise Architecture.  SAFe rightly recognises that we must have a view of ‘what’ we are building although this basic concept is too often overlooked.

The idea is simply this.  If we do not articulate what we are building then we arrive at an incoherent technology landscape that is complex, costly and that is certainly not agile.  We arrive at multiple technology platforms with overlapping capabilities.  We arrive at data silos and no coherent integration.  Think of a building that was constructed with no architecture plan or a city that has evolved with no city planning.  These are the results of the program of initiatives with no underlying architecture.

Digital Business Platform: The Enterprise Operating System

Meanwhile, a key emerging paradigm is that of the Digital Business Technology Platform (DBTP).  This concept has been put forwards by Gartner.  The concept can be considered as the technological realisation of the Digital Canvas:

  • An alignment of technologies into a single business-enabling solution that addresses the key architecture domains of the canvas.
  • A coherent approach to technology that standardises workflows, integrations, analytics and more to derive the agile framework that is required.

I like to think of it as the enterprise operating system.  The technology components that manage systematic access to enterprise assets such as systems and data.

Major platform providers such as Microsoft, ServiceNow and others are moving in the direction of the DBTP.  However, certainly at this stage a financial institution cannot simply purchase a DBTP.  It has to be designed and realised incrementally.  Those who set out now with a clear architecture map beneath them can realise this goal and all of the attendant benefits of agility and low cost of transaction.

Transformation Management Platform: Automating the Digital Transformation Process

The DBTP represents the ‘run-time’ technology foundation of the digital enterprise.  However, we recognize that the DBTP must be designed and must itself evolve in line with the needs of the enterprise.  We therefore need to consider the ‘plan-time’ technology platform that automates the ongoing transformation.  We refer to the plan-time equivalent of the DBTP as the Transformation Management Platform (TMP).

The role of the TMP is to enable the continuous alignment of strategic goals and objectives with agile projects and with the underlying architecture.  Currently, certain aspects of TMP are already recognised.   Corporate Performance Management (CPM) exponents have long recognised the need to systematically link strategy and goals to projects and initiatives.   However, as mentioned earlier this approach is myopic because it does not recognize how projects impact the architecture. 

There are other key elements to consider in realising the TMP.  The DTMP is rich with data and this data exists all the way from front end-channels to ERP systems in the back office.  The TMP should therefore be capturing relevant data from the DTMP to help inform the strategy and to measure progress towards objectives.

Whilst the TMP concept may seem far reaching the building blocks are already in place.  The role of the Digital Transformation Office should be to recognise these elements and to bring them together.  This is entirely achievable and in our view is the only way of evolving the truly digital enterprise.