Digital Transformation: Five Areas to Focus on Now

As we move briskly into the year, some central questions remain: Is 2022 going to be a do-or-die year for digital biz transformation? Will companies that don’t start now be able to catch up?

Fortunately, it is not too late to continue (or even begin) your digital transformation journey — and join many others as you do. According to IDC, direct digital transformation investments will accelerate to a compound annual growth rate (CAGR) of 16.5% in 2022-2024. Investment levels for 2022-2024 are expected to be $6.3 trillion and represent 55% of all information and communications technology (ICT) investments by the end of 2024. Financial services (banking, insurance, security, investment) are expected to see the highest digital transformation outlay of any industry, but interest is broad-based.

How should you begin? While everyone has their eyes on the distant summit of digital transformation, creating smarter workflows today is the path to take us there. That route will be built with day-to-day work, using exponential technologies like the cloud, artificial intelligence, 5G and the Internet of Things (IoT) to better collect, integrate and squeeze out real-time analytics across platforms. The resulting breakdown of siloed and static business processes will change everything from supply chain management to talent acquisition.

In times of great change it pays to be focused and precise, so here are five essential areas for accelerating your digital transformation journey:

Cloud-native development architectures

IT leaders increasingly look to the cloud to meet demanding business flexibility needs as well as deliver innovative products and services with competitive speed. The scalability and agility provided by a cloud-based infrastructure are essential for organizations that must rapidly respond to market changes (such as the pandemic). Enterprises are shifting from monolithic development designs to nimble cloud-native architectures for modernizing and optimizing their applications. “A cloud approach can reduce initial modernization cost, time, and complexity, allowing the use of legacy systems and environments with new approaches,” said Steve LaFleche, General Manager for the U.S. Public and Federal Markets at IBM.

Gartner expects 95% of modern applications will be built using cloud-native strategies by 2025, enabling organizations to improve customer engagement, reduce operational overhead, and ensure greater resilience. Developers are embracing cloud-native services such as containers and Kubernetes for greenfield application development, as they offer better performance, scalability and flexibility along with faster development cycles, reduced vendor lock-in and higher portability.

5G

Just as the power of the PC fueled the early leaps of the tech revolution and the accessibility of the web built on that, the next generation of networking technology will reshape our world with blazingly fast connected devices that will supercharge digital transformation. Leading that charge is 5G, the high-speed next-generation of mobile wireless connectivity that will connect virtually everyone and everything including machines, objects and devices. Once 5G hits, however, the impact on the digital transformation industry will be immense. Think about the massive amounts of data going through all of our smart devices today. Now consider all of the functionality and opportunity that come when all this technology communicates faster and more reliably.

The Power of AI

The ability of AI systems to transform vast amounts of complex, ambiguous information into insight has the potential to reveal long-held secrets and help solve some of the world’s most enduring problems. Data is rarely clean when acquired, and AI can be used to speed the process of data sorting, cleansing, labeling and selection. AI systems can be used to help discover insights to treat disease, predict the weather and manage the global economy. According to IBM’s Global AI Adoption Index 2021, almost one-third of IT professionals surveyed globally say their business uses AI.

One key component of this area is Responsible AI, a push across firms, developers, governments and workers to establish a framework for an ethical and human-centric approach to algorithmic-driven decision making. At its core, Responsible AI is founded on a central tenet: AI systems should treat all people fairly. Just as importantly, companies should be accountable for their AI systems.  “Algorithmic systems are used to make important decisions that affect people’s lives, often in high-stakes context,” said Alice Xiang, Head of Fairness, Transparency, and Accountability Research at the Partnership on AI. Ultimately, AI algorithms are only as good as the code at their core, and these algorithms can suffer from human biases when it comes to gender or race. Responsible AI encompasses not just the ability to understand and trust a computer model, but how we effectively deal with the human consequences of the model’s decision making.

The Internet of Things 

The number of IoT-connected devices is expected to increase to 43 billion by 2023, according to McKinsey, an almost threefold increase from 2018. Connecting a wide variety of machines and sensors to a blazing fast internet will bring forth new data that, when analyzed, will reshape work productivity, resource efficiency, asset optimization, business models and customer service.  IoT networks play a key role in bringing real-time insights together from devices that are connected to the internet and distributed in the field – such as an intravenous infusion pump in a hospital, a bulldozer on a construction site, or a printer in a small closet of a research lab. Each piece of equipment is loaded with sensors that monitor and send back detailed data about device usage and performance. Harnessing this data can unlock insights and ideas that take a business to new, unexpected places. But it must be done with intention.” McKinsey estimates 84 percent of companies working on IoT remain stuck in pilot mode for over a year. Why is this happening? “From our own experience, we know that adopting IoT technologies is typically only the first step,” said Lexmark CEO Allen Waugerman. “The real challenge is finding truly actionable insights from within the data noise.”

Your People

Surprised by this last one? Don’t be. Organizations often spend far more time executing strategies than dreaming of the future, and not enough people have the skills (and mindset) required to leverage these new digital capabilities. That’s a problem. In a Gartner study of more than 7,000 employees, 70% said they haven’t mastered the skills they need for their jobs today, and 80% said they lack the skills they need both for their current role and future careers. Skills shortages may prove to be one of the main barriers to digital transformation within large organizations. But there’s hope. HR leaders can help employees keep pace with shifting skills through effective in-house and outsourced learning programs. A digital transformation unlocks the value of your people, but you have to prepare them for the changes to come.

In summation, it’s not too late to begin your digital transformation. But the time to begin is now.