Although the phrase “digital transformation” seems to be a buzzword recently, it’s much more than jargon. These two words are completely intertwined, in that one requires the other. Think about almost any industry, and you can see how it has gone digital, and in doing so, has transformed. Sometimes we use the word “transformation” when digital “innovation” is more appropriate, but the message is still clear: Change or disappear.

Who Should Lead the Digital Transformation?

The best leader for a digital transformation is the CIO, with close partnerships with line-of-business (LOB) stakeholders. This way, the integrity of the company systems and platforms are preserved, while new applications, technologies and businesses are launched. This collaboration is also cited in the Harvard Business Review Report, Business Transformation and the CIO Role.

The CIO’s role has evolved in recent years, in large part due to the rapid pace of technological developments. While responsible for keeping current infrastructure, systems and technology investments running and secure, the CIO must also keep up with new technology and trends. Social, mobile, analytics and cloud, which IDC describes as the third platform, have recently been joined by AR/VR, IoT and more technologies as disrupters. Each of these developments brings with it a set of security, investment and manageability decisions, as well as challenges with integration, interoperability and compliance. In fact, the “I” in CIO is often morphing from ‘Information’ to ‘Innovation,’ reflecting the importance of innovation at the C-level.

LOB leaders, such as those in marketing, HR and sales, are also looking for innovation investments to accelerate customer satisfaction, employee satisfaction or revenue. So in addition to digital transformation being driven by the CIO, it can also occur at a more grassroots level.

While it might appear that the benefits of a department going off on their own to run a transformation project would speed up the process by not being encumbered by existing systemic constraints, the risks — from annoyances such as time wasted arguing over which set of data is “the truth,” to high-stakes security breaches — are too great.

Critical Investments for Enterprises

At the heart of digital transformation is technology; however, technology is just the tip of the iceberg. There are many recommendations from various resources on requirements for a successful digital transformation. Forbes shares their view on 15 suggested capabilities, McKinsey offers a list of nine questions to consider and Gartner Research’s senior vice president, Peter Sondergaard, provides CIO transformation topics.

My own list includes the following considerations:

  • Technology: Obvious components are strategies around devices, social, mobile, analytics and cloud (SMAC) considerations, integration and interoperability, and security. While technology can be complex, it might actually be the easiest aspect of a digital transformation. From IoT to virtual reality, 2016 was a breakout year for disruptive technology in the enterprise, and I do not see the technology cycle slowing down any time soon.
  • Support from the top: Transformation is not “business as usual”; top levels of the organization must be on board. This includes everything from setting up the right executive dashboards to measure progress, to messaging the importance and rationale, and continuously sharing the vision for the impact of this change.
  • Budget: Adequate budget must be in place to balance the maintenance of the existing infrastructure with digital innovation investments. A portion of the budget may have to be set aside for investments over the course of the budgeting cycle, since exact innovation costs may not be known at the start of the planning period.
  • Talent: Organizational talent must be in place to bring the right mindset to a new way of doing business. This includes developing current staff or bringing on new staff with digital skills, influence-leadership skills, project management and change management skills.
  • Communication: Technology transformation is a major investment for a significantly difference experience that management is undertaking, so you cannot underestimate the value of over-communicating to all stakeholders.

Potential Barriers to Innovation

The above list is not easily addressed, since many of these requirements are fixed assets. In my experience, talent is the biggest limiting factor to digital transformation. Recruiting employees with both the technical ability and the right communication skills is challenging. Including HR early in the process is critical to finding the right talent.

Another roadblock is the momentum of the status quo. There are always going to be people who look at the risks and the downside of technology transformation: “We never did it that way before” or “That will never work.” Communication — the why, the how and even the risks of maintaining the status quo — helps here.

Budget is another big challenge to overcome. I’ve never worked anywhere with a surplus budget — especially when undertaking transformation projects, since budgets are typically set at the beginning of a year, but technology changes happen at any time. Earmarking budget specifically for digital innovation projects is a potential solution to overcome this hurdle.

Employee adoption is crucial. Millennials expect their employee user experience to be just as delightful as in their personal lives. Employees are also demanding simple processes, and are even bypassing security protocols if they will hinder their productivity. Various sources report than anywhere between 20 and 90 percent of employees use their own tools and software for convenience and productivity. If the company’s technology and protocols are not being utilized, employees can represent a bigger risk than outside security threats.

Why Go Through the Trouble of a Digital Transformation?

This is a daunting list of requirements, and nothing on here is easy. However, the stakes could not be higher. Innovating is about creating new and improved experiences for customers that lead to increased loyalty and revenues. Transforming is about delivering improved employee experiences, which leads to lower turnovers and an ability to attract the best and brightest. Digital is about being always on, so you can meet your employees and customers anywhere and any time. All of this leads to breaking barriers that open opportunities for new markets, new businesses and new revenue streams.

Only you can determine the cost of not building a digital transformation strategy for your organization.

From IoT to virtual reality, 2016 was a breakout year for disruptive technology in the enterprise, and this year, enterprise leaders are looking to build on that momentum.