What is the best way of measuring the success of digital transformation?
a) Revenue growth; b) Customer experience; c) Operational efficiency; d) Cost saving; or e) Change of culture and mindset.
For Mark Newman, senior analyst Ovum, when quizzing CIOs and IT decision markers in the telecommunications industry, rarely is the answer d) with the most popular answer usually e) Change of culture and mindset, followed by answer b) Customer experience.
But with little CIOs or IT decision markers citing cost saving as the best way of measuring digital transformation, if the respondents were telco CFOs rather than CIOs, would the result have been different?
Is this because CFOs have a different vision of what a digital transformation program is, or should be, from the CIOs?
“A CFO is likely see a transformation program as an opportunity to streamline the huge number of legacy systems and processes accumulated over a 20–30 year period,” Newman claims.
“He may also see it as a chance to streamline call centre, distribution, and retail costs as customer interaction, service, and retailing moves online.”
According to Newman, digital transformation programs seen through the eyes of ICT vendors - or CIOs - are bigger and all-encompassing.
“The term “digital transformation” captures a whole raft of initiatives that improve the customer experience, that enable the launch of new services, and that change the culture of the organisation as well as ones that result directly in cost savings,” he adds.
“In brief, they are changes designed to make telecoms operators more like Internet companies.”
While there can be no doubting the merits of efficiency gains, or of improving the customer experience, Newman believes more discussion is needed about the extent to which telecoms operators need to become like Internet companies and about which services they should be rolling out.
“There is a real risk that telecoms operators will end up fighting yesterday’s battles by trying to emulate the services provided by Internet companies,” he adds.
“Just because operators will have the same capability in the future to roll out new services as quickly and efficiently as Internet companies does not mean that they should do so.”
Rather, Newman believes telecoms operators need to look ahead and work out where they sit - or should sit - in the digital value chain.
“Delivering broadband access will remain their core business,” he adds. “Bundling access with third-party services represents an evolution to this strategy.
“Increasingly, however, telecoms operators are exploring the potential of becoming platforms for a whole range of consumer and enterprise digital services.
“As such, they will be providing services for Internet companies, not ones that compete with them.”
But for Newman, it is not altogether clear that the digital transformation programs being undertaken by ICT vendors and operator CIOs are underpinned by these assumptions about where future opportunities and business models lie.
“Perhaps this is because operators are still experimenting with these new business models and are not ready to commit fully to them,” he observes.
“Until they do so, the reality is that support for digital transformation programs is likely to be based largely on the ability to drive efficiency gains - measured in terms of cost savings - rather than on a broader set of benefits to the organisation.”