The Architecture of Change – Part 1

Business architecture and the meaning of Digital Transformation

 Figure 1: Fish to Fowl, ‘Class’ Transformation

[This is Part 1 of a three-part article describing digital transformation and its illumination using a discipline known as business architecture.  In Part 1, we explore the term and point to a need for a generative abstraction in order to understand the its meaning.]

What is “Digital Transformation” and why do we care?

“Digital Transformation” has emerged as the catchphrase used to describe fundamental changes to organizations and institutions caused and enabled by modern digital information technology. Various consultancies and scholars have surveyed and cataloged these changes, but there is no model of how transformation occurs or, indeed, what is being transformed. If Uber is a taxi company, and if all taxi companies share a similar structure in order to be a taxi company, what makes Uber so different?

Before we propose an answer to this question, it is worth investigating how the phrase “digital transformation” is being used and what is intended by it.  Even if the meaning remains vague and ambiguous (and it will), it is worth understanding how the conversation has gone so far.  If nothing else, we can thereby avoid merely adding yet another opinion to the heap.   If we are successful, we can go beyond mere description and offer some very practical advice concerning how digital transformation can be actively and intentionally effected.  But let’s start with the data – the digital transformation discourse as it has emerged thus far.

Figure 2: a collage of Digital Transformation Discourse

You say you want a transformation?

Consider the phrase “digital transformation” in isolation.  In ordinary speech, it is an attributive adjective – “digital” specifies the kind of transformation.  But in recent years it has become a proper noun,[1] standing for phenomena occurring in commerce, science and culture related to the changes that digital technology makes either possible or necessary.

For the web as a whole, Google shows the incidence of “digital transformation” as a search term increasing 10-fold in just 2 years.  Amazon lists 333 book titles for the string “digital transformation.”  Of, these about 2/3 have been published in the last 5 years. Forbes.com returns 632 results and Harvard Business Review (HBR.ORG) 125.  It has become, as is said in the vernacular, “a thing” – a meme in its own right.

Figure 3 Google Trends “Digital Transformation”

But does this phrase “digital transformation” mean anything definite?  Does it have a definition?  We have to look to the salient literature (including online videos and presentations) as a starting place, since that is where the term is being defined.

Wikipedia defines digital transformation as “the changes associated with the application of digital technology in all aspects of human society.”[2]  The World Economic Forum also takes a similarly broad view of the phenomenon, defining it as “[r]apid advances in digital technology [that] are redefining society.”[3]  MIT Sloan Management Review, in collaboration with CapGemini consulting, focuses on business and defines digital transformation as “the use of technology to radically improve performance or reach of enterprises”.[4]  IBM states succinctly that it involves “[c]reating new business models where digital meets physical”.[5]

But these definitions are unsurprising and coincide with what we surmise digital transformation to be in the first place: digital transformation is surely business transformation, caused or enabled by digital technology. Given this, and the fact that digital transformation has been ongoing for at least 40 or 50 years now, one wonders: why the sudden attention to the phenomenon and, moreover, why now?  After all, the impact of information technology on humanity has been the subject of writings since at least the 1940s and 50s.[6]

Contemporary digital transformation, according to IBM, is rooted in technology’s pervasiveness in everyday life and in consumer empowerment:

As customers became increasingly empowered based on pervasive access to online information, along with a multiplicity of choices and channels, their expectations ratcheted skyward. As a result, customers have now become the primary force behind digital transformation in all industries.[7]

Figure 4 IBM evolution of digital transformation

In IBM’s analysis, digital transformation is a culmination of infrastructure and web strategy, resulting in the transformation of business models themselves.  The tool has, in this view, turned back on the tool-user and transformed him or her (the business, the industry, the economy, the society… ).

The World Economic Forum has a different point of view.   The transformative power of information technologies lies in their combinatorial effects, which accelerate progress exponentially, and which are today are reaching ‘critical mass’ worthy of trying to describe and systematize.

Figure 5: World Economic Forum 2016

In this view, technology is having recursive, self-reinforcing effects, which are reaching a ‘critical mass’ in the businesses and business environment they affect.  Digital transformation is change-inducing-change in which technology itself has turned back on the business model that uses it.

Finally (in this incomplete survey[8]), CapGemini/MIT Sloan defines digital transformation as “the use of technology to radically improve performance or reach of enterprises.”  What is new and transformative, according to CapGemini, is the fact that the impact of digital technology is being felt in large, traditional companies whose business is manifestly not digital.  The somewhat vague definition (doesn’t everybody have a website?) is made more definite by describing it as three ‘pillars’ of nine elements; digital transformation is the impact of digital technology on the business’s customer relationships, its internal processes or its business model.[9]

Figure 6: A famous chart by CapGemini

What’s so transformational about all this?

Pervasiveness, rapidity, empowerment, combinatory effects …  what each characterization of digital transformation is pointing to is the secondary and tertiary effects that digital technology is having on the environments in which it operates.  It is not, for example, merely the fact that anyone anywhere on the planet can now view a real time video of an event occurring in Minneapolis; it is that this fact of planetary simultaneity has passed onto tacit assumptions that we make concerning awareness, action, choice and even judgment.  One sometimes thinks this is why we see time as somehow “speeding up”.

The assumptions affected by technology permeate our “average everydayness.”  It is often those products or inventions that “disappear” or become inconspicuous – the telephone, the paperclip or the electric screwdriver – that have the greatest effect our shared fabric of meaning.  It is because technology has such fundamental effects that digital transformation – as a thematic field of study – is a credible and appropriate concept.

In the context of business, digital transformation means that the very suppositions on which business models are founded are changing.  That the largest taxi company need not own taxies; that the largest movie house should own no theaters; that the world’s largest telecom provider owns no switches, repeaters or transmission lines – these are profound changes to taken-for-granted business structures that have been in existence for hundreds of years.

Figure 7: Source IBM

Yet, even after transformation, we do recognize these altered entities as entities of a particular sort –a taxi company, a telephony provider, a movie purveyor.  Their essential nature remains the same.  What is therefore transformed and what persists through transformation?

To answer questions like these, what is needed is a generative abstraction –a model using general concepts which can be used to describe any business of a given kind, yet which is sufficiently rich and specific to tell us what we can or must do to assimilate technological change.   With such a model, we have a possibility of repeatedly, deliberately and creatively setting about on a digital transformation.  We can, so to speak, put our finger on what changes and what endures in our business.  Without one, we can at best imitate what others have done.  Without it, digital transformation is blind – an exhortation without substance.

[1] We will us title case only when referring to it as a title – as in “the Digital Transformation literature”.

[2] https://en.wikipedia.org/wiki/Digital_transformation

[3] World Economic Forum in Cooperation with Accenture, Digital Transformation

of Industries, 2016

[4] MIT Sloan / Capgemini Consulting.  2011.

[5] IBM Institute for Business Value, Digital transformation, 2011

[6] I’m thinking here of Claude Shannon, Herbert Weiner and the like – the early AI theorists.  The author was legal analyst at the now defunct Office of Technology Assessment – an agency of the US Congress charged with documenting digital transformation (among other technological impacts on policy) for House and Senate Committees concerned with technology-related legislation.

[7] IBM Institute for Business Value

[8] For a systematic review of the digital transformation literature, see: Association of Information Systems, The Shape of Digital Transformation: A Systematic Literature Review, http://aisel.aisnet.org/cgi/viewcontent.cgi?article=1027&context=mcis2015, 2015.

[9] “Executives are digitally transforming three key areas of their enterprises: customer experience, operational processes and business models (see Figure 3). Within each of the three pillars, different elements are changing.  These nine elements form a set of building blocks for digital transformation. Currently, no company in our sample has fully transformed all nine elements.  Rather, executives are selecting among these building blocks to move forward in the manner that they believe is right for their organizations. The tenth element– digital capabilities – is an essential enabler for transformations in all areas.”  These same themes – customer experience, internal business process and business model transformation – are echoed in the WEF and IBM papers on the subject as well.