Digital Transformation Portfolios

In my current role, I spend a lot of time talking with CIOs about digital transformation. Almost all are part way through a(nother) digital transformation programme, although some find it hard to articulate just what digital transformation is, and to know if and how well they are digitally transforming.

In this post I’d like to focus on a key aspect of digital transformation – the portfolio of work planned and underway that will deliver the transformative value sought.

Most digital transformation frameworks incorporate these three strands of transformational activity in some form:

  • Core systems optimisation
  • User (internal and external) experience transformation
  • New and disruptive business models implementation

It is intuitively clear that there is a hierarchy, if not of absolute dependency, then at least of sustainable dependency between the three components.

Value is delivered by each component in its own right: operational efficiencies, reduced customer churn and diversifying revenue streams would be an example of value that each component can deliver; and the first two components also provide enabling value for the next component in the hierarchy.

It is my hypothesis that at each stage of the digital transformation journey, some part of the change portfolio should be allocated to each component. Why? To satisfy competing stakeholders, to spread risk and to learn fast are three reasons that spring immediately to mind – I’m sure there are many others.

Given the soft dependency between each component, over time we might expect the balance of the transformation portfolio to change in the following (much simplified) way as the lower level components deliver the bulk of their value and increasingly enable value realisation from the higher level components:

If we overlay the five levels (as we define) of digital maturity we get something like this (for clarification, I’ve included the forming stage in the diagram as although it delivers little business value it does still consume capacity and resources):

Another way to look at this is from the viewpoint of cumulative value. Again over time we can see total accumulated value delivered increase, and the proportion of value that comes from each component changing (note that in this diagram we recognise that little value is delivered during the forming maturity level:

My aspiration is that the models above will provide some heuristics for guiding digital transformation planning and another lens through which to evaluate its success.

Thanks for taking the time to read this. As ever I’d very much welcome any critique of and build on the above. I’ve also developed a comprehensive digital maturity assessment model which I will make the subject of a future post.

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