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The Human Side of Digital Transformation: Why Digital is Driving the Need to Invest in Non-Technical Capabilities

 

NelsonHall recently completed an analysis of the digital transformation capabilities and offerings of selected IT services vendors. While all vendors are investing in offerings under the ‘digital transformation’ umbrella, their investments range from industry-focused offerings using proprietary IP, to packaged solutions, to digital strategy consulting.

One area of focus seems counter-intuitive to growth of digital: where clients are pushing more of their business to be digital, IT service vendors, positioning themselves as ‘digital transformation partners’ are investing in growing their non-technical capabilities.

User Experience

A major focus in early digital transformation initiatives was on transforming the customer experience and many service providers made significant investment accordingly in these capabilities, some acquiring UX specialists, and many building out dedicated spaces, usually location proximate to clients, used for collaborative design thinking workshops.

Examples of vendors who have acquired digital specialists include:

  • Accenture: has been on an acquisition trail for four years now. Investing billions of dollars. Recent acquisitions have included three specialists in Europe: MOBGEN in the Netherlands, Tecnilógica in Spain, and dgroup in Germany
  • Capgemini: acquired two U.S. consultancies, Fahrenheit 212 in early 2016, Idean in February 2017
  • Tech Mahindra: acquired U.K. digital marketing agency BIO in June 2016
  • IBM: in 2015 and 2016, acquired expand digital consulting capabilities, including two digital agencies in Germany ( Aperto, headquartered in Berlin and ecx.io, based in Dusseldorf) and Resource/Ammirati, a U.S. digital marketing and creative agency.

Others are primarily building organically. For example, HCL has built its Digital Process Experience & Consulting organization by hiring individuals from a variety of consultancies and agencies. It now has a ~150 FTE organization in which under 5% were internal transfers.

Digital-Physical Convergence

Organizations are moving up the value chain of digital transformation, from digitizing existing processes to completely reimagining business processes and customer interactions. In some early adopter industries such as travel and retail, this has included the convergence of digital and physical, for example, an airline’s mobile app interacting with beacons located within an airport to customize the information presented to a user based on their current step within the journey. This expands the scope of transformation to frequently include how people interact with physical objects, not just a screen. This has been another driver in some recent acquisitions: some design agencies possess skills in designing for the physical realm that IT service vendors lack. A smart vending machine requires the design of not just the underlying digital interaction but also how the machine operates.

For some vendors with a product engineering heritage, this has meant a priority on acquiring human-machine interaction capabilities. For example, Luxoft made two acquisitions (Populus in 2014 and Pelagicore in 2016) targeted at expanding human-machine interaction capabilities for its automotive sector clients.

Business and Process Change

Where the success of traditional IT services is primarily quantified in reduced IT operating costs, the business case of digital transformation often relies on broader benefits such as increased revenue or improved customer satisfaction. Identifying and achieving these benefits requires skills and expertise beyond a technical offering, including industry specific knowledge and business process capabilities.

As the scope of digital transformation initiatives increasingly expand beyond customer interactions to transforming internal processes or even an entire product/service lifecycle, these business and process skills will grow in importance. Adding new digital technologies to a client’s business process has limited impact alone; the value is maximized by adapting business processes to better leverage the digital capabilities.

While not yet seeing the level of investment that UX has, vendors are starting to build out these capabilities. Accenture acquired Kurt Salmon for its retail sector digital consulting capabilities. Sopra Steria has organized so that its digital transformation spans three distinct capability areas: technology champions, industry digital champions and UX champions.

Change Management

The greater the impact of a transformation, the greater the need to manage how that change is rolled out to the impacted population. Clearly planned and targeted communication help minimize that resistance to change. As digital transformations expand across an organization, and various groups are impacted differently, the structured management of that change grows in importance. The collaborative, design thinking sessions that shape these transformations are going to increasingly require greater focus on how the change is rolled out.

While the traditional IT consultancies typically have well established change management capabilities, for those vendors coming from outsourcing services or product engineering backgrounds to be positioned as an end to end digital transformation partner, change management will need to be an area of investment.

As their major clients focus increasingly on transforming more of their operations through the application of digital technologies, large multi-service IT service providers should also look to be able to support them deal with the human impact of digital transformation.

NelsonHall’s market analysis of digital transformation services, is available to subscribers here

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