Innovation as a Daily Practice is Key to Achieving Digital Transformation

• Global firms across economic sectors are expected to spend more than $10 trillion on digital transformation initiatives, yet more than 70% will fail

• In today’s accelerated, digital-first economy, revenue growth for digitally empowered enterprises is 1.8 times higher than for digital laggards

• A proven roadmap for successful digital transformation combines the power of rapid software development with a process emphasizing people, portfolio assessment, and enterprise-wide strategic alignment

According to Mendix, a Siemens business and global leader in modern enterprise application development, enterprises across every economic sector must dramatically alter their approach to digital transformation in order to stay relevant in today’s vastly accelerated, digital-first business landscape.

New research reveals that enterprises have embraced the message to go digital or go dark:

• IDC forecasts business spending on digital transformation initiatives will exceed $10 trillion within five years.
• PwC research found 60% of top executives cite digital transformation as the most critical factor to grow the enterprise in 2022.
• Boston Consulting Group reports 80% of organizations intend to accelerate their planned digital transformation initiatives.

Despite this activity, real-world efforts to accelerate the strategic adoption of new technologies — to solve operational needs, achieve efficiencies, roll out new lines of business, and provide expanded, innovative experiences for customers and employees — is proving difficult. Boston Consulting Group analysts recently calculated that 70% of all enterprise digitalization efforts result in failure. McKinsey found 87% of enterprises reporting a digital skills gap, complicating rapid implementation of business-critical, innovative solutions.

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Looking for success in all the right places

Mendix believes that successful digital transformation is best served by an open digital business platform that is flexible, interoperable, and collaborative to speed value creation and innovation at scale. To achieve this, companies should start with enterprise-wide alignment on a strategic plan that includes clear and concise execution and success metrics. It is a holistic process that reframes the digital transformation paradigm from a series of disconnected “one-and-done” initiatives to an ongoing practice.

This type of structured practice requires enterprises to undertake a thorough self-assessment of their digital maturity and application landscape. This is the basis for creating a scalable roadmap outlining how to develop a change-ready culture, demonstrate progress on business-critical goals, and win buy-in across the enterprise. Without this alignment, fundamental barriers such as risk aversion and resistance to change arise from the disconnect between strategic vision and execution and  torpedo all but 30% of digital transformation projects.

“The underlying premise of digital transformation is about creating the future without the constraints of the past. Innovation happens not just by creating something entirely new, but also by improving what already exists,” said Nick Ford, Mendix’s chief marketing officer at Mendix. “It’s no surprise that most enterprises try to jump start this effort with technology. That’s important, but the key to success starts with people — the team makeup, the company culture, the business case and product vision, deadlines and risk factors. At Mendix, we describe how digital transformation begins with a holistic self-assessment of an enterprise’s people, portfolio, process, and platform.  What this means is that a single initiative — no matter how brilliant — if undertaken by a committee working in isolation and greenlighted by the most well-meaning stakeholder will not lead to transformational benefits.”

Low-code enlisted to solve a next-generation problem

Prior to the pandemic, enterprises primarily adopted low-code to reduce costs and speed up creation of new applications for digital business portfolios. For a growing majority, low-code platforms are now playing a critical role for streamlining and automating operations and digitalizing customer experiences. Today, low-code empowers enterprises to change their business models for success in the digital-first marketplace, making data actionable for multiple uses and integrating next-generation technologies into core systems.

Illustrating this trend, Gartner reports that 70% of all new applications will be created with low-code tools by 2025. Low-code development fosters ongoing collaboration between business and IT. And better communication between these domains significantly reduces rework and IT project backlogs. Such efforts pay big dividends. Researchers found that digital leaders achieve earnings growth that is 1.8 times higher than digital laggards.

Not surprisingly, hundreds of low-code vendors have entered the marketplace to capitalize on this urgent need. But to obtain the benefits of digital transformation, businesses need to be sure a low-code platform will support digital solutions without compromising architecture, and meet specific cloud deployment needs and devops requirements. The right platform also leverages more of the  enterprise’s workforce — beyond just IT — for solution development. Finally, the platform should be able to handle a wide number of use cases requiring both data-centric and process-centric approaches.

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Adding people, portfolio, plus process to the equation for success

By itself, even world-class technology is not enough. It is crucial to harness the people power of fusion teams that include both business domain and IT experts to leverage technology to achieve enterprise goals. A common stumbling block occurs when “companies try to boil the ocean,” says Gordon Van Huizen, Mendix’s vice president, platform strategy. “Problems crop up when organizations do too much at the same time, launching big, ambitious projects, and investing in technology to quickly put digital infrastructure in place.” While ambitious, such approaches lead to fragmented efforts that don’t deliver hoped-for results. Instead, Van Huizen recommends decision-makers focus on specific use cases first. These iterative, high-impact selections are the natural outcome of an enterprise-wide, digital maturity assessment.

Van Huizen cites four stages to digital maturity: legacy transformation, efficiency improvements for both process and productivity, customer experience, and developing new lines of business. He also cautions that enterprises should not wait for their legacy systems to be fully modernized before tackling necessary transformation projects that may be smaller in scope but create a big impact. When the entire enterprise supports a strategic vision using an agile discovery process that validates and shares its success metrics, the ROI of digitally optimizing or transforming business processes can be greatly accelerated.

“Organizations invest many years and resources on transforming legacy systems before they start accruing benefits,” said Van Huizen. “It’s better to find small projects and develop cross-functional teams where you can improve efficiencies, show early results, and enlist new people to the transformational process.”

Preparing for the next chapter — composability

Transforming the enterprise with in-house talent that can leverage their digital expertise in response to market disruptions builds resilience into any business model. The next element for competitive advantage in the accelerated digital-first economy is for the enterprise to embrace composable thinking.

Simply put, “composability” is when businesses use pre-built software modules or digital components (such as templates or packaged business services) and assemble them into a targeted solution. This approach can dramatically reduce the level of effort and accelerate the time to value. Oftentimes, employees, key partners, independent software vendors, and customers can supply these easily adapted templates or packaged functionality that will accelerate the digitalization journey. The ability to find or deliver value-added capabilities breaks the stalemate between commercial off-the-shelf software that cannot be customized and the expensive undertaking of developing highly targeted, high-code software.

“Organizations can implement digital solutions at vastly accelerated speeds by composing and adapting these capabilities from an ever-broadening ecosystem of proven sources,” said Van Huizen. This approach, which Gartner describes as “the composable enterprise,” is the final element for successful digital transformation. It enables businesses to become agile and scale, quickly adapting to changing market conditions or disruptions, meeting evolving customer demands, and seizing opportunities with new lines of business.

Van Huizen concludes, “A composable approach unites creative solutions from the widest possible community with the targeted needs of business. That’s how to inject innovation across the enterprise as an ongoing practice, on a daily basis.”.