February 23, 2023

By: Abhishek Jain, Director, Strategy Office, LTIMindtree

Five years ago, HBR predicted that “75% of the world’s most valuable companies listed in S&P 500 will be replaced by the new entrants by 2027 if they don’t adopt digital transformation”. In the last five years, approximately 33% of companies have been replaced in S&P 500. With this current replacement rate, we will see a greater than 75% churn if companies don’t evolve and perform course correction in time. So, what has transpired in the last five years that compelled S&P 500 to remove these valuable organizations from their listing?

Let’s rewind a bit and take a look.

Digital Disruption Acted as a Catalyst for Change

By 2013, the industry-wide acceptance and implementation of agile practices resulted in faster time to market a business’s IT requirements and gave rise to the buzzword “digital transformation journey.” The three catalysts are:

1. The acceptance of “agile practices” coupled with a broader reach of “4G connectivity” and high-speed home connections gave rise to enormous opportunities to capture the mindshare of “always online” Millennial and Gen Z generations.

2. The businesses started focusing on creating “personalized interaction” through apps and social media with Millennials and GenZ, and incrementally every software development project began to focus on bridging the desktop versus cell phone user experience gap.

3. In the last five years, “digital budgets” have increased to close the consumer experience gaps between web, mobile apps, and offline engagements.

Digital Snowball

This quest for personalized and seamless consumer experience across all channels has thrown new challenges to businesses and IT firms and morphed the one-off large software projects into a continuous evolution of digital strategy approach towards development.

When to Start the Digital Transformation Journey?

The new age digital transformation initiatives are built on multi-platform and complex technologies, which put much pressure on the business’s IT strategy to accept and mitigate new challenges like integration and redundancies.

In the last two blogs, we looked at the holistic transition solution development and implementation of cross-industry learnings to reduce the overall transition timelines without compromising on the client’s expectations.

In this blog, let’s look at how the transition can become an enabling stage to kick-start the digital transformation journey during outsourcing initiatives.

Why Is It Essential to Kick-Start Digital Transformation with the Transition?

The market forces are driving IT organizations to continuously introduce new technologies and ways of working and transform from an inflexible delivery mindset to a more innovative, fast-responding, and agile model that syncs with market realities.

1. The traditional mindset approach resists introducing new ways of working and commencing the digital transformation journey during the transition period, resulting in missed opportunities to bring digital agility within the organization.

2. This dated approach also overlooks the upfront productivity gain commitments that can be brought upon by initiating a transformation roadmap during the transition period.

3. Transition, the first touch point for outsourcing organizations and IT vendors, sets a base for this shift in mindset and forms a working foundation for this relationship. Getting it right the first time is critical to minimize disruption to processes and people and ensure stakeholders are appropriately focused on introducing and adopting new ways of working at this touchpoint.

Traditional v/s Digital Mindset

A successful transition requires a rigorous process that considers all dimensions that can influence the program, viz., end-user challenges, software maturity, organization design, inflight projects, and many more that can potentially impact the outsourcing initiative.

With so many dimensions affecting the transition, the focus of most organizations must remain only on crossing the transition bridge without any impact on current operations. However, if designed with a proper structure and roadmap, the transition can become a vital contributor to the success of a digital transformation journey through symbiotic connection.

During the vendor selection and transition stage, the businesses are more open to sharing the data and pain points of their current IT landscape and keen to evaluate and accept transformational solutions. The digital transformation solution devised at this stage benefits businesses in three ways:

1. It doesn’t hamper their current operations and gives time to carefully analyze all possible digital designs that would benefit end customers
2. It gives them the flexibility to evaluate the solution prototype without the urgency of delivery
3. The overall implementation strategy post-evaluation of prototypes can be thought through during the transition stage without rushing against timelines

Creating a well-defined transition and transformation roadmap is essential for successfully implementing a business’s digital transformation journey to realize these benefits.

One example we implemented is the Flywheel transformation model for a leading insurer that wasn’t sure of investment in transformation during the transition phase. To overcome this problem, we invested 3% of initial funding for the first spin of the “Legacy elimination” flywheel during the transition stage. The client realized the operational benefits of the transformed IT landscape within six months of the contract award resulting in potential savings of 40% and didn’t have to wait for the transition to get over to start the transformation journey.

Let us look at another example for better understanding – NextGen AMS transformation experience for a top 3 global pharma company. The client wanted to transition 190+ applications serving 41 sites in 14 countries to a transformed state from an incumbent vendor. We identified and implemented 30+ automation initiatives during the transition stage. It benefitted us in multiple ways, such as Mean Time to Recovery (MTTR) reduction, a reduction in overall tickets via tool-based monitoring, and a substantial reduction in the dependency on L3 support on legacy applications.

Summary

Transition and transformation are not mutually exclusive; the former focuses on charting a path toward operational ownership changes, and the latter focuses on improving and evolving the same operational ownership to the next level.

The transition stage provides a ground to plan and simulate various strategies for the digital transformation journey without the risk of implementation failure. Hence it is imperative to kick-start the digital transformation journey during the transition stage.