Yes, digital transformation is still a thing.
It always will be.
If digital transformation talk has faded, then I think it’s due to lingering confusion about the term itself. Many people treat and discuss digital transformation as a single tech-driven initiative—an IT undertaking primarily focused on replacing or upgrading an organization’s core technology stack.
This is off in my book.
Digital transformation is about business transformation. I think of it as business transformation through digital means. That means that as technology evolves, the opportunity to transform digitally persists. The problem with thinking that digital transformation is a one-time event or even a multiyear initiative is that it implies that a digital transformation can somehow be complete, as though it’s a project with a start and end date.
In fact, digital transformation is a process—an ongoing, continuous evolution in how an organization leverages digital technology to run its business, interact with customers and deliver its products and services. And, as long as technology keeps advancing the minute you finish one transformation effort, you’re presented with a new world of digitally driven opportunities.
To quote Jeff Bezos, “It’s always day one for digital transformation.” Sadly, success with digital transformation has been modest. While digital transformation is never dead (and results may vary), transformation successes have unfortunately been few and far between.
In a recent study, the global management consulting firm McKinsey took a fresh look at digital transformation in the banking sector to determine who’s succeeding in their efforts and who isn’t. [The study, a Finalta benchmarking study by McKinsey, tracked the performance of 80 global banks from 2018 to 2022 against a set of normalized metrics.]
The results were disappointing. While 89 percent of organizations surveyed indicated they actively pursue digital transformation, only 31 percent indicated that they’ve realized a significant return on their investment—not exactly a resounding success.
Much of this shortfall gets back to the problem of perception. Many of the organizations surveyed focused their digital transformation efforts on keeping up with technology rather than leaping ahead in their business. And lagging organizations, in particular, were focused on implementing “table-stakes” digital tools—tools such as a customer-facing mobile banking app. Ten years ago, this might have been transformational, but not anymore, especially from a competitive standpoint.
As the study noted, “As soon as one bank introduces a mobile feature, others see it and follow suit relatively quickly.” Organizations that play a perpetual game of catch-up never truly transform anything about their businesses relative to the rest of the industry. What was once innovative quickly becomes just the cost of doing business.
So, what do those leading the way with digital transformation do differently? In short, they focus on creating value that’s hard to copy. According to the study, organizations enjoying the greatest benefits from their digital transformation efforts go beyond table-stakes apps and focus on transforming core functions of their business. They focus on reengineering or optimizing complex processes and workflows. This involves integrating dozens of use cases, multiple stakeholders, volumes of data and numerous external systems.
In the banking sector, leaders go far beyond customer-facing mobile apps and transform the entire digital sales process. They leverage foundational digital technologies (such as cloud, mobile, analytics and social) to optimize the entire customer journey. This includes developing personalization analytics to improve marketing campaign uptakes, providing omnichannel customer contact center access, enabling real-time financial product approval, and offering extensive customer self-service tools to support day-to-day banking.
Digital leaders don’t just change technology; they fundamentally change how business is done. Technology that enables and optimizes complex integration will drive the next wave of digital transformation.
What stands out from the trends in digital transformation identified by McKinsey is how central the concepts of integration and connectivity have become. Re-engineering complex business processes is essentially an exercise in integration, where you undergo a deep rewiring of systems, workflows, and behaviors.
Modern digital transformation rests heavily on achieving broader and tighter integration inside and outside an organization, and the technologies that enable and accelerate this deep connectivity will compete for mindshare. That’s why conversations around digital twins, generative AI and geospatial technology have reached a fever pitch.
Digital twins are virtual replicas of physical systems and are, in essence, the ultimate integrative concept. Whether it’s a digital twin of a manufacturing production line, a transportation network, or a river basin, implementing a digital twin involves integrating numerous datasets, systems, and processes to model a real-life functioning system. That includes how humans interact with and maintain these systems, often in real time and in 3D, depending on the degree of sophistication.
Digital Twins and Geospatial Technology
A twin with a high degree of integration and richness provides the basis for complex digital transformation. Managers can confidently model scenarios across complex workflows and identify process improvements. Essentially, digital twins are a vehicle for modern digital transformation.
Underpinning digital twins are two critical technologies: generative AI and geospatial technology. These are central to digital twin systems, as they provide the means to generate, simulate, and adapt digital representations that closely mirror real-world systems. Generative AI delivers predictive and prescriptive powers. Geospatial technology provides the spatial context. Put them together, and you get an integrated, intelligent digital twin that can tell you where, when, and why to take action or make changes.
Geospatial technology is a foundational component of digital twins and plays a vital role at each level of maturity. Table 1 summarizes a general digital twin maturity model.
Generative AI and Geospatial Technology
Generative AI has the potential to accelerate outcomes at every stage of the geospatial data life cycle, shifting human involvement toward data-driven interpretation, decision-making, and innovation.
How do I see the digital twin-driven transformation era unfolding? It is hard to say overall, but here are a couple of examples from city government organizations that are already underway:
- Infrastructure Development and Investment
- Uses generative AI to assess economic indicators, demographic trends, and urban growth projections to recommend strategic infrastructure investments
- Uses geospatial technology to map existing infrastructure and growth areas
- Integrates both technologies to create a planning twin to guide city officials in making informed decisions about where and when to invest in new infrastructure projects
Citizen Engagement and Services
- Uses generative AI to analyze residents’ feedback, service requests, and sentiment analysis data to identify trends and improve service delivery
- Uses geospatial technology to provide location-based insights into service demand
- Combines these technologies to enhance resident engagement, tailor services to specific needs and optimize resource allocation for improved public satisfaction
The Bottom Line
Digital transformation is not dead; it’s thriving, evolving, and adapting to the changing times. The integration of digital twins, generative AI, and geospatial technology (and other innovations) into business operations is a testament to its continued relevance. Organizations that embrace these technologies are better equipped to innovate, stay competitive, and meet the demands of an increasingly digital world.
So, let’s not bury digital transformation prematurely. Instead, let’s recognize its enduring importance and harness modern digital advances to shape a more efficient, creative, and sustainable future for businesses and societies alike.