Explore the nine steps of a digital transformation journey.

1. THE PATH TO SELF-DISRUPTION
Nine steps of a digital transformation journey
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2. START YOUR OWN DISRUPTION
C-suite executives in every industry must set the right pace for digital innovation. Move too fast, and you can undermine
still-valuable business processes and threaten your customer franchise. Move too slow, and established enterprises risk being
“Ubered” by aggressive newcomers that steal business and gain competitive advantage. A balanced approach is paced,
modular and risk-adjusted—but executed with a sense of urgency. The following nine steps, broken down into three main
stages, can guide change agents as they design their own transformative businesses and use the latest technology to create
modern architectures—all while securing the enterprise.

3. DESIGN STEP 1:
Develop the end-game
business model.
This means disruption. However,
the future business model may
be such a radical departure from
the business that the planning
process may not work, and
traditional planners may feel
threated by the results. Here are
three starting points:
• Begin with your own digital
assets. Every company has a
series of digital initiatives already
ongoing—these should be
catalogued, reviewed, and used
as the starting base.
• Begin a process of innovation
to design the new model. The
use of cloud capabilities can
provide an environment in which
experimentation can be rapid
and failure can be low-cost.
• Finally, a useful model for
future digital business may be
the very insurgents that are
driving transformation in the first
place. You cannot copy them,
but you can emulate their best
practices in technology and
business model.

4. Because legacy firms do
not start from a blank slate,
they must assess their current
assets and liabilities against
the future business model.
Many of the discussions about
transformation focus on the
weaknesses of traditional
firms—legacy technologies,
inability to attract tech talent,
etc. But traditional firms should
not underestimate the strengths
they bring to the table.
Some firms appear to have
an inferiority complex when
dealing with digital disruption.
These incumbent companies
bring enormous assets to the
table, such as big customer
bases, big brand names, or
regulatory approvals. These are
strengths that can be built into
their new digital businesses.
DESIGN STEP 2:
Perform a gap analysis
and strength assessment.

5. DESIGN STEP 3:
Weigh M&As for digital change.
Some traditional firms are turning to acquisitions and partnerships as vehicles for digital change. This approach
addresses the struggle incumbents often face when building new cultures and businesses, particularly those
that threaten the existing franchise. Insurgents—for all of their hubris—often need the assets and branding
of their larger competitors to break out from their many competitors. Thus, by combining with the insurgent
challenger, established enterprises can accelerate time-to-market for the new enterprise, which is critical in
the digital space. In its research on the financial industry, the EIU found that 45% of traditional firms and 53% of
digital challengers believed that the best strategy was for them to join forces as partners or acquisitions. Digital
disruption is not always a zero-sum game—a combination of forces may be the best and fastest route forward.

6. ARCHITECTURE STEP 1:
Define the optimal IT architecture.
The central choice in self-disruption is whether—or how many—applications should be shifted to the cloud. After
all, many of the new disruptive firms capitalise on the low costs and technical agility that cloud can provide.
Some providers depict this as a stark cloud versus on-premise decision. This is a false choice. Each firm will make
its own decision on public, private, and on-premise solutions according to its business and security needs.
The bottom line: don’t look at hybrid cloud as a compromise—it can be a valuable way to combine cloud
agility with traditional IT predictability.

7. Once the end-game is defined, the incumbent must examine its current networks, processes, and personnel
not only as assets but also as liabilities. Early technology leaders, such as insurance companies and airlines,
have found that their proprietary, server-based systems are holding them back. What were once constraints
are now becoming serious liabilities as nimble, cloud-based insurgents challenge traditional firms for the
market. Incumbents must identify their technology liabilities and make plans to replace them where necessary.
ARCHITECTURE STEP 2:
Conduct a legacy technology audit.

8. As firms redesign their
technology, an emerging
model is that of “dual-speed
IT.” Legacy firms often find
they cannot abandon the
legacy technologies that
house their customer lists,
product information, and
back-office systems. At the
same time, customers, whose
digital expectations have
been set by LinkedIn and
Facebook, are expecting
nothing less than an
outstanding digital interface.
The most realistic option may
be to embrace co-existing IT
architectures. “Organizations
need to overhaul their support
model to adjust to this new
paradigm. A critical element is
recognizing that IT needs two
speeds of service delivery,”
says Antoine Gourevitch,
managing partner at the
Boston Consulting Group.
While this model will present
significant integration
challenges, it is a practical
solution to the back-office
realities of many firms.
ARCHITECTURE STEP 3:
Build out the IT architecture.

9. SECURITY STEP 1:
Define a data security
strategy.
In an EIU survey of over 700
disrupting and disrupted firms,
the majority of executives said
data security was the number
one challenge.
Clearly, a data security
strategy must be designed
not just for the present, but for
the future business and the
projected level of threats in
the years ahead.
This requires a new degree
of flexibility and scalability
in security strategies. Data
security used to consist of high
firewalls and other tools for
locking down the firm. With
the increased sophistication
and frequency of cyber-
attacks, security managers
now accept that the bad
guys are going to get in,
which puts new emphasis
on containment and fast
remediation. New security
strategies must be flexible
enough to be scaled up and
modified for the cyber risks of
tomorrow, which can only be
expected to escalate and
become more sophisticated.

10. The transformation journey
is a period of elevated data
security risk. By its nature,
transformation brings new
entities—some of which
may not have equivalent
standards—within the firewall.
New devices, new networks,
and new employees all
present potential entry points
for hackers. These require
an aggressive data security
program that keeps pace
with and is an essential part of
the journey.
SECURITY STEP 2:
Maintain security during
transformation.

11. Just as transformation
presents risks, it also presents
an opportunity to escalate
the security standards of the
enterprise. In most legacy
firms, security consists of
passwords, firewalls, and
software, and remains the
domain of the IT professionals.
But with the new sophistication
and frequency of attacks,
security needs to be woven
into the fabric of the entire
enterprise. Disruption can be
turned into an advantage for
data security.
The digital transformation
journey is a fluid time, when
new systems can be adopted
and new cultures created.
This is an opportunity to
weave security into the
DNA of the enterprise.
SECURITY STEP 3:
Turn transformation into
an opportunity.

12. URGENCY
Time to do it right, but no time to lose.
This is one of a series of Economist Intelligence Unit discussions, sponsored by Hewlett Packard Enterprise,
on the digital transformation journey. For in-depth analyses of digital disruption, securing the internet of
things and managing legacy technology, please click on these links.
No industry will escape disruption. And the timeline for disruption will not be set by you—it will be set by your new competitors.
Rapid mobilisation will require a ramp-up of resources. Some of your best employees will welcome disruption and become
its leaders. The complexity and urgency should make you carefully screen and select your partners. The stakes—which can
include the survival of the firm—demand that you recruit the support of your C-suite and board.
You have time to do it right, but no time to lose. Start disrupting yourself now, before others do it for you.