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A Cross-Cutting Look at Digital Transformation

Jun 25, 2018 15 MIN. READ
No matter your industry, digital transformation requires much more than simply updating an outdated IT system.

In today’s environment of rapid digital evolution, many of us struggle to determine when—and to what extent—we should let new technology into our lives. If you’re like millions of other consumers, you're probably asking an increasingly familiar set of questions.

“Should I upgrade to the iPhone X?”

“How will an Amazon Echo make my home ‘smart’?”

“How much of my personal data is Google actually collecting?”

 And between online reviews, consumer report studies, and word-of-mouth, it’s often easy to weigh the benefits and make an informed decision about the technologies we adopt.

For businesses, institutions, and organizations, however, it’s a different story.

Online behemoths like Amazon, Google, and Netflix are conditioning consumers to expect a seamless user experience and personalized customer engagement before, during, and after an actual transaction. And their share of consumer markets keeps expanding: Last year alone, Amazon was responsible for over 4% of all sales in the United States.

This exponential growth hasn’t just changed the way these juggernauts do business with their consumers; it’s changed the game for everyone else, too.

Digital transformation requires a true culture shift in the way employees, leaders, and other stakeholders envision the role of technology.

All businesses and organizations—private, behemoth disruptors or not—are under more pressure to meet those skyrocketing consumer expectations.

For many, adapting to those demands is a steep uphill battle that requires a full-fledged digital transformation. Though the details are different for every adopter, digital transformation, at its core, marries the capabilities of emerging technologies with business, corporate, and government cultures so that organizations can adopt change in value-driven, user-centric ways.

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To that end, digital transformation requires much more than simply updating an outdated IT system or investing in a software suite (more often than not, taking these kinds of measures without a plan can actually worsen the end-user experience).

In the past, digital transformation might have meant moving data and services to the cloud; today, the focus is even more on how that newfound agility can enable change in broader ways.

It requires a true culture shift in the way employees, leaders, and other stakeholders envision the role of technology. Given that scope, there’s no one-size-fits-all approach to digital transformation. Public and private sector organizations alike need to come to their own understanding of the digital technologies, strategies, and processes that will help achieve their goals, stay competitive, and meet customer needs.

It’s not just consumers who benefit from technologies like smart thermostats. For example, in a recent ICF-led pilot program, we found that smart thermostats could help gather valuable customer data and reduce energy runtimes by up to 95% during times of high demand.

Even when organizations develop a clear vision of their digital transformation, putting that plan into action represents a common sticking point. To be successful, organizations need an underlying digital transformation framework—put simply, an outline—for how they will progress through periods of significant technical changes.

A digital transformation framework can be utilized across a company or government agency to funnel all levels of the organization toward similar endpoints. It can come in the form of a checklist, a decision tree, or even a series of questions, and it is designed to help companies adopt the right technologies while staying aligned with their goals.

Take airlines, for instance: Many are collecting more data about their consumers, back-of-house processes, staffing systems, and other elements that affect service. Without a standardized plan to establish how this data will be communicated, analyzed, and applied, the transformation can easily fall apart.

But if you can integrate across systems and databases, it's easier to analyze corollary factors and potentially harness the power of that data in more effective ways—rather than letting it go to waste.

For the Public Sector, Digital Agility Can Be an Uphill Battle

In theory, every organization’s end goal regarding digital transformation is an expansion of output—be that profitability, customer engagement, or reach—combined with increased operational fluidity.

There’s no one-size-fits-all approach to digital transformation. Public and private sector organizations alike need to come to their own understanding of the digital technologies, strategies, and processes that will help achieve their goals, stay competitive, and meet customer needs.

That goal requires a high degree of digital agility: an organization’s ability to react to and implement change, while accounting for changes in its industry’s landscape and making room for proactive and immediate responses to emergent events.

That kind of flexibility is a tall order for almost every organization, but it’s been easier for private businesses, especially startups, which tend to create iterative, responsive processes as they grow. These instances of rapid expansion have put more pressure on legacy institutions—such as large, established companies or public-sector institutions—that had previously considered their own processes and customer relationships more static than fluid.

As a result, more public-sector institutions or industries that are subject to heavy federal regulations (like aviation and energy) need to push for greater digital fluidity to stay both relevant and competitive.

Unlike their private-sector counterparts, though, these institutions don’t have the same freedom to iterate or implement at will. They operate within established organizational frameworks controlled by stringent government regulations and bureaucratic red tape. But these limiting factors don’t diminish the need for change, especially not from the citizen perspective.

In the past, the public sector didn’t experience much pushback from consumers because there was limited to no competition in the market, or competition was primarily insular—one airline competing against another, for example. Competitive markets and citizens alike are increasingly holding public institutions accountable. In the meantime, those institutions face a slew of constraints, including (but not limited to):

  • Tight budgets make it difficult to invest in the types of IT that support transformation. And without in-house data about the benefits of a new technology or potential return-on-investment, it can be hard for transformation advocates to make their case.
  • Strict government regulations limit the ability to implement or even envision the kinds of swift innovation that permeates the private sector.
  • Cybersecurity concerns demand meticulous (sometimes painstaking) vigilance when it comes to process or product development.
  • Conflicting organizational processes that make it difficult to envision, message, and apply sweeping changes across a team or organization.

The good news? These types of bureaucratic organizations and institutions also possess some key advantages, like unique access to demographic and usage data and advances in integrated IT software. With these attributes, many are expanding their boundaries, mitigating challenges, and improving the citizen experience.

So how are they doing it? And what does a successful future look like from industry to industry?

To find out, we spoke with some of our leading subject matter experts in the aviation, transportation, federal IT, and energy industries. Their answers aren’t only illuminating and forward-thinking but also a solid jumping-off point for framework-setting discussions you might be having with your teams today.

Working Within IT Management Constraints to Effect Change in Aviation

Though the U.S. aviation industry is decidedly private—airlines, airports, and air cargo planning services are money-making companies —it’s still one of the most heavily regulated. On top of that, airlines must juggle a dizzying amount of logistics to make sure their customers and their baggage make it from point A to point B as seamlessly as possible.

Mark Drusch, a leader on the ICF aviation team, knows those pressures firsthand. Before joining ICF, he spearheaded transformations for commercial airlines like Delta and Continental, tackling specialty areas like strategy and execution, revenue management, route planning, and more.

“At the end of the day, customers are at the center of everything, meaning they should benefit the most from digital transformation,” Drusch says. “The more we’re able to integrate data and understand our customers and their needs, the better we’ll be able to offer them products they want and need.” Yet it’s not just customers who can benefit.

hurricane travel impact 2017

Airlines have the ability to generate more profit while reducing their costs. Further, airports are realizing that customer-first experiences can have a major impact on both revenue and customer happiness. The end goal, says Drusch, is a “virtuous echo system” that will allow everybody—customers, airlines, vendors, and airports—to benefit.

Though aviation services are very different from most consumer tech, industry players still need to adopt new digital technologies thanks to customer expectations set by Amazon and Google.

Bill Collins, ICF’s vice president of airlines, aerospace, and maintenance repair and overhaul (MRO), says, “We now expect across the board this sense of ‘it’s always right, it’s always on time, it’s always when we were promised it.’ And that is clearly something airlines have historically not done a good job of. Amazon has raised our standards so much that airlines and aviation services as a whole have got to step up and do the same thing.”

Second, the aviation industry is beginning to realize that coming technologies could play outsized roles in future aspects of airline revenue management, scheduling optimization, cargo planning, aircraft MRO, and so on. “There’s a lot of interest and not a whole lot of utilization yet in understanding how [artificial intelligence] and machine learning can help in various aspects of the business,” he says. “It’s one area where we see client interest starting to gravitate.”

“[Airline logistics] are like conducting an orchestra. There’s an art and science in understanding which pieces have to move when creating the best overall network. This is an area where we are increasingly seeing airlines look for help from digital transformation.” — Mark Drusch

Third, the aviation industry contends with an inordinate amount of data and logistics in order to get a plane (and its passengers, baggage, catering, crew, etc.) to an end destination. Meeting those objectives while staying as profitable as possible is like “a conducting an orchestra,” says Drusch. “There’s an art and science in understanding which pieces have to move when creating the best overall network. This is an area where we are increasingly seeing airlines look for help from digital transformation.”

How exactly are aviation companies implementing new digital strategies? One way is an integration of databases, not just within a company, but among companies as well, to the benefit of all. ICF’s Bill Collins, for instance, recently worked with an airline that was merging with another entity.

They needed a way to conjoin their technical operations—i.e., moving airplanes, technicians, and inventory to different cities—without hundreds of millions of dollars and years to spend on developing new systems. Instead, Collins' team helped the airline develop a simple web-based front end that tied into all the systems.

"Everything was already BC-compliant; all information went in both directions," he says. "We were able to get what we needed regardless of where the technical material was, regardless of where the products were.”

Using Data to Manage Transportation Needs

Perhaps the vertical in which we’re seeing the highest need for rapid and disruptive digital transformation is transportation, and for good reason: as our population grows, so do the demands on our transportation infrastructure systems.

Transportation planning and transportation demand management have always required ongoing maintenance. While we aren’t typically building new highways and metro systems in the United States, we are constantly expanding and refining the systems we already have.

Even if we didn’t have ride sharing services, connected autonomous vehicles, or increased e-commerce demands, we would still need to manage huge, expensive roads and urban transportation systems that accommodate millions of people every day. Transformative digital technologies, however, allow transportation specialists to better manage these systems.

“If the public agencies can pull that data together and crunch the numbers and produce some useful technology out of it, the public thinks, ‘Wow! This is cool! I can actually use this.’” — Jeff Ang-Olson

ICF’s vice president of transportation, Jeff Ang-Olson, sees four major changes happening that are enabled by digital communication: 1) new mobility options (like Uber, Lyft, and bikeshares), 2) connected autonomous vehicles (which are very data intensive and data hungry), 3) freight movement and logistics, and 4) ongoing maintenance of our existing systems.

New mobility options and connected autonomous vehicles have arguably more obvious digital implications on transportation while longer established transportation modes, like rail travel, are also under pressure to evolve in the digital era.

Freight movement and logistics, however, may not be so obvious. These areas require highly intelligent digital communications systems to manage things like intermodal or multimodal transportation. E-commerce alone is totally changing the way customers’ merchandise moves and how significant freight demands are on shipping companies. Now, so much is bought online that much of the transportation industry is coming to grips with how to get everything to its proper destination.

The biggest challenge in transportation is that the public sector is consistently outpaced by the private sector, startups in particular. “It’s very difficult for [public sector transportation agencies] to compete,” says Ang-Olson. “So, the challenge has been figuring out how the government—federal, state, and local—can best function in the roles it needs to: safety compliance, privacy standards, and keeping transportation equitable and fair.”

For example, a few years ago, the San Francisco Metropolitan Transportation Commission (MTC) awarded a sizable grant to a local startup to develop a ride sharing app.

hurricane travel impact 2017

However, as soon as the app was ready to launch, more user-friendly, private ridesharing options like Lyft and Uber exploded. As Ang-Olson puts it: “The MTC took a gamble with several million dollars of public money to [fund] a startup that proved to be obsolete because others did it better without any government subsidies.”

With shifting technologies, transportation demand management continues to be an important role for governing bodies. And it’s something governing bodies can really excel at given their ability to collect data in ways that private companies can’t.

For example, intelligent transportation systems (ITS) allow cities to provide transportation services in ways that are both safer and more informed than in the past by utilizing an array of “smart” technologies like traffic signal control systems, car navigation, parking guidance, automatic car plate recognition, and so on. Of course, with these smart technologies comes the need for more data collection and analysis.

“We talk about accidents on the freeway system, travel times on the highway, or how the transit system is running, and a lot of that is public data,” says Ang-Olson. “If public agencies can pull that data together and crunch the numbers and produce some useful technology out of it, the public thinks, ‘Wow! This is cool! I can actually use this and benefit from it.’”

While most of our infrastructure regarding transportation is already in place, rapid urbanization and the emerging concept of smart cities are changing the game. That means it’s incumbent on the transportation sector to incorporate smart technologies to streamline this growth and better utilize existing resources.

Increasing Competition in the Energy World Demands a Digital Future

The energy world is experiencing a huge sea change based on increased regulatory pressures, new forms of competition, and the rise of distributed energy resources (DER). On top of all of that, the traditional definition of what public utilities can offer us has rapidly shifted in the past few decades.

For example, while Ma Bell might have been the first thing to come to mind for many consumers just a generation ago, modern telecom technology has made the landline almost obsolete. What hasn’t gone the way of the roadside, however, is our need for energy.

In the past, the utility-customer relationship was a one-way street; the utility provided energy, and the customer paid for it. The only reason to contact an energy company would have been a power outage or a problem with an electricity bill. Energy companies simply worked behind the scenes, and the fewer touchpoints a consumer had with them, the better. In fact, until recently, utilities rarely even thought of their users as “customers;” rather, they most often referred to them as “ratepayers”—just dollar signs that existed to support their bottom line.

But today’s consumers have much more choice, and they’re increasingly investing in energy options outside of their utility—solar energy, smart home devices, electric vehicles, energy efficient products and services, etc.

As non-utility energy options have expanded and become more accessible, the disconnect between utilities and their customers has come into harsh relief.

“Energy companies’ customers used to be simply 'ratepayers.' Suddenly, their customers are now expecting to be known by the utility and to have their needs met across different channels so that the personalized customer experience that they get elsewhere, like at Amazon, is now being thrust upon the utilities,” says Jeffrey Adams, a senior VP who focuses on customer engagement. It’s precisely because of that perception that utilities face increased pressure to embrace comprehensive digital transformation frameworks.

Commercial energy companies are finding that the modern consumer isn’t willing to just take a passive role in the relationship anymore.

Energy companies are now realizing that modern consumers aren’t willing to take a passive role in the relationship anymore. They are increasingly expecting the same personalized customer experience from energy companies that they are getting from other entities. In addition, these same companies are seeing increased competition from new distributed energy resources (DER) and shifting regulatory demands.

The good news? Smart grid technology, coupled with smart meters, is allowing energy companies access to unprecedented amounts of data in real time from real users. So, what are the challenges? How are we helping our clients move past them? What does the future look like?

Advanced metering infrastructure (AMI), otherwise known as the smart grid, is one part of the puzzle. AMI, an integrated system of two-way communication between energy utilities and their customers, is enabled by smart meters, data management systems, and improved communications networks. Because of AMI, many utilities now have access to much more information about the people and communities they’re trying to reach.

Patty Cook, senior VP of market development and utility initiatives, clarifies, “The piece that [energy companies are] really sinking their teeth into is how to make sense of the value of [their] data and the insights into energy usage that’s no longer on a monthly basis, but available at 15-minute increments. They now have [much more information] on their customers that they previously didn’t—not just energy use, but also information about their buildings or the connected devices.”

Energy utilities, however, are still struggling with how to build customer engagement and enable change within their organizations, both concepts that aren’t built into the DNA of many energy companies. The biggest challenge, says Adams, “is having optics into all the touchpoints so that they know what message they are delivering to their customer over what channel, and making that effective.”

With these insights comes a crucial shift in perception: Customers are unique users with individualized wants and needs. One consumer may be of a set-it-and-leave-it mindset, for example, while another could want more engagement from his or her utility company. Through digital transformation, the energy sector has the opportunity to better recognize and address those differences and streamline its own processes at the same time.

Improving the Citizen Experience via Digital Transformation in the Government

With snafus like the bungled implementation of the Affordable Care Act (ACA) website grabbing worldwide headlines, government agencies face extreme public scrutiny and increased pressure to ensure that citizens are able to access and understand government services with ease.

But it’s not always the big mistakes that shape users’ experiences or their long-term impressions of the government. Smaller headaches—like a student or taxpayer logging onto the IRS’s or FAFSA’s website and spending frustrating amounts of time trying to locate the information they need—can deteriorate consumer trust and government-wide efficiency.

That’s exactly why many government agencies are developing strong digital transformation frameworks—to streamline services and become more responsive for American citizens. “That’s what citizens want from their government: simple, usable solutions that are easy to access when they need them,” says ICF’s Senior Vice President of Digital, Design, and Information Insights, Mary Schwarz.

hurricane travel impact 2017

Schwarz also doesn’t see it in terms of limitations, but rather in terms of what’s possible given the special positioning of government. She explains, “There's an aspect that digital brings that separates it from [web] development, in that it’s the notion of an integrated system that is connecting multiple data sources, different functions, and processes [across teams and agencies]." This is what drives government digital transformation and IT modernization.

“We are not just replacing technology,” says Schwarz. “We’re [also] really looking at how people work. Where can we gain efficiency? How can we have data work in coordination or in concert? And then, how can we embed change management as part of that development practice? As you’re going through design and development activities, [it’s important] not just to think about the product you’re creating, but [also] how people are going to use it.”

"As you’re going through design and development activities, [it’s important] not just to think about the product you’re creating, but [also] how people are going to use it.” — Mary Schwarz

The challenges with implementing public sector digital transformation frameworks, however, are multifold. ICF’s Peter Wilson, a senior fellow who leads innovation and strategic service development for a range of federal customers, states, “The first answer is always ‘money.’ The second answer is always, ‘But we have a hiring freeze.’”

That is to say, government agencies are limited not only by the whims and priorities of each administration but also by yearly budgets that can make forecasting a very difficult prospect for government entities.

Wilson believes it’s even deeper than budget, though. “I think day to day, on the ground, the most common problem I see is the way responsibilities in the federal workforce are divided. People take a very functional, parochial point of view on the work that needs to be done. And looking broadly to get that consensus is not a habit they have.”

In other words, government digital transformation frameworks need to account for a certain amount of disconnection and fragmentation that is inherent to the foundations of governmental institutions.

It sounds daunting, but the future looks brighter than one might presume, says Schwarz. “We’ve learned to shift away from the infrastructure pieces and focus more on the actual tools that they use, whether for internal staff or for citizen engagement and task completion.” By moving the goalpost away from large, unwieldy tasks, ICF’s community partners have been able to harness the strengths government agencies already have at their fingertips to effect change on a larger scale.

In some cases, transformation isn’t just a way to improve systems; it can also change the way people think about the public sector entirely.

The future of digital transformation in government thinks about enterprise architecture, the system’s view of people, process, technology, and results.

“We worked with the State of Pennsylvania on a modernization effort for an underground storage tank. We created and modernized their billing and payment collection system, and we were able to do more than just help the client team. We were able to really identify other areas for improvement so that we weren't just replacing the system.”

Peter and the ICF team developed a solution that improved the state’s manner of communicating with their constituents by giving them new tools and more efficient ways of delivering answers and information while ensuring that these digital accounts were fully up to date and being measured. What was once an unwieldy paper process became a digital one.

What does the immediate future of government digital transformation look like? According to Schwarz, “The future of digital transformation in government thinks about enterprise architecture, the system’s view of people, process, technology, and results.”

For example, transformation can help all levels of government coordinate strategies in times of disaster to better serve their constituents. Schwarz elaborates: “It thinks about communication and how you, through a program management office (PMO) or through other avenues, engage the workforce to get them aligned in active and productive ways to achieve those results. And that’s the transformation. We’re the shepherds and the definers of that transformation on a broad scale.” Through strategic planning, allocating available resources, and keeping a thumb on the pulse expectations, the federal sphere has the ability to keep pace with consumer demand and the private sector.

In a bigger sense, the future of the digital transformation in the public sector is a balance of IT modernization with evolving processes. As Schwarz puts it: “IT modernization is half cyber hardening and half modernization. Modernizing isn’t just, ‘Oh, this used to work on my computer only. Now I can do it on tablets and phones and on my watch.’ Now, it’s moving toward how it works across [independent tech] platforms in a really secure way. And we’re moving out legacy vulnerability and tightening up how we architect and deliver our services.”

If your organization could use some help figuring out what digital transformation might look like for you, don’t hesitate to reach out to our experts here at ICF to see how we can help get you moving toward your goals.

Download the Report | 2018 Federal Digital Trends
We asked 500 federal leaders to identify the biggest obstacles they're facing, from tech adoption to citizen engagement. Here's what they said.