Some ingredients to digital transformation success.
The term ‘digital transformation’ is likely to win you a trophy at your next game of buzzword bingo. You are also in for a good chance if you set your sites on the cousins of digital transformation such as AI, APIs, Robotics, Data, IoT, Cloud, Cyber security and Chat bots. As much as we may grow tired of hearing about digital transformation and its close relatives, I am not sure that it’s time to remove these buzzwords from your LinkedIn profile just yet!
The waves of digital disruption continue to wash over industry, increasing the pressure on organisations to take the leap into the rough waters of digital transformation.
If I think back to the last 20 years of my career, every company that I have worked in has experienced some form of digital disruption and the impact has not been pleasant. Out of 5 of these companies (of which 4 were/are household names), 2 are no longer in business, 1 is in an extremely precarious position and the other 2, despite relentlessly investing in digital, continue to wrestle with the ongoing threat of disruptors and the ever growing demands of customers for better products and experiences.
In Deloitte’s Future of Work report, they highlight that if you look over the last 50 years of Fortune 500 companies, approximately 88% are now gone. 50 years ago, the life expectancy of a firm was 75 years, now it is…15!
At this rate, we may soon see the average lifespan of Fortune 500 companies reducing to sub 10 years. Given these stats, the incentive to combat digital disruption through committing to digital transformation seems obvious.
However, an equally troubling set of stats may give you moment to pause. The success rate of digital transformation is said to be around 30%! Some well known examples of digital transformation gone wrong include: GE, Ford, Proctor & Gamble and Nike.
These are big brands, with big budgets and no doubt big brains leading their transformation effort. So what went wrong? Or rather, what might you do in your digital transformation to get it right?
Well, I’d be honoured to provide you with a fail proof recipe for digital transformation, alas, this is no silver bullet! Instead, you’ll have to settle for a set of ingredients to consider that will vary in quantity, timing and quality depending on the context of your business, the capability of your leaders and the strength of your commitment to change.
- Ambition: Set and align transformation ambitions
- Context: Know the turf you play on
- Capabilities: Understand your digital and leadership capability baseline
- Customer Centred: Commit to genuine customer centricity
- Vision: Rally your teams around a true North Star
- Autonomy: Empower your teams to sustain the transformation
- Holistic: Sustainable change cuts across people, process and technology
- Measurement: Align metrics, rewards and incentives to the change effort
Please read on to find out more about each ingredient:
- Set and align transformation ambitions
A prerequisite for successful digital transformation is that your business is committed to go beyond what some refer to as ‘digital sugar coating’ to create a markedly different future for your customers and business. It is said that you cannot increment your way into the future. Meaningful change requires bold moves and a commitment to the long game.
Genuine transformation requires leadership to be prepared to make the difficult decisions involved in changing their business model. Following through on this commitment will require choices. Specifically, to not chase the next shiny technology that comes along, but to carefully consider the people, process and technology related changes that are best suited to achieving digital transformation objectives.
It boils down to the basics of making decisive prioritisation decisions backed by someone who has the authority and clear accountability for leading the digital transformation.
2. Know the turf you play on!
So you have defined the ambition level around your transformation program and chosen someone to lead the effort. Now you need to get cracking!
To ensure your transformation effort is pointed in the right direction, it’s crucial to get a lay of the land and understand the context you operate within. This includes understanding both your external and internal situation. This analysis should provide a radar view of what opportunities and threats exist today and those that are emerging that may knock you off your pedestal when you least expect it.
This insight will help to shape the reality of the challenges you face including the regulatory environment, the state of the market, identify meaningful consumer trends and reveal the threat you face by established and emerging competitors.
3. Understanding your digital and leadership capability baseline
Taking the time to assess your current digital and leadership capabilities can help to gain alignment around the size of the gap between where you are now and where you aim to go as part of your digital transformation.
The model below, found in Leading Digital, provides a simple view of where your organisation might need to focus its efforts, for example, it might be to invest in educating senior leadership and building up digital team capability and culture. Or, might involve a focus on defining a more clear overarching vision, or perhaps a focus on adopting a more agile way of working to execute and sustain the transformation effort.
Whatever approach you take in assessing the current state of your digital and leadership capabilities, it essential that you use this insight to acknowledge the magnitude of change required to achieve your transformation ambitions.
4. Commit to genuine customer and experience centricity
Power now rests in the fingertips of customers. This is largely due to the ease at which a dissatisfied customer can switch to a competitor’s offering. This is a good thing as it leads to greater competition and as a result, better products and services.
For those competitors who fail at any point of the customer journey, there is someone else investing the time and effort to turn your pain generating experience into their gain.
As much as putting the customer at the centre of business decision making is heavily talked about by organisations, it is still an area that is easily compromised.
Saying and being customer centric are two very different things. Being customer centred is hard. It takes a growth mindset, courage, persistence and a tolerance for taking risk.
Given the context of the Australian market that I am familiar with (small market, oligopolistic tendencies, highly regulated) the traits that have previously lead to success have often been the opposite — move cautiously, risk averse, take the conservative path, go for the short-term win.
It is worth taking a moment to stare inwards at your organisation and understand to what extent you are genuinely customer centred and willing to make this a core component of your approach to digital transformation vs. take the safe (but short sighted) path.
5. Rally your teams around a true North star
So you understand your turf, are aware of your internal strengths and weakness and have a pretty good idea of how to delight your customers. Now you need to rally the troops!
Having a clear North Star that is repeatedly communicated to the teams responsible for the transformation effort will galvanize team support, collaboration and in the process, break down silos that threaten to undermine your digital transformation effort.
Having a clear and motivating North Star pays massive dividends when things get tough by providing a compass to help team members navigate through the pain and complexity that is unavoidable within meaningful transformation effort.
6. Empower your teams to sustain the transformation
Armed with a clear and motivating vision, your teams are chomping at the bit to execute on the plan. As a leader, the best thing you can do is to get out of the way and give them the autonomy and runway to execute on the transformation objectives.
Your value ongoing is to be at the ready to break down blockers and constantly reinforce the ‘why’ of the transformation effort. Adopting an agile approach at an enterprise-wide level is one way to enable rapid escalation of issues, efficient redirection of resources/priorities and continual improvement of execution.
7. Sustainable change cuts across people, process and technology
The Digital Transformation Pyramid, created by Patrick Turchi, from The Digital Transformation People, provides an effective visual illustration of the multiple layers involved in digital transformation that are interdependent and benefit from taking a holistic approach to change.
In determining the right level and sequence of transformation it is important to understand the relative benefits and effort required to execute change as well as the accompanying dependencies.
8. Establish and align rewards, incentives and measures of success
So the digital transformation is in full flight, how will you measure success? Aligning incentives and rewards to shared outcomes will galvanise the commitment and effort across the organisation to achieve sustainable change.
This is where adopting a learning mindset is so important, enabling an organisation to continually explore options, measure outcomes and adjust course as rapidly and efficiently as possible.
The use of OKRs is one way to help align teams and the specific results they aim to achieve. The objective (the O) defines the broad, overarching strategic theme as a qualitative headline of what is to be achieved. This is where the ingredients above come together. Your North Star and emphasis on the customer should culminate in an objective that sets a clear, ambitious and customer oriented objective for the organisation.
The achievement of this objective is measured by the key results (the KR) which are quantitative in nature and resemble key performance indicators (KPIs). Typically these include 3–5 measures that will tell you if you have succeeded in achieving your ultimate objective.
So are you ready for digital transformation?
You now have 8 ingredients to consider as part of your digital transformation recipe. Given the high failure rate and inherent complexity associated with digital transformation, you may be asking yourself, is it really worth taking on such a daunting task?
If your objective is to feel safe in the short term, then your strategy might be to maintain the status quo and remain in the space that makes you feel comfortable. However, if history is any measure, this comfort is temporary and will lead to pain and potentially extinction down the path.
As the saying goes, if you’re ripe, you’re rotten, if you’re green you’re growing.
The choice seems obvious. Start the change now!
Know that you are not alone in the transformation effort. This is where the importance of cultural change is so important as it helps to break down a monumental undertaking into components that can be shared across the organisation and reassembled into something better and more resilient to withstand the disruptive forces that will persist over time.