I came across this very interesting post by John Hagel, where he brings up a very interesting topic, one that I feel strongly about – Digital Transformation.
It appears that you can not go through a corporate presentation or a CxO presentation without hearing the word “Digital Transformation”. Not a day goes by when I don’t read about some initiative run by a business under the banner of “Digital Transformation”. As with any other loosely thrown around words, this term has also lost a lot of meaning and significance.
As John clearly points out in his post, doing the same thing faster or cheaper by applying digital technologies, while interesting and beneficial to the business, is not an example of transformation, less so of digital transformation.
Digital Transformation Initiative
In order for something to qualify to be called “Digital Transformation”, it would need to satisfy at least one of the following conditions. The initiative needs to use a digital technology to
- Help us enter a new market or go after a new kind of customer
- Change how we compete in the market
- Change the businesses we compete against in the market
- Change how we measure success
- Enable us to partner with someone to create competitive advantage
- Enable us create new product offerings for existing or new markets
- Enable us to reach our customers and prospects through a new channel
- Enable us to add & extract significant value in the overall supply chain
If you look closely to the above list, one thing is absolutely clear. And that is that in order to truly qualify to be a digital transformation initiative, the project should have two elements – Technology & Business Impact. This means that the Digital Transformation needs the collaboration of the CIO/CTO/CDO and the business leaders.
Transformation, in general is extremely difficult to pull of. Digital transformation is even more difficult because you are now adding another variable in an already difficult process. Also, one that changes at a pace that is difficult to keep up with.
In a recent HBR post, Scott Kirsner, the editor of Innovation Leader and a business columnist for Boston Globe, shares the result of a survey that he fielded earlier this year for Innovation Leader to find out the biggest obstacles to innovation in large companies. The list of top obstacles is as below:
- Politics, turf wars, and a lack of alignment (cited by 55% of respondents.)
- Cultural issues (45% of respondents.)
- Inability to act on signals crucial to the future of the business (42% of respondents.)
- Lack of budget (41% of respondents.)
- Lack of the right strategy or vision (36% of respondents.)
These are exactly the same obstacles that one will run into when trying to run a digital transformation project.
Keeping in this mind, here are some of the key areas that leaders need to consciously work with:
ABCDEFG of Digital Transformation
This could potentially be the easiest thing to achieve or probably the most difficult one to achieve depending upon the level of trust within the executive teams and the state of the current business.
Irrespective of what the situation is, if everyone is not aligned to the objective of the transformation exercise and why is it imperative now, no progress is possible on the project. One way that leaders have achieved this is by creating a burning platform scenario.
Another way that leaders have overcome the alignment challenge is by creating a stealth unit which works on potential transformation ideas until they have been at least tested a bit and validated. They then continue to invest in these ideas and grow them to significance.
Everyone who works in any business knows that the best way to judge how important an initiative is for its business by the ease or difficulty that the initiative has to obtain budgets (talent, currency and executive attention). All the three are needed at the same time. One can not just throw money or talent or just executive attention and expect the initiative to be taken seriously. The easier it is to get all these three, the more important the initiative is for the business and the more seriously it will be taken by the employees and leaders.
Culture & Communication:
As with any change project, the culture of the organisation plays a very critical role. If the culture of the organisation is to enforce discipline top-down, then that business needs to learn about it and use it to their advantage. There will be times when the team might even have to learn to change the culture of the organisation but that makes it an even more difficult transformation to achieve.
Constant and good quality communication around the below questions/topics will be critical in the exercise to even have a shot for success:
- the goals of the transformation exercise,
- Why are we embarking on this project? Why now?
- Who is leading this?
- What is the progress?
- Who will be impacted by this exercise?
- How will they be impacted
- What are we doing to prepare for the impact?
- How will they need to respond?
- What are the consequences?
As we are talking about digital transformation, it is important to have someone who is extremely digital savvy leading the transformation. It is also critical to train the teams to become digital savvy. If that means teaching an old dog new tricks, then so be it. Everyone in the team must become digital savvy.
They need to understand the digital technologies that are available today, potential breakthrough technologies that might breakout and all the trends that we see in the market and how these trends will affect the business in general and each one of the employees/teams in particular.
This is an intense training exercise that everyone on the team must go through in order for them to embrace digital rather than resist it.
One way that we have seen work really well is to find light house employees in every corner of the business who are digital savvy, enrol them to help others see the changes around us and how it will impact them and help them on their journey to become digital savvy.
Nothing ever gets done without strong execution capabilities. One needs to understand how to run a project first, before they can run a transformation project. The ability to keep track of various moving parts and not so moving parts is critical. The ability to monitor progress and move people to act and hold them accountable is a big part of the process.
Failure & Learning:
Transformation is not easy and one will not get it right the first time. This is why the team needs to have a healthy approach to failure. The team needs to learn how to move forward and take risk, while at the same time de-risking the process as much as possible. The team needs to learn to fail forward and fail right. They need to learn as much as possible from the failure. They need to think as scientists do with their experiments. They use control most variables and try to find the impact of a few variables. This is important here. Most projects and ideas will start small and based on iterations will grow and become something worthy of progress and attention.
Lastly, if the entire process is not governed well, it could easily turn out to be a huge drain on the business. We have all heard about millions of dollars being spent on projects which everyone knew had no possibilities of having any kind of success. This is the classic case of throwing good money after bad money. The governance process needs to be able to do three things:
- Look at and approve new ideas and processes (Seed new ideas)
- Constantly look at the progress of these ideas and protect them from corporate anti-bodies (Nurture these ideas)
- Identify and kill ideas that are going nowhere, before they become too big to fail (Weed out the bad ideas so that the good ones can flourish).
This is the responsibility of the leader of the organisation to put in place a great governance process and expect and reward people who are honest and open with their opinions.
Digital transformation is not easy. Simply deploying digital technologies to digitize or speed up existing processes will not cut it (unless it is of such a magnitude that it qualifies through the criteria I have listed in the post above).
When done well, this has the potential to give wings and take the business in a completely new growth trajectory. In some cases, this is no longer an option for a business but is already a mandate.