According to the World Economic Forum, digital transformation may deliver as much as $100 trillion in value to business and society over the next decade, but despite the potential reward, some business leaders resist the term. Why? Perhaps because successful digital transformation means everything must change.
Change management
Digital is impacting businesses at multiple levels. (Just think about what your business looked like a decade ago.)
“It’s Increasingly clear that traditional ideas about the business value of IT are inadequate for understanding the true value that digital now offers,” says Saul Judah, research director at Gartner.
Digital transformation poses multidimensional challenges for business leaders. Currently, up to 88 percent of digital transformation projects fail, according to Alistair Sergeant, CEO of Purple Consultancy.
Related: What is digital transformation? A necessary disruption
Not only must leaders accurately identify future technology and customer expectation trends, they must also find the courage to dismantle existing structures, or risk destruction at the hands of fast-moving all-digital startups.
Change does not come simply through giving iPads to the customer service teams – or anyone else. Digital transformation is not just about digital, it embraces a commitment to permanent disruption. IDC describes it as a “continuous process” of “disruptive change.”
Success requires training in digital competencies along with recognizing the necessity of developing a supportive workplace culture robust enough to manage the mistakes that are certain to happen when a company is in a state of permanent change.
It means using – and identifying – digital competencies to “create new business models, products and services.” It means challenging existing business models, breaking down established management silos and nurturing collaboration.
If you say you’re not connected, you’re wrong
Digital transformation does not happen in a vacuum. It is likely that every other enterprise, partner or customer you interact with (and the many others they interact with) are engaged in similar changes. Digital change may not have hit your business yet, but your business partners may already be in position to wield data and digital efficiency to enter new markets – that could potentially include yours.
Everything is connected.
This reflects today’s reality: Industry supply chains are becoming fluid, interconnected operations. An order in Wisconsin may have an immediate impact across supply chains on several continents as automated systems requisition required competencies, components and collaborators. A small regional emergency can negatively impact supply chains on the other side of the planet. Our connected digital economy is an international entity that produces constant data, and that data generates risk and opportunity.
“We are witnessing historic economic theory being re-written with data becoming the fourth production factor, every bit as important in the modern economy as land, labor and capital,” wrote Orange Business Services CEO, Helmut Reisinger.
Digital means competition is intensifying.
This is driving incredibly rapid evolution of new business processes, models and efficiencies, that also gives consumers more power than ever before.
Just because an enterprise has been successful for decades doesn’t mean its existing practices can remain intact. Legacy processes put incumbent enterprises at a disadvantage against digital challengers. Perhaps this is why 40 percent of the companies that comprised the FTSE 100 10 years ago are no longer there.
Digital transformation is a commitment to permanent change management and enterprise agility. Those who do not engage will not survive. Which side of that fence do you want your business to be on?
10 steps to ensure digital transformation success
1. Take time to understand
A McKinsey study claims up to 45 percent of existing work activities can be automated using technology that already exists. Look at your existing business and ensure the digital solutions you choose match genuine business needs – don’t fix problems that don’t exist, but do explore for those that do.
As you look into your business operations, you may find some problems can be fixed relatively easily using digital technologies. For example, Russian fishing fleet, Dobraflot, found it could use digital processes to optimize fuel consumption. It is using the money saved in doing so to finance other elements of its digital rollout.
The 2017 State of the Digital Workplace report shows that while 95 percent of organizations think digital workplaces are important, just 44 percent have digital workplace programs in place. Meanwhile, organizations such as Dobraflot that identify and exploit quick wins, can continue to develop their wider digital infrastructure on the back of such easy and useful digital efficiencies. Small changes can help support bigger changes, until the entire company is engaged.
2. Speak with everyone
To understand your business, you should speak with employees, partners, customers and anyone else who may be part of your enterprise.
Gartner analyst Carol Rozwell explains that digital deployments must help individuals and teams work more productively without compromising operations: "The idea of the digital workplace is to bring that same simplicity and intuitiveness to employees when they're doing their mission-critical work," she says.
Related: Successful Digital Transformation Begins with a Cultural Transformation
DBS group head for institutional banking Tan Su Shan explained that her bank had contacted all 26,000 of its employees to stress the importance of its digital projects. "Tech is business and business is tech," she said. “Everyone knows 'you better change, otherwise you're going to get Apple Bank, Facebook Bank, Google Bank eating our lunch.'"
This is critical. Digital is already impacting every part of your employee’s life, so it shouldn’t surprise any business leader to find their workforce is ready to discuss how digital can change their working life, too.
A recent KPMG survey found that 71 percent of business employees now believe digital transformation needs to be a key priority for their business. An earlier Capgemini survey found that 62 percent of employees see corporate culture as the biggest obstacle to such change.
This evidence suggests your stakeholders, internal and external, are ready for these conversations.
3. Bring your own
BYOD and employee choice programs have been proven to boost both productivity and retention, and these have a bearing on the above.
Form focus groups and try to break down departmental siloes and hierarchies as you build your understanding of your business – it is important to instill a recognition that change is coming while ensuring those asked to participate in that change are willing to engage. During this process, many who begin as critics will become evangelists. That’s normal. Enterprises need all kinds of people, steady cynics and early adopters, traditionalists and innovators. People are the heart of any successful transition. Listen to them. Engage with them. Find solutions that genuinely meet their needs. Digital transformation projects fail if you fail to engage your workforce. Corporations whose employees are actively engaged outperform peers by 147% in earnings per share, an Altimeter report claims.
4. Focus on the users
Develop solutions that will please the end users – you, your employees, partners and customers.
The temptation to see digital as the be-all-and-end-all of process automation and digital change is high, but your greatest asset is people.
McKinsey predicts post-artificial intelligence (AI) demand for “soft skills” will grow across all industries by 26 percent in the U.S, and by 22 percent in Europe.
Tools such as big data analytics are important factors when building next-generation supply chains, but human skill remains essential to intelligent decision-making on the back of that analysis – solutions they do use will always beat those they don’t, so it’s important to build systems that fit into and augment existing workflows. This will reduce friction and improve efficiency.
5. Avoid complexity
Why have three processes when you can have one? Why create software that’s more complex to use than what it replaces? Who are these systems for – high-end hierarchies in management, or the employees and end users you need to persuade to make use of your new platforms?
The truth is that low digital literacy or expertise among colleagues and leadership is seen as one of the biggest change management obstacles, according to Altimeter.
There is also a continued problem around integration with existing systems. Legacy technology or a lack of the right technology is causing problems for 55 percent of organizations going through digitization projects, a survey shows.
Legacy workflow practices or intransigent corporate culture also pose costs, 31 percent of organizations think data silos – scenarios in which data is not effectively shared through workplace or legacy tech bottlenecks -- are a key barrier to digital success.
6. Break down the walls
Existing internal knowledge siloes no longer makes sense. They may have made sense at a different time in which different departments competed for scarce resources, but digital processes mean knowledge and resources sharing is far more important than before.
A recent report from the Confederation of British Industry and Oracle found that despite being better resourced, larger companies tend to struggle with transformation.
This can be a big problem in enterprises with highly traditional hierarchies, particularly large enterprises in which department leadership engages in adversarial relationships with peers in order to acquire departmental power.
“Many will assume that, with the resources at their disposal it’s easy for large firms to adopt new technology,” says Felicity Burch, CBI director of digital and innovation. “But a host of challenges, from aging legacy systems, cybersecurity threats and agile new challenger firms can make successful innovation feel like hitting a moving target.”
Data siloes, intransigent management and inter-departmental rivalries can blunt the change you seek.
7. Embrace errors
Mistakes happen. Any organization engaged in deep transformation of business processes will likely generate additional error overheads, speedy and effective resolution of which will not be nurtured in a risk averse culture of blame. If the employees that drive your business are scared of the consequences of making an error, they will resist new processes, or hide their mistakes.
The latter is particularly important in the context of digital, where an error could leave your business at risk of cyberattack, the consequences of which could far exceed those of the initial problem.
This is the crux of digital transformation – agility is not just a matter of technology deployment, it’s also a cultural shift, which – once taken – makes your business more flexible, more efficient and more capable of seizing fresh opportunities as they emerge. It demands a new approach and supportive workplace culture.
DBS group head for institutional banking Tan Su Shan explained how her bank worked to ensure staff felt secure enough to try new approaches, fail and move on. "I often joke that DBS now stands for Digital Bank of Singapore,” she said.
8. Lead from the top
“The line between the CEO and the CIO/CTO has now blurred… the CEO and entire management team must lead from the front, using digital collaboration tools themselves and by being a champion for the digital workspace,” explains Mark Tan, vice president of global solutions & marketing, Asia Pacific at Orange Business Services.
Change management in digital transformation also demands a commitment to education and training.
Related: Digital transformation isn't only about technology
For a digital transformation project to succeed, you need to bring your people with you. Digital empowerment means training and developing digital skills across your workforce, it also means finding ways to boost communication and collaboration.
Leadership also means admitting ignorance. Lack of governance, inexperienced project teams and the lack of risk analysis are common challenges in digital transformation projects.
9. Set targets, check project health, define outcomes
While it poses an additional cost in terms of cash and time, any digital transformation project should be subject to pretty constant project health checks while it is ongoing.
It may be tempting to simply focus on the end result, but doing so risks leaving systemic or technical problems unsolved, which threatens to cost your business more than what it would have cost to repair the problem.
“Using best practices, including a project health check, will smooth the road to a successful transformation,” wrote Colleen Risk, senior analyst at Celent.
When planning a project, think about:
- What are the end goals?
- What is required to achieve them?
- How will you measure success?
Planning and strong change management are essential. Workfront data showed that enterprises spent $1 trillion on digital transformation projects in 2018 – but 70 percent of such projects fail to deliver their intended results. Planning, engagement and analysis are just as – perhaps more – important as technology investment.
Related: 12 reasons why digital transformations fail
10. Live in the future
When was the last time you visited your bank?
This isn’t a facetious question, just an observation that the banking sector is a good barometer for the scale of digital change, which is driving the industry to close brick-and-mortar stores in order to open digital branches that live inside our iPhones.
In 2007, Apple CEO Steve Jobs once famously quoted Wayne Gretzky, saying: “'I skate to where the puck is going to be, not where it has been.' And we've always tried to do that at Apple.”
This approach is mandatory for every business today, as every business is becoming a digital enterprise. In almost any field, you are not preparing for today’s digital environment, but tomorrow’s.
With this in mind, Gartner’s annual Technology Trends and Mary Meeker’s annual Internet Trends reports should be essential reading for any executive attempting to predict the future of their industry and of their enterprise within that industry.
Take AI. John Van Reenen, a British economist at Sloan warns that while most European firms were too inflexible to benefit from the 90’s impact of IT, they must now prepare for AI. For example, recent advances in natural language processing mean machine intelligence can now translate conversations in near real time – which can impact international collaboration.
Where are we going?
One great example of an enterprise successfully unleashing the business potential of digital comes from L’Oreal. The company this year introduced three digital products that speak to and expand its core business: AR hair advising app, Virtual Hair Advisor; Skincare help app, Skin Consult by Vichy, and My Little Factory.
Related:
The latter is an automated in-store factory that uses AI to identify the ideal foundation formula for a person’s skin and can then produce a completely personalized jar of that formula.
That’s a completely personalized product made by a global brand for just one customer, for around $89, a very compelling illustration of a brand maintaining its global reputation while also engaging with technology in order to deliver a completely customer-unique service.
This is the essence of many digital transformation projects, which seek to close the circle between enterprise, customers, internal and external stakeholders using technologies that enable deeper connection and maximize personalization. All while being flexible enough to thrive and survive in a fast-moving business environment defined by constant change. Where will your puck be?