In today’s business environment we hear so much about digital transformation, but we also hear many voices crying out for better understanding of the term - calling out change that isn’t in fact true transformation and noise around how best to take an organisation through the often-painful process of becoming inherently digital.
So, what does it really mean, and how should we be embarking on digital transformation in truly impactful ways in 2018?
"When digital transformation is done right, it’s like a caterpillar turning into a butterfly, but when done wrong, all you have is a really fast caterpillar."
George Westerman | Principal Research Scientist with the MIT loan Initiative on the Digital Economy
First a simple definition. This should be read and understood by anyone who is part of a digital transformation project (and that’s arguably everyone in your company).
Digital transformation implements new digital processes, workflows and tools to generate opportunities for growth and optimisation.
To be clear, it is not simply digitising existing information or digitalising current methods, but rather creating entirely new business models, products or services which drive future success.
To unpack that for a moment, let’s clarify those key components:
- DT is the sum of its parts, and is focussed on the overall value it adds for the business, in line with that organisation’s core objectives.
- The doing of DT is making radical change to how you do business, leveraging untapped digital opportunities
- Ultimately the goal of this transformation is to drive growth in new areas and improve existing ones. This could be at any level that contributes to the overall business mission - from winning your next big client to making your coffee machine work better.
- Digitisation is making all your information available digitally. This information could be the obvious - documents and customer data - as well as the less obvious, such as knowledge in employee’s heads and conversations. Systems like Slack have been effective in capturing this.
- Digitalisation - making your processes and methods digital. Changing how you do business e.g. how you communicate, track customers through their lifecycle, perform transactions and so on.
- True digital transformation manifests when new things happen in your business that are inherently digital - new roles, departments, products and services.
To further clarify, let’s look at how IDC frames the phases of digital transformation we have been through. They look through the lens of widely available technology from early business computing (first phase), through networked computing (second phase) to mobile, IoT, cloud and data-driven computing (third phase).
As the diagram above suggests, we are on the cusp of moving into a fourth phase of computing which will radically change how we do business (again!). At the core of of this are factors such as:
- Machine learning
- Proliferation of networked sensors
- Billions of networked devices
- Digital technology naturalisation
- Brain-computer interfaces
The likely real-world impacts of entering this new phase are starting to become apparent in ‘smart’ contextual consumer products as well as enterprise automation tools, programmatic marketing and autonomous vehicles. Our current efforts will of course be looked back on as stone age baby steps in 10 years’ time.
The key ingredients of successful digital transformation
Strategy
The foundation is - it should go without saying - a clear and specific strategy that everyone in the business can understand. One without consultancy jargon or impenetrable, thousand-page decks.
Mission statement - furthermore, it should be boiled down into a mission statement written in plain English that can easily be invoked on the spot e.g. in meetings. Something that proposed ideas, measures or tactics can easily be checked against to ensure everything you do digitally furthers the overall mission.
Objectives - This mission can then form the basis of key transformation objectives, with KPIs to define success. Bear in mind those KPIs can be different depending on who you’re reporting to, so decide on one set for C-suite, one set for digital managers, one set for analysts and so on.
Culture
"Culture eats strategy for breakfast"
Peter Drucker | Father of modern business management
Just as Drucker sharply observed, you can have the most thoroughly researched, written and deployed strategy in the world, but if the people within the business just don’t share the same culture - i.e. the same mindset, values and expectations - it can never succeed.
Culture is chiefly formed of two fundamental elements, which fuse together to create a happy, successful workforce:
- people who come to you motivated to drive change and overcome challenges. As many management gurus will remind you, it is impossible to motivate people, you have to find already highly motivated people and then inspire them.
- a workplace which makes them feel lucky to be there. That means one which treats them at least as well as your competitors, that tasks staff with irresistible and satisfying challenges to surmount together and - most important of all - has a compelling, transcendent reason to exist in this world. A purposeful mission such as Google’s famous “to organise the world's information and make it universally accessible and useful.”
If these key components are in place, your people will be hungry for challenges, change, innovation and risk. And they will face these things together, ready to assist one another in a great, purposeful challenge. The process is likely to throw up many new digital skills, tools and knowledge areas which your people need to adopt in often agile (unplanned) ways. Are your teams ready for DT?
Leadership plays a huge role in this. A basic understanding (let alone buy-in) at every level, all the way to the top is crucial in ensuring transformation projects are funded, committed to and kept on course.
People over technology
Following on from the last point, people are the key to whether your digital transformation delivers on its promise. At the end of the day, the ‘digital’ comes from the tech, but the actual ‘transformation’ is made by people.
And it’s those people outside your business - customers - who should be at the centre of your plans. The temptation can be to start with the new capabilities afforded by burgeoning tech innovations, whereas the most successfully transformed businesses have used their customer experience as the basis for DT.
Buy-in from the top down
The appetite for change needs to start with the CEO, and other C-suite stakeholders. DT often works well when treated like a campaign with a clear set of messages internally, originating from the top. A great example of this is when Ralph Hamers, CEO of ING Group, announced his vision for the Dutch bank, called ‘Think Forward, Act Now’. It was essentially a branded company strategy, and its objective was to deliver a differentiating customer experience through faster innovation and better use of analytics. Later, in 2016, the vision was updated to ‘Accelerating Think Forward’, which focused on mobile banking.
Through this campaign-style approach, a CEO can start to win over key influencers in the business to join their clearly defined mission.
Technology
Last but not least, is of course the technology that will open up those new opportunities for the business. There are a few considerations here:
Disruptive technologies - always a potential differentiator in your industry, disruptive tech can pave the way for new models of doing business and perhaps change the very core of your offering forever. Starting that journey however requires some sort of formalised experimentation, perhaps through a ‘labs’ department whose brief is to test, revise and break burgeoning technologies. How can some of these new capabilities be combined with your existing toolkit to create hitherto unimagined possibilities for the customer?
Product design and adoption - as we often remind our clients, a piece of technology can have awesome power, but if the interface a human must use to realise this value is badly designed no-one will use it. Sadly, this is a common point of failure for digital products. But if we really do put the user at the centre of what we build, then the parts closest to them (the design) is the deciding factor in whether or not they will feel positively towards the product both intellectually and emotionally.
Networked platform business model - to transform digitally a business needs to break out of the siloed pipeline model, in which value flows in one direction and each part of the pipe operates quite independently. Today, it is more relevant to users both internally and externally (and both human and machine) to provide universally accessible platforms with robust APIs that can be flexibly networked, device/user agnostic and relatively future-proof (or at least with longer, maintained lifecycles). Value creation can now be two-way, continuous and happen anywhere in the business.
So digital transformation has many moving parts, and there are clearly lots of pitfalls to avoid, but with a clear strategy led from the top, a company culture bought into that and a people-centric approach to technology and design it could be the most significant change your business has ever been through.