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StrategyFeb 25, 2016

Leading Digital Transformation

Justin Bell

In recent years, we have seen how every company, regardless of industry, cannot ignore the extremely rapid changes that improvements in technology are bringing. Technology and the open communities that adapt it daily, can run around and through traditional barriers to entering markets, changing the ways of making, selling, and running companies.

In the book Exponential Organizations, by Salim Ismail, he gives many great examples of how traditional, “material” businesses are being completely disrupted by innovators that leverage technology and a scalable organization. Here are some of the examples:

  • Photography / film industry and the impact of going digital

  • AirBNB now has more rooms available and a higher valuation than the world’s largest hotel chains

  • Uber has completely disrupted the Taxi / Transportation business

  • Blockbuster was destroyed by Netflix and streaming / on-demand

  • Drones for delivery

He has a great line that says “Any company designed for success in the 20th century is doomed for failure in the 21st”.  This is supported by the data point that corporate lifespans are shrinking considerably.  In fact, the average lifespan of an S&P 500 company has decreased from 67 years (1920s) to 15 years (now).

Many of the companies I work with are undergoing some form of a “Digital Transformation” to ensure they stay competitive and relevant into the future. These big, transformational changes are very hard and require far more than an investment in new technologies. They require a clear and solid strategy for how technology can be used to transform the business and provide better customer experiences, a culture that embraces change and collaborates heavily, and the technology capabilities to execute the strategy quickly and efficiently. Otherwise, these digital transformation initiatives will end up just like the failed ERP projects of the past we’ve all heard about or been a part of.

I wrote recently about our Digital Maturity Model (below) to assess where you are today and identify opportunities to improve your digital maturity. The key concept is that it takes more than an investment in the latest technology trends to be a Digital Leader, it also requires strong digital leadership, a culture that embraces digital opportunities and the talent to move fast and smart.

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Expanding on that, this post focuses on some of the “requirements” needed for a successful digital transformation.

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Strategy

A successful transformation starts with a well-defined vision for the future, the business outcomes and goals associated with it and a strategy for how to get there.  Many companies struggle with this up-front ability to “re-imagine” the business. For this, it is important to think big and not be overly constrained by the current capabilities or limitations. Focus on the customer (e.g., how are their needs changing, what needs are un or under met, etc.) and external factors (e.g., advancements in technology, demographic changes, price of oil, competitive landscape, etc.). Digital strategies at leading organizations go beyond the technologies themselves. They target improvements in innovation, decision making and, ultimately, transforming how the business works.

  • Strategize and Plan: Anchor the transformation or process management program to strategic business results your organization must deliver within 12 to 18 months. For large programs, prioritize projects to deliver optimized business results and communicate a common vision.

  • Develop Governance: Solicit peer input to craft process governance and decision policies. Get executives to hold process owners accountable for business outcomes. Assess process styles and interdependencies to determine the impact of operational change.

  • Drive Change Management: Motivate behavior that accelerates delivery of desired business outcomes. Communicate and socialize ideas via multiple channels. Get buy-in from stakeholders at all levels. Avoid change fatigue and establish a broad capability for Big Change.

  • Execute: Optimally operate the initiative in accordance with business goals, and update it in response to changing business requirements. Use technologies and services to extend existing systems of record and accelerate differentiated and innovation solutions.

  • Measure and Improve: Continuously capture process intelligence from stakeholders, events, social interactions, and structured and unstructured processes to assess in near-real-time. Apply technology to dynamically adjust and optimize processes.

Culture

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Peter Drucker is famously quoted as saying “Culture eats strategy for breakfast”, and I believe this is definitely true when attempting a digital transformation.

Many organizations will have to change their cultural mindsets to increase collaboration and encourage risk taking. Business leaders should also address whether different digital technologies or approaches can help bring about that change. They must also understand what aspects of the current culture could spur greater digital transformation progress.

  • Build a culture that embraces change and a new way of doing business / technology…this mindset is critical.

  • Leading organizations are more comfortable taking risks than their less digitally mature peers. To make their organizations less risk averse, business leaders have to embrace failure as a prerequisite for success.

  • Leading organizations encourage risk taking, foster innovation and develop collaborative work environments.  I tell my team and clients “Fast is better than perfect”.  The cost of inaction almost always exceeds the cost of action.

  • Although leaders don’t need to be technology wizards, they must understand what can be accomplished at the intersection of business and technology. They should also be prepared to lead the way in conceptualizing how technology can transform the business.

Technology Capabilities & Processes

To move fast and adapt to the changes coming to your business and meet customer expectations, companies need new technology capabilities.  This goes beyond point-solutions for web, mobile and social and instead gets to how these and other technologies can be leveraged to truly transform your business or industry.

  • Heavier use of automation and “Dev Ops” to shorten time-to-market and reduce the amount of manual work involved in releasing software.

  • Building a rich set of capabilities and data that are accessible through APIs.

  • Establishing a service-oriented architecture or other approach that allows internal and external teams to work effectively and somewhat independently to speed innovation and delivery of new solutions.

  • Focus on integrating digital technologies, such as social, mobile, analytics and cloud, in the service of transforming how your business works. Less-mature digital businesses are focused on solving discrete business problems with individual digital technologies.

Change Management

Finally, any large-scale organizational change needs to be supported by a strong change management program. The formulation of an organizational transformation management strategy is a critical component of any modernization program and involves a systematic approach that supports both the organization and the individuals in it to plan for the change and then accept, implement, and benefit from the change.

  • Pinpoint stakeholders at all levels, inside and outside the enterprise that are critical to Big Change success and gain their support.

  • Change agents and directors of transformation need insight into how to transform work, and inspire teams, executive management and value chain partners to pursue common, albeit volatile, goals.

  • Business outcome owners — responsible for delivering the targeted business results from transformation projects — need decision guidelines to optimize business outcomes across multiple groups and competing priorities.

  • Solution architects and application portfolio managers need guidance on how to design, implement and manage applications that support the different process styles and software life cycles needed to deliver targeted business outcomes.

  • External business partners also need to understand what is changing and the way you work with them will need to be adapted.

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