Many (if not all) of us are facing the challenge of keeping our businesses relevant and successful in a digital age. And many (if not all) are turning to digital transformation as the key to survival.
Recent research from MIT Sloan Management Review/Deloitte confirms that digital transformation needs to be strategic. The research found that digitally mature companies concentrate on integrating digital technologies rather than looking at how to solve individual digital challenges.
However, when you ask managers what they are doing to make sure that their organization stays ahead, they tend to answer in terms of tactics rather than strategy. There’s no doubt that you need tools to build something new, but whether you’re building a house or an IT infrastructure, you don’t start working until you have a solid plan. And neither do you start working without having a skilled architect or a team of skilled craftspeople.
Think Strategy, Not Tactics
The 2014 Altimeter report on the state of digital transformation found that some organizations confuse digital transformation with increased technology spending, while others see it as a mere extension of their website development. Less digitally mature organizations tend to focus on individual technologies and have strategies that are clearly operational in focus.
What companies really need to do is align their internal structure and processes with their stakeholder needs and interests. That’s easier said than done, but they need to understand the full journey undertaken by internal and external stakeholders. They also need to be ready to implement new processes and technology to optimize this journey.
Companies like Burberry manage digital transformation well by approaching it strategically, according to Capgemini. The British fashion brand was struggling until CEO Angela Ahrendts began a major transformation program in 2006, using digital technologies to enrich the in-store customer experience, while also rolling out a global ERP program to unify processes and integrate data around the world. In her eight years as CEO, she more than doubled sales at Burberry.
'Tactics First’ Cuts off Flexibility
Companies are desperate to get the ‘first mover’ advantage so as not to be constantly trying to catch up. As a result, they decide to take action quickly, and put pressure on their IT team to develop something short term that shows that they are aware of the challenges. These solutions often don't address longer-term strategic objectives. In particular, the technology adopted doesn’t always give the flexibility to adapt to changing market conditions.
One of the reasons for the disconnect between strategy and tactics is the fact that there is often a divide between the business and technology elements of a company. However, digital transformation can’t happen without cross-functional collaboration.
Ultimately, organizations need to realize that while technology is tactical, solutions need to be strategic. If we realize that transformation needs a longer lens, then we can focus more on strategy. In the current digital environment, we can’t plan tactics years in advance, but we can plan strategies to deal with and implement change.
The MIT/Sloan report found that maturing digital businesses focus on integrating digital technologies like social, mobile, analytics and cloud, to transform how their businesses work. Similarly, the Altimeter report focused on the importance of "uniting individual technology efforts around a common vision supported by an updated, integrated infrastructure."
The companies who succeed at digital transformation are those that consider future possibilities rather than just current functionality. This means that integrations functionality is very important, as pointed out in the Altimeter study.
Organizations that use a flexible digital business platform will have an advantage, as they have the ability to quickly integrate new tools and data whenever they need to.
A Cultural Transformation, Led From the Top
Many companies fail to succeed in their digital transformation efforts because they see it as a technical issue rather than a cultural one. The BBC cancelled a 100 million pound digital transformation project in 2013, and was criticized by PwC for a "crippling lack of focus on business change."
According to Capgemini, organizations who reach digital maturity first create the leadership capabilities to drive digital transformation. In Nike’s case, they built a digital division, while Volvo developed vision and governance capabilities before implementing digital services in cars.
It’s also clear that cultural transformation can’t happen without strong leadership, and that means that the move needs to be backed at the C-level by leaders who are digital-savvy. A Harvard Business Review survey sponsored by RedHat found that companies that excel in digital leadership are significantly more likely to have experienced higher revenue growth. Transformation leaders don’t need to have technological knowledge, but they do need to have the vision to understand what digital can do for their organizations — and for their customers.
Yet many companies are not ready to embrace digital transformation. They’re happy to introduce new technologies, but are either unwilling or unable to change their company culture. According to the Altimeter report, nearly two out of three respondents saw company culture as the greatest antagonist to change whereas more than half saw cross-functional collaboration as a challenge.
As Gerry McGovern pointed out, the digital revolution is cultural, not technological. If organizations truly want to succeed at digital transformation (and there really is no choice if they want to survive), then they have to learn to evolve culturally. In my next article, I’ll be writing about some top strategies for digital transformation.
Title image by Noah Kuhn