There is no owner's manual to digital transformation, which may be why 70% of enterprises fail.
“Failure” can be defined in many ways: from the mini, e.g., taking too much time to implement change, not delivering satisfactory results, or spending too much to implement the initiative; to the mega, e.g., entire projects dying on the vine before they get implemented, desired changes impacting the business negatively, or key customers and employees defecting because of the changes.
Regardless of how you measure or define it, it’s not a pretty picture. But it does not have to be this way. There are enough examples of successful digital transformation to know that it is entirely achievable and worth the effort. So, what’s the difference between those that deliver and those that don’t?
Let’s find out.
Is Term 'Digital Transformation' the Problem?
The term “digital transformation” might be part of the problem itself. It is so used and abused these days that it has lost any real meaning when it comes to actually doing something.
In reality, transformation is iterative and continuous. We don’t transform organizations, or even businesses processes, with one project. It’s an evolution that is the sum of multiple specific digital initiatives. Too many digital transformation initiatives try to take on too much all at once. That’s admirable, but perhaps not so effective based on the results cited above.
Related Article: Is It Time to Retire the Term Digital Transformation?
Balancing the Short vs. Long Game
There’s a tendency among some IT leaders to prioritize quick wins over long term foundation and planning. While smaller, bite-size progress is important, it can’t be at the expense of the long term.
Sometimes, adding exciting new digital tools can cause IT teams to put off modernizing monolithic legacy systems, creating bigger problems. A recent Harvard Business Review article said as much, noting that the more we favor quick wins over structural overhaul, the more we build up technical debt and store up problems for later.
Too Much Focus on Technology
Make no mistake, enterprises do encounter technology problems during their digital journeys. Choosing the right infrastructure, applications and tools isn’t easy, but knowing what to prioritize is arguably even harder.
When digital transformations are deemed failures, it is often a failure of management or mindset as much as a technology that has not lived up to expectations.
Related Article: Going Beyond Digital Transformation
Organizational Alignment Not in Place
When digital transformation efforts stall, it often can be attributed in some way to team culture, motivation and mindset. Digital initiatives are generally designed to connect different areas of the business: IT, business development, sales, marketing, customer support, product development.
That requires buy-in and alignment from the different stakeholders that will make the desired change happen. Too often, that alignment is not in place.
Digital Skills Gap
According to the World Economic Forum, by 2025, there will be 149 million new digital jobs in areas like software development, cybersecurity, data analysis, machine learning and artificial intelligence.
This lack of available talent was made worse by the pandemic which, according to Coursera’s Industry Skills 2021 report, saw two years of digital transformation occur in just two months. Hiring in these skills is already difficult — upskilling the existing workforce must be a significant part of the solution.
Related Article: A Fresh Approach to Narrowing the Skills Gap
The Data Gap
Data is a critical element of any digital initiative. Without efficient and accurate data access, management and analysis, digital transformation efforts are destined to fail. If the business does not have an accurate view of changing customer dynamics, it’s impossible to stay ahead.
Organizations in regulated industries such as banking, financial services and insurance (BFSI), healthcare and life sciences face complex compliance requirements. If the underlying data that interacts with digital platforms is out of date, an organization faces potential penalties, business interruptions and damage to their brand. As digital initiatives require the management of more and more data, TCO costs can spiral.
Seizing the Digital Opportunity
Despite all the pitfalls mentioned above, no one can argue that the future is digital. As Gartner noted in its 2021 CIO Agenda Report, “During the COVID-19 lockdown, many CIOs helped save their enterprises. They now have the attention of the CEO in a way they hadn’t before. The enterprise’s path to the future runs through IT, and boards and CEOs know it.”
A recent commissioned report from ZDNet notes consistent evidence that digital transformation helps organizations become more resilient, navigate change and perform better financially. CIOs have a crucial role to play in shaping digital transformation. But they can’t do it alone. Digital transformation is a team effort.
- Treat digital transformation as a process, not a project: Although the term is increasingly used to talk about individual projects or an attitude toward change, successful enterprises find it more helpful to look at it as either a process, an evolution or a journey toward digital maturity. As such, it requires strategic vision and long-term commitment. It also requires stamina. Everyone wants a quick win, but there is no doubt that enterprises need strategy and endurance to realize the longer-term benefits of digital transformation.
- Mind(set) over matter: Achieving scale can be a challenge, which is why there is an argument to be made that digital transformation should start small but have a big vision. On the flip side, scaling the vision is hard because it also requires organizations to scale up their passion for change, their people’s curiosity and their willingness to make mistakes and learn together.
- Decentralize digital innovation: Not only is the workforce becoming more digitally savvy, but advances such as no code and low code software platforms are enabling those with no prior coding or tech background to create sophisticated, customized digital solutions to their business challenges. Gartner figures show that already 41% of low code applications built are done so by people outside IT.
- Be all about the customer: Being able to better focus on the customer is the most valuable byproduct of digital transformation. That is why, ultimately, the process is about business transformation, not just technology.
Related Article: Learning From Digital Transformation Failures
Having a Collaborative Mindset
Digitally engineering a business so that it can thrive in the connected economy is a bespoke initiative. Doing it right requires serious ambition, laser sharp strategy and staying power to reap the long-term benefits. Luckily, advances in automation, cloud, AI and the no code and low code market are making the individual components required for digital transformation easier than ever before.
Enterprises that succeed at digital transformation have certain characteristics in common. They have a collaborative mindset, for example, in which business transformation becomes a common, shared goal. Team culture plays an important part, too, since individuals need to feel empowered to take responsibility, make decisions and even make mistakes along the way.
It should not be surprising that successful transformation involves leadership right from the top, supported by management throughout the organization. As the word “transformation” implies, structural changes to the way the business runs inevitably impact employees.
For that reason alone, how a business approaches its hiring and skills acquisition is a key indicator of its capability to transform into a digital business. And while digital transformation success is a good gauge of where a company is on its digital journey, there is a need to ensure that the right boxes are ticked at the right time.
Strategy, structure and speed are all part of the digital transformation challenge, and the companies that understand that the puzzle is more than just technology will be the ones that come out on top.