Digital transformation: 11 emerging lessons
Is digital transformation giving way to digital malaise within your organization? In late 2019, a McKinsey survey found that just 16 percent of respondents said their organizations’ digital transformation had successfully improved performance in a sustainable way. Another 7 percent said that performance improved – but only for a time.
The continuing drumbeat of “change or die” can certainly get old, particularly if the results are less than satisfactory. “We’re entering a world of digital transformation fatigue because of the failure rate and the exorbitant amounts of money that disappear into the digital transformation black hole,” says Ankur Laroia, managing director of BDO’s Houston office and leader of its Digital Transformation Services practice.
Yet the drivers behind digital transformation aren’t going away. In a hypercompetitive market, worldwide spending on the technologies and services that enable the digital transformation of business practices, products, and organizations is forecast to reach $1.97 trillion in 2022, according to the IDC’s Worldwide Semiannual Digital Transformation Spending Guide. By 2020, nearly a third of G2000 companies will spend ten percent or more of revenue on their digital strategies, IDC says.
In an effort to re-energize digital initiatives, it makes sense to review what we’ve learned. This accumulated wisdom may help leaders refocus those areas that have veered off course or reinforce practices more likely to yield positive results. The Enterprisers Project talked to those who live in the digital transformation world to find out what’s working now – and what’s not.
Digital transformation lessons learned
1. Multi-disciplinary teams win
Some organizations have a chief digital officer, chief transformation officer, or other head disruptor-in-charge; some don’t. But what unites the most successful efforts is a cross-functional approach. “Successful enterprises leverage centralized and line of business IT, business units, and other corporate functions in digital initiatives,” says Yugal Joshi, vice president at Everest Group, which surveyed 180 CXOs on the topic of digital transformation.
Likewise, APQC found that best-practice organizations tend to have a steering committee to guide their digital transformation efforts and rely on a center of excellence or transformation team. Such groups include a mix of technical, process, and change management skills, says Holly Lyke-Ho-Gland, APQC’s principal research lead, process and performance management research. Their digital leaders likewise are experienced leading cross-functional teams, she adds.
2. Buy-in is never optional
“One disconcerting trend is that some companies continue to try to drive digital transformation as an IT project without complete buy-in and participation from the business beyond the obligatory steering committee involvement,” says Brian Caplan, director with management consultancy Pace Harmon.
Migration of data and workloads to the cloud, a move that’s often part of transformation efforts, may seem like a simple tech swap, but there are still significant risks. “The lesson learned is there is no such thing as a digital transformation that shouldn’t be business-driven,” Caplan says.
3. Innovation injections work
“Innovation can come from any source for these [successful digital transformation] enterprises, including conferences, webinars, seminars, tech vendor events,” says Joshi. Digital transformers remain open to innovation from all areas. According to Everest Group research, 69 percent of successful digital transformation enterprises work with academia in addition to their own internal think tanks. Some of the most successful transformation initiatives involve an innovation function skilled at evaluating and testing trends and technologies, Lyke-Ho-Gland adds.
4. Rush jobs never deliver
There is incredible pressure on the business and IT to digitally transform and deliver results – like, yesterday. As a result, some organizations are (still) undertaking projects without conducting a thorough analysis of business needs and impact.
“Companies frequently believe they are being left behind in the digital transformation phenomenon – in particular for customer-facing digital transformations – and feel pressured to begin implementing the transformation before they understand the business and technology impact to the entire company, as well as the impacts of changes to data sources, models, consumption and governance,” says Pace Harmon managing director Andrew Alpert.
5. Seek alternative sources of talent
It’s accepted the wisdom that certain digital transformation skills are in high demand and short supply. So digital transformation leaders take advantage of acqui-hiring (bringing talent into the fold through M&A), joint ventures, partnerships, and crowd-sourcing. Are you using any of these valuable talent acquisition tools?
What else distinguishes organizations logging early wins with transformation? Flexibility, communication skills – and the guts to hit the pause button.
6. Digital leaders expect problems
“Companies that plan well and anticipate the pitfalls are making great strides in executing digital transformations,” says Caplan. “These organizations include a contingency in terms of time and budget and effectively manage expectations. Additionally, when using third parties to drive transformations, they include expected outcomes as payment incentives.”
7. Align, align, align
Although those seeing progress in digital transformation can offer flexibility to individual business units to drive their own agenda, there is a common theme among those achieving enterprise-level value: alignment. “100 percent of successful enterprises in our research suggested that their leadership has strong shared vision around DT initiatives’ importance for the future,” says Joshi.
In addition, 70 percent of these enterprises said that designing digital strategy in conjunction with overall corporate strategy is crucial.
8. Old-fashioned communication required
Think direct conversation, not email. “Don’t underestimate the value of targeted in-person communications,” advises Lyke-Ho-Gland. “Because digital is so broad and for many, a scary or nebulous concept, best-practice organizations take the time to engage each business with what it means in their organization, ways it can help each business and set up conversations about potential needs.”
9. Digital roadmaps will be fluid
Because technology and business changes happen so fast, rolling plans and ongoing exploration and recalibration are key. Specifically, there is a need for a robust feedback loop, says Lyke-Ho-Gland. “Employees who are experiencing the transformation need to feel like they have a voice, and the organization needs an efficient and transparent process to synthesize and respond to their feedback.”
10. Define exactly what you mean by digital transformation
“There may be a tendency to simply overuse the term ‘transformation,’ which may have diluted the meaning and intent of the term,” says Elizabeth Ebert, an advisory services executive at Avanade.
It’s crucial to both set expectations and deliver on them. “Make sure transformation deals actually drive specific and actual transformation so that the term, focus, and commitment maintain their value within your organization.”
The most successful transformations have a clear, concise vision that is driven by leaders and engaged staff who understand why they’re doing the work, said Cindy Anderson, vice president of brand management at the Project Management Institute. “Know why you are doing what you are doing. Connect it to your customers’ needs. Involve your staff meaningfully in creating and executing the transformation.”
11. You’ll never be done – but know when to hit pause
Successful organizations understand that digital transformation is not a one-and-done project. “If you embrace digital transformation, you’re embracing perpetual change,” says Laroia. Although the work is never done, smart IT leaders know when to press pause and reassess. “94 percent of successful DT enterprises periodically rethink the impact of digital on their business,” says Joshi of Everest Group. “They understand continuous change can create fatigue and stay away from too much of it.”