The rapid ascent of digital technologies is having a massive impact on virtually every major industry. And companies are being forced to pursue profound changes in their working practices to benefit from this revolution or even keep up with competitors. Indeed, a 2018 McKinsey Global Survey discovered that 80% of organizations had undertaken efforts related to digital transformation in the past five years.
Other research has been similarly illustrative. A Tech Pro Research survey found that, even in 2018, 70% of companies had a digital transformation strategy in place or were working on one at that time. And IDG discovered that 40% of all technology spending in 2019 was directed towards digital transformation; over $2 trillion in total.
The Building Blocks of Digital Transformation
Clearly, companies understand the pressing importance of digital transformation. Yet achieving success in this area is proving challenging. And this is particularly true in large organisations, with IDG also discovering that only 38% of traditional companies have successfully adopted a digital business strategy.
And even those companies that have implemented a transformation program will not necessarily ultimately succeed. Research on transformation has consistently demonstrated that the success rate for such efforts is consistently unimpressive. McKinsey found that less than 30% of all transformation strategies are successful, and digital innovation is even more challenging still.
Only 16% of respondents to a McKinsey survey indicated that digital transformation has successfully improved performance and equipped them with changes that were sustainable in the longer term. IDG found that only 7% of companies had fully implemented digital transformation in a recent survey, while Futurum found that 77% of companies conceded that the relationship that they have with technology was average at best.
The Roadblocks of Digital Transformation
The generally more nimble start-ups have been more agile at embracing digital; 55% of such startups have already implemented some form of digital business transformation. But, a start-up is by definition as an organization that does not yet have a business model. It is in the (sometimes desperate) search of one. Once it has found a business model that appears to be working, it is trying to scale it. Almost all startups scale through technology. Given this definition, startups do not require a digital business transformation – and in any case, they are much smaller so have less complexity.
Speaking of traditional enterprises, they have a legacy of outdated processes, types of equipment, and skills that they need to manage before they can transform successfully. They don’t only need to introduce and adopt new technology and processes but also make sure that their human resources, established businesses, and customers face minimum disruption during the transition. To make things harder, there is no set process or procedure of digital transformation that could guarantee success. DX is unchartered territory and it’s easy for traditional leaders to get lost.
So, what are the hurdles that make it difficult for organizations to transform successfully and how can you improve your odds of success? Let’s take a look at the roadblocks that can stall a DX project and the building blocks or best practices that increase the odds of success.
1. Knowledge Gap
This apparent floundering is perhaps surprising, considering that the importance of digital transformation is widely acknowledged. Deloitte Research discovered that 87% of companies believe that digital will disrupt their industry, while a 2017 Gartner survey of CEOs found that 56% believe that digital improvements had directly led to increased revenue.
2. The Scale of Digital Disruption
Smarter strategies will help companies across all industries deal with the challenges of digital transformation more effectively. Your transformation strategy will flow from your digital desires, organizational strengths, and the type of innovation you want to embark upon. Your customer is in the center of the transformation throughout, but the impact of digitalization goes beyond customer satisfaction and helps improve efficiencies in all business functions.
3. Savvy Leadership
Business leaders own the transformation effort, so it’s important to ensure that the top executives have knowledge and exposure to digital transformation. Digital transformation impacts all levels of an organisation and McKinsey found that nearly 70% of businesses experienced changes to their top teams of managers when digital technologies were implemented. The new skills that these people brought to the management teams were considered critical in the transformation process.
Engaging the workforce with digital transformation is extremely important, particularly if there is skepticism amongst the rank and file. Thus, when people in key roles are more actively on-board with digital transformation, and able to contribute to the process constructively, its ultimate success is significantly more likely.
4. Building Skills
The talent and skills that an organisation possesses are critical for its successful digital transformation. The organisation should take the steps to build the required still set by either training its employees or hiring new employees or both. The roles and responsibilities of the employees engaged in the digital transformation must be aligned with the goals of the transformation.
Engaging the specific roles of integrators and technology-innovation managers is also particularly important, as these credentialed individuals can assist with the process of building stronger internal capabilities. These people bring knowledge of the traditional business side of organisations, and marry this with the technical aspects of digital technologies, ensuring that transformation occurs seamlessly.
5. Planning and Training
Planning and training is also a central pillar in the overall digital transformation process. Employees at all levels of an organisation must be kept in the loop regarding the evolution in the company practices, as they will ultimately be essential to conducting the new strategy at the shop floor level.
And getting everyone on board can often be problematic when the majority of employees in an organisation struggle with a skills gap. Long-term employees that were hired in a completely different working environment would need considerable training to adapt to the new normal. External hiring is also important, as traditional organizations may often lack the specific skill sets that are extremely important for transformation.
6. Working in New Ways
If there is one impact of digital transformation that is particularly profound, it is the cultural and behavioral changes that the process inherently requires. Digital transformations demand increased collaboration and customer-centricity, which require a change in the organisation’s culture. As famed management guru Peter Drucker once said, “Culture eats strategy for breakfast”.
As many readers will recognise, people can often be resistant to change, particularly if they have been working in a certain manner for a long period of time. Therefore it is essential to reinforce new behaviors and ways of working through formal communication if you want to manage the digital transformation effectively.
Continuous learning, ongoing support, mentoring, carefully planned training programs, and two-way feedback between workers and management are all effective ways of dealing with the evolution of a company. Another important aspect is ensuring that employees have a voice in the digitalisation process. By involving people in the process every step of the way, the opportunity for employee buy-in is greatly increased.
7. Upgrading Everyday Tools
Employees within organisations rely on familiar tools on an everyday basis, but some of these tools are insufficient or inadequate to work within the new digitised environment. This can often require structural changes for these everyday tools to match the updated environment.
One of the most obvious examples of this is ensuring that information is made more accessible across an organisation. Research indicates that the ready availability of information doubles the odds of a successful transformation. Data is of critical importance in the contemporary world, and indeed many attempts at digitisation are focused on dealing with data more effectively and efficiently. An increase in data-based decision-making and the visible use of interactive tools will have a massive impact on the likelihood of a successful transformation.
Speaking of tools, it is customary to provide digital self-service technologies to important stakeholders. Examples of self-service technologies include ATMs, interactive kiosks, supermarket barcode, and QR code scanners, and mobile payments. These technologies can operate both internally and externally, providing insight to customers and employees alike. And organisations should also be prepared to modify their standard operating procedures and build best practices around implementing new technology. As the structure of an organisation evolves, so should the processes that comprise everyday activity.
8. Clear Communication
Communicating clearly during a digital transformation is also extremely important. Employees within the organisation need to understand the rationale behind the change, particularly if they are to get onboard the new climate as quickly as possible. Communicating where an organisation is headed, why it has chosen to head in this direction, and why process changes are important can help streamline the process and increase the chances of successful digital transformation.
Senior management within organisations also needs to communicate a sense of urgency while also encouraging a two-way dialogue. Studies have shown that organisations that are more successful with digital transformation tend to convey a richer story than those that are less successful.
McKinsey Research has demonstrated that organisations which empower and reward employees for generating new ideas, taking an appropriate level of risk, and following test-and-learn practices will experience a smoother transition during the digital transformation process.
10. Priorities and Agility
Recognizing the key areas involved in the digital transformation is also particularly valuable. There are usually a few clear aspects of a business that are tied directly to measurable outcomes, and focusing on these is almost inevitably conducive to achieving better results.
Today’s business environment experiences paradigms shifts at breakneck speed, and this means that agility is vital when conducting any form of digital transformation. It is naive to view digital transformation as a solitary process. Top economic performers continue to update their digital strategies more frequently than other less successful companies.
While any business process tends to be measured by outcomes, the success of digital transformation cannot necessarily be easily manifested by more sales, stronger customer relationships, lower operating costs, or improved products alone. These are exalted goals of digital transformation, but the likelihood of achieving success has been proven to be dependent on enabling people internally within organisations, rather than focusing on external results.
A management team may have little control over external factors, such as the quality of digital competition it faces or the extent to which its industry has already been digitalised. But it always possesses the power to control the way that the organisation embraces best practices within a digital transformation. Working with experts and following their suggestions can lessen uncertainty and ensure that the complex transformation process becomes as painless as possible.
Transparency, communication, and inclusivity are particularly important, as it is these factors that will prompt buy-in and cultural acceptance across an organisation, greatly increasing the likelihood of success and enabling a digital transformation that will deliver sustained benefits.
Working with Experts
Digital transformation experts from HBR and Dell advise not to let a digital guru lead your transformation efforts. The best person to lead your transformation program would be an insider who has a track record of delivering results and is willing to learn. However, experts are needed as consultants to steer the efforts of your transformation team in the right direction so that you don’t waste time and money learning through trial and error.
We at Digital Leadership have helped many companies like yours achieve their transformation goals and sustainable bottom-line results. We rely on our digital innovation and transformation know-how, experience, knowledge of customer behavior and technology to assist your organization in formulating a clear strategy, minimizing ambiguity, working out a renewed value proposition, and follow the leading practices that lead to a successful transformation.
Be invited to contact us with your questions & challenges.