Successful Digital Transformation Must Go Beyond Digital to the People, Process and Culture
With technology continually evolving and changing, so does its vocabulary. The enterprise world is littered with jargon, one of the buzzwords du jour being “digital transformation (DT)” which I’m sure you’ve heard of by now. But what does it mean? It’s like Dan Ariely’s humorous comment on big data, “everyone talks about it, nobody really knows how to do it, but everyone thinks everyone else is doing it, so everyone claims they are doing it.”
At a high level, DT is very easy. It’s simply the adoption of digital technologies to transform your business. So just choose the digital technology you want, and use it to change how your business operates. Done!
Why Digital Transformation Fails
Sounds easy. But it’s not. Numerous sources report that roughly 70% (ranging from 66% to as high as 84% via Forbes) of the DT initiatives fail. Clearly, it can’t be as simple as deploying a digital technology (given such high failure rate), even though that could pose challenge in some cases.
So why is DT so difficult? The reason is because that a true transformation of your business requires more than just the adoption of new technology. DT usually starts with some kind of technology upgrade, but that’s only the first step. Subsequently, it requires changes in your business processes, your employee and leadership behavior, and ultimately your corporate culture. Changing technology might be easy, but changing the people, processes and culture is hard.
The challenge of DT is not a digital or even a technological problem; it’s a business transformation problem. If we try to understand why DT fails, the most common causes of failure boil down to the following 4 categories of reasons.
- Using outdated technologies
- Failure to integrate with legacy or other digital systems
- Believing that it’s only a technology problem
- Lack of clarity and vision
- Lack of leadership support
- Too much top down imposition without grass root support
- Lack of a digitally savvy workforce
- Silo effort that didn’t engage the broader stakeholders
- Process misalignment
- Not agile enough for faster innovation
- Short term thinking
- Not customer centric
- Too little cross-functional collaboration
Since these are failure modes, they are all important. As it only takes one broken link to break the whole chain, any one of these failure modes could undermine the success of your entire DT initiative. So every one of them must be addressed, which is a lot for businesses to undertake.
But here’s the bright side: Although all the common failure modes must be addressed, not all of them need to be addressed at once. And if you are embarking on the DT journey, not all of them need to be addressed at the beginning. So which ones should you focus on first?
Upon analyzing the natural dependency among these failure modes, there are only 3 that must be addressed from the get-go. And I will explain this with the video blog below.
1) Customer Centricity
A customer-centric strategy is imperative, simply because every business needs customers. Moreover, in an increasingly service-oriented subscription economy, every business is striving to retain their customers, because not only is the competition more intense, the switching cost for consumers is often minimal. While this is a given from a business standpoint, customer centricity is equally as important for your digital transformation (DT) initiative for several reasons.
It’s easier to rally for support when you have a customer-centric strategy, precisely because it makes business sense. Very few people would argue against serving your customers. A well thought-out customer-centric strategy could easily win both leadership and grassroot support. You still need to sell the strategy within your enterprise, but it shouldn’t be a difficult sell.
It’s also less challenging to create processes that are aligned across different departments with a customer-centric mindset. Traditional business processes are often created to optimize some business KPIs while meeting their operating constraints. However, different departments and teams often operate under disparate constraints and have unique set of KPIs. Consequently, their processes are typically misaligned because they were created irrespective of one another. Customer-centricity serves as the glue that binds different departments and teams together. It helps you create processes that are aligned with giving your customers a great experience.
When all your processes are aligned, it facilitates cross-functional collaboration. At the very least, the processes are not adding friction that could hinder collaboration. Although this doesn’t automatically drive collaboration, it certainly makes it easier when there is a business need to do so. When that happens, your DT is suddenly no longer a siloed effort.
Finally, a customer-centric mindset fosters long-term thinking because most businesses want to have loyal (long-term) customers, especially in a subscription economy.
2) A Clear Vision
Despite the simplicity of the definition, digital transformation (DT) could be confusing because it’s different for every company. Myriads of digital technologies are on the market, which can change any one of the multitude of business operation within your enterprise.
For example, DT for one company may be using iPads (a digital technology) to scale onboarding of new employees (a perfectly valid HR function). It could also be using social media (another digital technology) to engage and support your customers throughout their customer journey (a marketing and customer support operation). It could even be using big data (yet another class of digital technology) to predict sales, using IoT and augmented reality to improve customer experience, or anything in between.
DT can mean many different things, so you must have a clear vision of what DT means for your enterprise. Which digital technology are you using? And which part of your business operation are you trying to improve with these technologies initially? Most importantly, what business outcome are you trying to achieve? As alluded earlier, a customer-centric mindset could help you answer some of these questions and shape your vision.
Armed with a clear vision of what DT means for your business makes it even easier to garner both leadership and grassroot support. And if you are a leader, a clear vision probably means that you are bought in and committed to supporting this change.
3) The Right Technology
Since digital transformation (DT) almost always starts with a technology upgrade, it is important to choose the right technology at the beginning. Having a clear DT vision that is customer-centric helps you choose the digital technologies to realize your vision, but there are other factors to consider.
Certainly, the right technology must have all the functionality required by your specific DT project. It must meet all the security, reliability, and legal compliances for your enterprise, and must built to scale with robust technologies that last. This is unique to each business, but there are two elements that are often overlooked at the beginning which may impact the long-term success of your DT initiatives.
First, the right technologies should be easily integrated into with the rest of your company’s technology ecosystem. And that includes both your legacy systems and other newly adopted digital systems. Keep in mind that when you kick off a digital initiative, your core business will still be running on your legacy system. Failing to integrate with these systems means your DT project will remain a siloed effort. While DT initiatives often start small in one area of the company, it must permeate throughout your enterprise to achieve lasting transformation.
Second, the right technologies should be simple and intuitive to use. It should be so intuitive that even your non-digital workforce should be able to pick it up and immediately carry out rudimentary functions without much training. Of course, training and education will always be required to reach proficiency.
The key is to make sure that the learning curve does not offset the efficiency gain from the use of your new digital technology for the “digital novice,” even at the very beginning. Furthermore, when there is residual efficiency gain, even during the adoption phase of your DT project, innovative minds within your enterprise will have the cognitive surplus to innovate and be more agile.
Transformation means lasting change
Digital transformation is a journey. It always starts with the adoption of digital technologies, but it must also change the people, process and the culture to be truly transformative. It typically begins as a siloed technology project, but must permeate throughout your enterprise. Although digital transformation can seem difficult, concentrating on the above focuses at the very start will help pave the road for long-term success.
*This article originally appeared on CMSWire.
Michael Wu, Ph.D. is Lithium's Chief Scientist. His research includes: deriving insights from big data, understanding the behavioral economics of gamification, engaging + finding true social media influencers, developing predictive + actionable social analytics algorithms, social CRM, and using cyber anthropology + social network analysis to unravel the collective dynamics of communities + social networks.
Michael was voted a 2010 Influential Leader by CRM Magazine for his work on predictive social analytics + its application to Social CRM. He's a blogger on Lithosphere, and you can follow him @mich8elwu or Google+.
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