Even though the majority of companies have already started their digital transformation journeys, it has been hard to bring about any real change. Our Global Head of Digital Strategy, Marc Huijbregts, explains why.
Digital transformation is no new topic. It has been around for the last decade, and has become one of the top business priorities. Yet the impact of the average digitalization initiative tends to be more incremental than fundamental or transformative. Why is that? Digital transformation pervades all aspects of life, and is not as straightforward as just sliding innovative technologies and digital products into your organization and waiting for magic to happen.
As the environment we live in becomes increasingly digital, the impact on business becomes much deeper and more impactful. Let’s start by taking a look at the key trends driving digital transformation right now:
1. Human behavior is changing
A top priority of digital transformation projects today is enhancing the experience and moving customers to the center of business. Customers expect seamless interaction with companies just like they do in every other part of life, and this goes beyond apps and tools. When we talk about digitalization in this way, what we usually are referring to is the fundamental change in the way we behave and interact. This is happening on 3 levels: On a personal level (e.g. the move to mobile), on an industry level (the arrival of disruptors), and on a societal level (the way we live, work, communicate and make decisions).
2. Connected devices are the new normal
Digital technologies are more abundant and more affordable than ever before. Things that were previously considered innovations or “nice-to-have” have simply become the new normal. Mobile, cross-platform and immediately responsive experiences are part of how we live our everyday lives. To succeed with digital transformation, companies need to move beyond the screen and onto the next wave of digital impact: The Internet of Things. This is a truly innovative topic right now.
3. Our digital environment is more mature
Digitalization is no longer confined to specific industries or topics. We’re not just talking about the major companies scattered around Silicon Valley – digital start up hubs are popping up in all industries and spreading across the globe. That’s why another hot topic today is industry convergence. Innovation is accelerating cross-industry disruption, making it is possible for a retailer like Amazon to move into the financial sector, and a social media network like Facebook to get into retail. It’s getting harder to identify and benchmark against the handful of competitors or industry names you’ve always known.
4. We’re in the midst of a data explosion
Our actions are being monitored around the clock. Whether we are on social media, shopping, or reading the news, all of our online activity is being recorded. Big data will impact our society as a whole, with increasing questions around what this means in terms of privacy. Of course, privacy is not such a huge concern for us that we refuse to engage with digital platforms. However, focus is sharpening toward how we safeguard and protect our data, and companies need to think hard about how they plan to address this challenge.
Why is digital transformation so hard?
In the past two decades the pace of disruption has increased so rapidly, and traditional companies are finding it hard to keep up. Just look at how the average life span of an S&P 500 company has decreased in the last 40 years.
Traditional companies’ are known for their inherent difficulties in changing and adapting business models and business processes. Meanwhile, more agile players are entering the scene, and in every sector. Uber is shaking up the automotive industry. Airbnb is revolutionizing hospitality. WhatsApp has changed the way we communicate, Amazon the way we shop. These new companies have a natural ability to quickly react to changing market conditions and become dominant players in their industries. Competition is stronger than ever, and waiting around every corner are a hundred more startups. And even though startups typically just do one thing, they do that one thing really well, and are reactive in a way that larger, more traditional businesses just can’t.
This increasing disruption and changing business environment puts heavy pressure on the board. Shareholders are pushing companies to get on top of digitalization. They need to see positive results, but also want a forward-looking, future-proof, digital business. Trying to manage these multiple expectations can turn into a disordered juggling act: act on opportunities, react to threats, use digitalization as a business enabler, and so on.
CEO leadership is key to driving digital transformation
One major inhibitor of digital transformation is insufficient CEO leadership behind the company’s initiatives. Ask a company’s employees why their digital transformation initiative isn’t working, and it soon becomes clear that these issues could be avoided with clearer direction from the CEO. Check out some of the top reasons we hear as to why digital transformations fail:
- "What is the business case?"
- "We lack the sense of urgency to make the large investments"
- "There’s no focus on projects that impact business"
- "We don’t have the capabilities to drive innovation at scale"
- "There’s no real CEO/Board sponsorship"
- "Our IT systems can’t support our digital ambition"
Too often, leadership think transformation is all about implementing new digital technologies, when in fact the first step of the journey should be ensuring the organization shares one common digital vision.
Roadmap for success: It all starts with ambition
Success is all about ambition. Look at what you are trying to achieve. Are you trying to transform, or are you trying to be truly innovative? Transformation is about adapting to the new normal. Innovation is about disruption. Realistically, you probably need to be aiming for both, so draw up a roadmap that ensures transformation AND innovation at the same time.
However, depending on your focus, there will be different requirements influencing how you achieve your goals, e.g. leadership, steering, working approach, KPIs, and culture.
Essentials for your digital transformation roadmap
- Culture plays a key role regarding how decisions are made, how people are engaged, how they work and measure results. Your team needs to be stimulated to develop their best ideas. If employees are afraid of getting things wrong, or even fired, this just stifles creativity and inhibits progress. Digital transformation requires a culture where talent can accelerate in a changing environment.
- At the same time, you need stable leadership working towards an agreed agenda. You have to be able to deliver on your promise, so develop a clear, steady business case with a proven ROI and learn from industry best practices.
- A good partner strategy is key. Trying to do everything in-house will only lead to failure. Work with well-established third-party suppliers and professionals with a track record. Utilize their capabilities to accelerate your strategy.
Essentials for your digital innovation roadmap
- Innovation requires disruptive leadership – someone who’s going to drive the process and encourage people to think outside the box. Create small, agile teams who report directly to senior leadership and share with them your ambition to reinvent the company through innovation.
- With innovation the value path is uncertain. You’re embarking on a high-risk endeavor, but also stand to reap higher rewards. Work with a portfolio of prototypes. You might have to try multiple approaches in to achieve your goals.
- Collaboration is a driving force for innovation. Co-create your innovations by partnering up with an ecosystem of startups.
Digitalization transformation outlook
A lot of companies are “preaching” digital, but still struggling to sustainably reinvent themselves. Large scale change is hard, and digitalization is more than just mastering technologies. Clay Shirky, Vice Provost for Educational Technologies at NYU, does a good job of summing this all up: “A revolution doesn’t happen when a society adopts new tools. It happens when society adopts new behaviors.”
Companies need to make sure their digitalization transformation strategies are in line with this trend. Digital transformation is no longer just about increasing efficiency in your existing business. It’s about transforming the customer experience and identifying where you can create value. More importantly, it requires clear leadership from the CEO. They need to make sure the entire company shares one digital vision.