Digital transformation – where is the magic?

An executive self-assessment on your digital transformation program – your Digital IQ. Digital transformation, going digital, digitisation…the buzzwords go on and there are signs that digital fatigue is setting in.

We are now several years into the digital era and it is now time to reflect on how are we going; is it working, and are we doing the right things to get the different business model and outcomes that we envisage?

Recent reports from McKinsey, HBR (and corroborated by others) would indicate that we are not doing well, with fewer than 20% of companies/executives reporting that digital transformations are delivering effectively and achieving transformed outcomes.

This is a lower success rate than previous generation IT/business transformations that delivered around 30% to or above expectation.

So what’s the problem?  Where is the magic in making it work?

In looking beyond the buzzwords, there is practical advice and evidence on some of the good practices for success, as well as early warning signals of mediocrity/failure. From direct practical experience and extensive desk research, this paper sets out key questions and interpretations to help self-assessment of progress on the digital journey, and pointers for improvement.

Bottom line, if you are uncertain on your digital transformation direction, not seeing the outcomes, nor quite understanding how agile working will change everything, then read on!

The top line – 5 key magic ingredients / Executive Summary

The top 5 may differ from firm to firm.  That said, the five key areas below are ‘must haves’ for a digital transformation to deliver to the point where you bank the result:  higher margins, faster growth, increased corporate agility, greater market share and shareholder value.

• Vision, goals and outcomes. All executives and leaders will have a clear and consistent view of the vision, goals and outcomes of the digital program and a broad understanding of the roadmap to get there.   Project and initiative outcomes must be tied to the strategy with relentless communication and reinforcement to ensure everyone gets it.
  • Digital transformations are: creating new products and services based on new technologies and emerging customer preferences and behaviours (particular focus on creation of new IP to gain further competitive advantage and market presence), designing new and differentiated customer and employee experiences, increased speed and flexibility (corporate agility) to act on new ideas, enter new markets, business and pricing model reinvention, capture opportunities and market response, using data ubiquitously for value, fundamental change in processes and cost base, fundamental change in skills and ways of working. Goals and measures can be created for all of these.
  • Digital transformations are not: digitising today’s products for sale on traditional digital channels, applying robotics and automation on existing business processes, upgrading/replicating legacy IT applications on new cloud platforms, doing training on agile without fundamental organisation and work style restructure.
  • Ask 10 executives on what they think digital transformation is and you get a wide variation of answers. The magic is to get 10 similar answers from the execs in your company.  Test it.

• Governance, measurement and reporting is in place, consistent and rigorously applied at every level of the organisation. All leaders understand what the measures mean, what the early warning signs are, and what actions are required when issues emerge or performance drops, conversely, how to accelerate once the ship is humming.  Additionally, it is critical to ensure governance is not ‘heavy-handed, bureaucratic, process intensive’, rather it empowers teams, enables autonomy while ensuring that positive progress is achieved, and waste is minimised (but not eliminated in the spirit of experimentation, innovation, and its ok to fail, learn and redirect.)
  • Governance over digital transformations needs a deeper understanding of the methods and processes used than previous IT transformations. Governance over predominantly agile programs requires all levels of management and executives to be trained to understand the language, measures, methods etc to effectively oversee the path to value.
  • Agile governance is inherently hard to pin down exact goals, outcomes and timings. Hence a sound set of ‘towards’ measures/leading indicators is critical.

• ‘The way we work’. Digital transformation requires new ways of working where everyone in the company (and as required, its key eco-system partners) are trained appropriately with a common set of methods, approaches, language and tooling.
  • Digital transformation is a company/eco system wide journey. Teams will form from disparate groups to solve problems or innovate new ideas.  Many approaches exist for design thinking, agile, DevOps etc.   Company level method adoption is critical.  Multiple concurrent methods and approaches will cause confusion and hamper progress.

• Culture change enabled by a very clear view of what is to be achieved (the vision and goals), how it is to be achieved, and what each individual role contributes in achieving the future outcome. This necessitates training and upskilling on new capabilities and ways of working.   Communication on progress and regular wins accelerates the cultural transformation.  Equally, the acceptance and learning from failure or project realignment is a key to cultural change, often not tolerated in the past.
  • Many papers cite culture as one of the most important, if not the most important aspect of digital transformation. Sadly, there is no precise recipe to execute change to the right culture and as such, can only be achieved in the context of getting all five of the top five key ingredients.

• Digital transformation costs money. Budgets need to be set on the understanding that IT expenditure across the corporation are likely to rise by virtue of the fact that much more of the traditional labour/process/outsourced functions are now IT enabled and underlying digital enablers often fall under traditional IT budgets.  With the additional digital transformation outcome including the fundamental products/services, business model and organisational capability, change in budget profiles in all these areas is required.
  • Once digital transformations start, there is often a realisation that the scale of resource and scope of the program is much larger than first thought. Be prepared to revisit, replan and set loftier goals.
  • Many corporations are driving down ‘traditional IT’ costs of operations and application management. This must continue aggressively.  However, the savings from this alone will not cover the increase in digital technologies across the corporation and technology budgeting and planning needs to consider all business functions digital content.

The top five above, are consistent themes across successful transformation programs.   They would appear to be the most important to get right, however, it only scratches the surface.   To help you assess how you are going on your journey, the following provides a self-assessment in a number of categories:

• At a company level and for the executives,
• For the business unit leadership and practitioners.

Company/Executive level – digital IQ

Ask yourself the following questions, while doing so, think about 5 other key stakeholders in your company, would they provide a similar assessment and share the action plan to accelerate the successes and address the issues and pain points?

Vision and Strategy

1. Is there a clear long term vision for the company – that requires digital transformation for success? Is the future state broadly defined and understood?
2. Is there a digital strategy in place that all executives understand and can articulate consistently? Is there a narrative/story that describes the journey to the future state? Is progress communicated regularly? (A good story is easy to communicate).
3. Can you briefly describe it?
4. What are the top three initiatives, and the specific goals and measures for success (ie how will you know when success has been achieved?). Do these initiatives directly support achievement of the vision and strategy for the company?
5. How would you rate your strategy and digital program in terms of articulating the goals, changes and outcomes for the following on a scale of 1(poor) to 5(excellent): (change areas in parentheses)

• Customer interactions (the way we interact) – use of digital technologies, re-imagining customer processes.
• Workforce skills (the skills we build) – training programs and recruitment to develop digital skills across the organisation.
• Organisational capabilities (the way we work) – programs for consistent development of new ways of working, eg design thinking, agile execution.
• Cultural change – positive, proactive, accepting and implementing change, share the vision.
• Process innovation (the work we do) – innovating how work is done through robotics, challenging current processes, using AI, deep learning, etc.
• Business model innovation (the business/ecosystems we are in) – rethinking value across the company and its partner ecosystems to extend/acquire/divest/partner for more efficient outcomes.
• Data strategy – collection, management and usage of data for value throughout the company and beyond
• Product and service innovation/digitisation – creation of new IP, reinvention of current and new product offerings, taking advantage of latest and emerging technologies.
• Technology strategy and tooling – use of sophisticated technologies and tools for hard outcomes.
• Partner interactions and innovations – use of digital technologies, reimagining partner interactions across all ecosystems.
• An integrated program that combines all of the above to achieve the vision and goals.

6. Is there a chief digital officer or equivalent in place? – This is the key thought leader for the program, with the ability to communicate the story, shape and guide the program across the organisation seamlessly moving the business and technology together to achieve the vision.

Execution

7. How well is your digital program delivering?

• Outcomes and benefits clear and in the bank -vs goals?
• Specific measures and metrics managed on a regular basis?
• Clear successes achieved on time on budget and communicated widely.

8. Please rate execution performance on the following on a scale of 1(poor) to 5(excellent): Programs and teams in place, funded and operational, with results flowing.

• Customer interactions (the way we interact)
• Workforce skills (the skills we build)
• Organisational capabilities (the way we work)
• Cultural change
• Process innovation (the work we do)
• Business model innovation (the business/ecosystems we are in)
• Data – collection, management and usage
• Product and service innovation/digitisation
• Technology strategy and tooling
• Partner interactions and innovations
• Integrated program management and reporting

Leadership:

9. Is effective governance in place from C level through to operational execution?
10. All management (senior and middle) engagement? In communicating a clear and unified story, creating a sense of urgency, encouraging experimentation and to challenge to current ways of working, enabling collaboration across departments, business units and workgroups.   All executives and managers trained on the agreed methods for the company, particularly design thinking, agile, tooling and enabling digital IT.

Interpretation:

As with any self-assessment, it is easy to be overcritical (and sometimes overconfident).  A strong recommendation is to do this yourself, and then with a set of peers to gain a consolidated view on your digital transformation program, its strengths, weaknesses and most importantly the opportunities to improve.

From your assessment, the ideal outcome would be where all the executives and stakeholders in the company would answer these questions consistently and positively.   Where there is inconsistent or divergent views investigation is required on the route causes and actions necessary, these 10 areas represent critical success factors for the program.

On the strategy and execution performance questions, where you rate performance below 4 or 5, again there is a requirement for review, analysis and action.   Overall, success in digital transformation programs requires everyone to be on board, appropriately skilled, trained and motivated.   It is not a job for just the ‘digital team’.

The ROI of the program or initiative set is very much a lagging indicator.   Once you see your program is not delivering the financial outcomes, a large amount of time, effort and money will be spent.  The key is to be in agreement that the company has the right set of leading indicators to measure performance and to have a sound understanding of the levers to adjust the program to deliver to expectation.

Business unit and practitioner level – digital IQ

Digital transformation practitioners and line management must demand executive leadership create the environment for the success of the program overall, and the success of the constituent projects and work efforts.

The ten questions above should be answerable by all, and again, should all be addressed for the Transformation program.   If not in place, then the governance process should enable escalation of gaps, solution and action creation.

There is a vast amount of literature and case studies available on digital programs.   Summarised below are a collection of additional key success factors.   Where there are gaps, there is an opportunity to improve.

Here are some additional questions to ask yourself.

1. Do you have a clear plan, agreed outcomes and a cohesive story for your digital program?
2. Is your part in the overall company program well understood and in context of a broader outcome? Do you feel you have the skills and capabilities to execute digital transformation in your part of the business?
3. Have you and your staff all been trained on digital methods such as design thinking, Agile? And adopted a common method across the company?
4. Have you redefined roles to effect transformation across your area of responsibility?
5. Is there a sense of urgency, collaboration, challenging the status quo, experimentation, new ways of working, innovation, ability to fail and redirect across your area?
6. Is there a strong positive culture and outlook regarding progress and successes to date?
7. Is the funding and resourcing appropriate?
8. Do you have coaching from company thought leaders on how to improve performance?
9. Do the business and technology teams act as one in multi-skilled, multi-competence teams?
10. Do you have the freedom to set your own goals?

In summary, there is a pressing need to improve the outcome performance of digital programs and transformations, 20% success rate is just way too low, too slow and expensive.  This self-assessment should help identify the gaps in your program and through governance, should provide the right environment to raise the issues and agree the actions necessary.

At the end of the day, this is a fundamental capability to get right and the outcomes are no different from what the shareholders have always expected.

Please feel free to contact the writer at gurneydigital@gmail.com

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