Digital Transformation Essentials
1 February 2017, by Karl Graham
We have met with business leaders from across the globe in diverse industries. They see the impact technology is having on their business and say, ‘We need that!’ They recognise the need to exploit digital transformation opportunities to discover new markets, find ways to do business more effectively and respond to the challenges from new entrants and movers in their sector. They realise that embracing technology will enable them to be more responsive to potential and existing customer demands. They recognise that being technically complacent will mean lost opportunities, lost market share, lost customers. But they don’t know how to go about getting the benefits that come from using technology in new and disruptive ways.
In the main, the business leaders we speak to are asking:
- How do I create a company culture that encourages and enables exploration and experimentation whilst acknowledging and managing risk?
- Where am I going to get the skills I need to make this happen? I have great people in my business but this is new to us.
- How do I make sure I’m getting value for money and not just kicking off projects that will wither on the vine?
- What benefits and ROI should I expect from digital transformation initiatives?
Below are some of our responses to these questions.
Think BIG. Plan BIG. Start small.
Organisationally you need to know where you want to get to, you need to have clarity on the vision you are trying to achieve, whilst being flexible about how you get there.
Core questions include
- What do you want to achieve?
- What will be different as a consequence?
- How will you know its been successful?
- How long can you take to get started?
- When do you need to start seeing results?
Answering these questions and others will give you a strong footing for making key decisions and a reference point when it starts to get hard and you come up against challenges or resistance.
The key point: Clarity. For you, for your leadership team and for your employees. Everybody needs to know what the plan is, how it’s going to happen and how excited leadership are about the journey. And when you tell your people about it – always err on the side of over communication. Tell and tell the story about how great things are going to be. Celebrate the successes. Publish them. Share them. Make a lot of positive noise.
Once you have clarity, you need to make someone responsible for action. We recommend a key member of the executive team. The most commonly selected role type is the CTO/CDO. They can then get on with selecting their team, making their lower level plans and executing them. We recommend a cross-functional core team. The make-up of the core team will depend on your objectives but role types include accountable leader, line of business owner who is seeking change, technical architecture specialists, business process specialists and programme management. Depending on the size of the organisation some of these roles may be covered by a single person. The key at this stage is to get a plan in place and start getting stuff done.
We recommend starting small. Based on the strategic vision and objectives this team should select some key hypotheses to validate and then using experimentation techniques to understand if the hypotheses will return the expected results. To facilitate experimentation whilst managing risk, businesses should adopt rapid innovation tools such as Lean and Agile. They should also consider coupling these to a change approach such as Kaizen.
Lean and Agile approaches allow businesses to quickly validate or discard hypotheses, whilst minimising investment. Coupling them to Kaizen as an evolutionary, incremental change method allows management of significant change from existing operating models without alienating staff along the way. Used correctly this approach can create a cultural paradigm shift. Whilst some businesses will have experience of these tools and methods, where you do not, we recommend investing in training and finding a partner who can work with you to embed this capability in the organisation.
The key here is to have tools and processes for getting stuff done and Getting On With It.
I.T. Skills Shortage
Look inside and outside the organisation for talent that is both complementary and challenging
There is a current and growing IT skills shortage. At some point this is likely to have a direct impact on your ability to achieve your objectives. It’s an Elephant in the room. Adopting a cross-functional and shared services approach can address some IT shortages, but it will not help support the skills that are lacking within a business. Therefore, you need to be open to and actively seek ways to create a highly collaborative culture. To facilitate external collaboration, leaders need to seek collaboration opportunities with partners, such as Softwire. These partners should have, or be able to develop a deep understanding of your business and help design and implement digital technology solutions.
Controlling costs and generating ROI:
Leverage legacy systems to free up investment capital. Allow for reasonable failure. Learn from it fast.
Leaders need to be clear on how they are going to invest and how they are going to measure both tangible and intangible ROI across the organisation. Digital transformation is technology driven. However it is not solely driven by the I.T. department. It crosses lines of business. It impacts ways of doing business – people, process and policy. It can succeed or fail based on the buy-in and attention given from people who are not directly I.T. staff.
Organisational silos can be a significant impediment to digital business transformation. When people are protective of their ‘turf’ or budgets this gets in the way of disruptive innovation. As already mentioned, creating cross-functional teams can reduce the negative impact of silos and this protectionism. Getting the right people hooked into the process and empowering them with clarity of purpose and confidence enables each team member to give their expertise and insight.
Adopting Lean and Agile methods means you can commit to small, incremental investments based on validating specific hypotheses – whether the outcome is learning quickly to kill an idea, or pressing the button to scale a proof of concept into a fully-fledged customer offering. The key is to keep investment small, work quickly to learn all you can and make active decisions based on evidence.
Where investment grows without checks and balances on the value, where decisions get bogged down in unnecessary bureaucracy or committees, you will eventually find a disgruntled finance executive demanding that this ‘waste of money’ be canned. So, when you have success, celebrate it. Make sure it’s shared widely and repeatedly.
We all know budgets are always tight. In most organisations the I.T. Department is seen as a cost centre, especially since 80% of an I.T. budget is generally spent on maintenance and support of legacy systems. As a consequence, we recommend leveraging existing legacy technologies and processes rather than creating new systems. That said, one of the major challenges with legacy systems is the inertia from decades of systems and processes. It’s true that the business needs to invest and maintain systems they rely on to operate. However, this is an area where budget can be freed up to aid experimentation with new technologies. In addition, years of organic growth in legacy systems across multiple lines of business can lead to a complex matrix of technologies and processes. We suggest significant benefits are achievable from harmonising processes, in particular where customers’ have to engage with these systems.
‘There’s a battle outside ragin’, It’ll soon shake your windows, And rattle your walls, For the times they are a-changin’[i].
We are in a period of significant upheaval across the business landscape. Macro and local economic impacts are meteoric. Technology disruption and innovation impacts are seismic. Whole sectors have been decimated. Some are under attack right now. Others are seeing the early waves breaking against their shores.
We have seen traditional responses to these attacks fail.
In addition customers are much more savvy. They realise how powerful they are. They demand to engage with the business on their terms. The quality of experience and service they receive is ever more in direct proportion to the level of loyalty they are willing to give. Customer tolerance for a subpar experience is at an all-time low. We see this demonstrated in the way they move on to a new supplier almost immediately something does not suit them.
This behaviour alone is driving digital transformation, and shaking up businesses. With customers expecting an experience that is fast, efficient and simple we have to find ways of meeting their needs, or be left behind. Its little wonder business leaders are looking at leading technology companies and saying, ‘We need that!
[i] The Times They Are A-Changin’, Bob Dylan, 1964.