What’s stopping Digital Transformation – three misconceptions and one key tip
No industry is immune to disruption. Are your competitors doing an “Uber”? Are the likes of Amazon, Apple or Google moving in on your territory in Finance, Telecoms, Transportation or Home accessories? And how about those AI’s that are replacing accountants, lawyers and doctors?
To keep ahead of these threats, companies need to build digital into their DNA.The good news is, many leaders recognise it. Cue the tremendous activity in the digital transformation space: spent in on digital transformation is forecast to reach $2.0 trillion in 2020.
High failure rate
The bad news, however, is that these initiatives show a worryingly high failure rate. Research by McKinsey suggests that 70% of transformation programmes fail, while Forbes puts the figure at 84%. That comes with a hefty price tag: Consultancy UK estimates that large enterprises throw away an average of $400 Billion (£258 Billion) per year on digital transformation programmes that fail to deliver promised benefits.
So how come that despite best efforts by very smart people and huge sums of money, companies struggle to make this shift? Is it just too big a tasks?
Transformation of any kind IS a big task, and it is not helped by some persisting misconceptions around what digital transformation actually is.
Here are three misconceptions about digital transformation I come across again and again:
Misconception #1 – It’s just about automation.
Digital transformation is more than using technology to replace previous analogue tasks. Digital transformation means doing things drastically different, to the extent that it either disrupt the market or wards off disruption. For example, replacing paper forms of staff records with online forms is not digital transformation, it is digitisation. Similarly for all the initiatives to overlay digital channels to the customer journeys. By themselves, offering digital channels is not transformation. It is merely using digital tools to automate and improve the existing way of working.
Of course, there can be merit in digital change projects. A considered, strategic portfolio of them might very well be part of the digital transformation.
Misconception #2 – Digital transformation is a one-off programme.
Assuming that digital transformation “programmes” have a beginning, middle and an end is a mistake. They don’t. Instead, digital transformation requires continued effort. Digital transformation cannot be “done” like a fad diet – it needs a real lifestyle change. And it is not going to go away: to remain competitive, organisations must be continually seeking to improve and innovate.
Misconception #3 – Digital Transformation is about technology.
Of course, choosing and implementing the right technology is important. But getting it right is less about the technology than it is about people. No matter what the tech: cloud, social, big data & analytics, mobile, IOT or Artificial Intelligence, technology is just a tool. And as a tool, it will only function well if the people, data, processes and culture of the organisation are taken into account. Vendors don’t like to hear that, but not every tool is right for every organisation every time.
Falling prey to these misconceptions can positively undermine transformation initiatives. The focus for activity and spend is misdirected, costing the company dearly in terms of money, effort and time and potentially leaving it vulnerable.
Key tip: Take the digital transformation out of the IT department.
If you want to give your initiative the best chances for success, you need to develop a digital culture. That means not delegating it to the CIO or IT Director and assuming the rest of the organisation can carry on business as usual.
Instead, the initiative must work with multiple stakeholders – including business units, support functions like HR, Finance, Marketing, Facilities, etc.
Prepare your organisation for a digital culture:
- Create a broad digital strategy. Be very clear on the goals for your digital strategy – what is it about and why? Are you truly aiming at transformation or just improving the status quo by using digital tools? At the same time: don’t get too attached. The trick will be to keep it flexible, yet consistent in the direction of travel.
- Develop a group of internal digital champions from across functions and business areas that shape a common journey to transformation. Make sure they can experiment and feel secure enough to learn from failure.
- Tell the story of the digital journey while being open to feedback and willing to adopt it as appropriate (see above about flexible and structured)
- Start flexing organisational behaviours, processes and even the organisation chart. That means changes to top-down decision-making. Changing who can take action. And how people collaborate with each other.
Digital transformation is everyone’s business
As Selina Heiska, the new VP of Digital Transformation at Wärtsilä puts it
“The transformation can mean different things to different people. For some, it may mean the use of new tools, for some need to think outside of the box to look for new innovative solutions to solve customer problems – but common for all is that transformation requires everyone’s participation.”
Find out how to set up a team of internal champions and prototype your way to transformation that is fit for your business, book your complimentary Future of Work Game Plan session here