Over the past decade, increases in computing power, ubiquitous connectivity and changes in consumer and channel dynamics, along with new competition, have seen digital technology transformations become CEO agenda items.
Building a digital-ready company is a board-level imperative, but success has been elusive. In a BCG study of nearly 900 transformations globally, more than 80% of companies indicated that digital transformation is an urgent priority, but only about 30% of the efforts are successful.
While issues in digital transformation projects can stem from technology and data, the primary causes of failure are typically related to strategy alignment, organization and behaviour change. We identify key factors that can materially change the odds of success.
Integrated strategy and a clear roadmap: It is critical to start with an aligned strategy with tangible business goals and outcomes. Disjointed use cases, sometimes propagated to start off experimentation, are unlikely to create sustained value and may even be counterproductive.
For example, a retailer using AI for personalized marketing increased online traffic, but an underprepared e-commerce platform led to poor fill rates and dissatisfied consumers.
A 360-degree view is crucial, with an integrated strategy as the starting point that leads to specific business use cases along with clear metrics and a well laid-out roadmap.
This must be done through a concerted effort by the leadership team. The prioritization of select areas to start with is crucial to ensure adequate focus and resourcing, and to secure some early wins.
Reimagine and don’t just redesign processes: A common mistake is to focus on automating existing processes and ways of working without rethinking entire workflows.
A large industrial company avoided this through an ‘outside the function’ team that developed the new process to avoid the status quo trap of familiarity.
Successful companies have used technology to completely reimagine business processes, leading to better consumer experience and lower costs.
Payments and digital lending have been exemplars of it. In contexts where physical touchpoints will stay important, digitization must keep human and physical interactions in mind.
Top commitment and talent: Sustained leadership commitment changes the odds of a successful transformation by as much as 65%, as per the BCG study. On the other hand, such results are absent where the middle management isn’t inclined to pivot.
Top leadership must lead by example, demonstrating its commitment by investing time, attending reviews, upskilling themselves, celebrating small (and large) successes and rewarding worthy efforts.
Successful transformations need organizations to put their best talent into the effort, which is easy to say but tough to do. The leadership often does not want to use its best operating talent (in fear of how it could impact business-as-usual).
The best talent often thinks of it as a ‘side gig’ and not as a core task, and is sometimes unsure if the organization is really invested in it. The only way to exit this negative loop is to set up an enthusiastic team, staffed with the best or most digitally aware.
This is seen to improve the chances of success. At the same time, this team of talent needs to treat the exercise as an ‘all in’ effort with no ‘escape’ button.
Think full ecosystem: Companies that approach a digital transformation with an end-to-end value chain perspective that extends beyond their own organizational boundaries realize the full benefits.
An auto company that actively drives suppliers to go digital has better control over its supply chain. An FMCG business that digitizes its sales system realizes maximum value when its distributors are also part of the ecosystem.
Thinking of the full ecosystem requires paying attention to the starting capabilities of partners and focusing on change management and communication.
A digital pivot can be transformative: A digital agenda is a great opportunity to change the organization. Every company wants to focus on a few strategic priorities, be agile, take a holistic view and innovate on the operating model.
Being digital-ready can drive an organization-wide transformation by identifying the prioritized business cases that drive value, reimagining and not just redesigning processes, deploying cross-functional teams to break silos, enhancing capabilities through upskilling and new talent infusion, encouraging experimentation and celebrating successes and failures, and persevering to make change happen.
These are the authors’ personal views.
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