How to make sure Digital Transformation does not transform you out of business
Digital Transformation is a hot topic lately; it seems to be all the rage right now, especially for any business not ‘born digital’, which is basically every large organization out there, except those like Google and Facebook. But what is Digital Transformation? In a nutshell, it is a business ‘going digital’, moving from its traditional market. It could be moving from print to online delivery, or bricks and mortar to e-commerce, or simply putting up an online presence for a traditional business, like a bank or other financial institution. There is a key difference, however, between a traditional organization going digital and a company born digital and that is in the back end – born digital companies are digital end-to-end. Their systems are integrated and ‘talk’ to each other natively. The business was created that way and it is just natural that information will flow from front-end to back-end digitally. Traditional businesses are usually not built that way. Even if you have fully electronic records and systems, like CRM, ERP, accounting, HR, for example, chances are they do not talk to each other easily. Therefore, Digital Transformation is not just about putting up an outward facing digital footprint, but it is about reengineering the entire back end.
Easy, right?
Now that we know what we have to do, it’s not that hard, or is it? Modern corporate systems are quite advanced, they have Application Programming Interfaces (APIs), some even have Software Development Kits (SDKs), or in the case of Software as a Service (SaaS) offerings, they are often set up as a platform for developers and partners alike to develop solutions on top (take Salesforce AppExchange as an example). It should be a simple matter of coding some connections between the systems and enabling a fully digital experience for our customers. So why is it so hard for organisations to transform in this manner? The more successful an organization becomes, the greater the forces of stability become. Successful business can become inherently hostile to change, known as the ‘Paradox of Success’. As firms grow in size and profitability they become increasingly reluctant to change. This paradox adds significant complexity to any transformation and the problem cannot be solved by technology alone.
Wrong way ‘round
Most organisations start a Digital Transformation from the wrong end – they start with the technology. Yes, the technology is imperative to a successful transformation, but most organisations ignore all the other forces in the organisation and assume that the technology will ‘fix’ the problem. It is often said, ‘You simply have to train the people to use the new technology and all will be fine.’ So why do new systems get implemented and then sit unused? The problem is culture – the way we do things around here. The resistance in the organisation has been put in place over years of rigor and enforced not only by rules, but by the social norms of the organisation. Ignore culture and this engrained behavior at your peril!
The New Normal
Digital Transformation is the ‘new normal’. Organisations must change or they will be left behind. Disruption lurks around every corner and not just from the start-ups or born digital organisations. A successful move into the modern digital world is the only way for large established organisations to remain competitive, but there are many pitfalls to watch out for on the journey.
Others have done it
Since other organisations have made the digital transformation, can we just use their playbook? There are positive and negative lessons we can take from organisations that have tried in the past. Beware, though of thinking you can outsource the whole process. There are no experts in this field, no matter what they might tell you. The important thing to remember is that every transformation is unique to the organisation in question. As can be seen from some examples, it is important to form your transformation around those things that are important to your organisation and especially your customers. Do not trust this journey entirely to outsiders, but do not forget much can be gained from some external insights. Seek help on your journey, but do not hand over the keys.
Lessons Learned
Some organisations have undertaken successful transformations to digital and we can learn from their experiences. Take Hive from British Gas as an example. An organisation doesn’t get much more established and set in its ways than a two-hundred-year-old utility. Hive provides a fully digital experience for the consumer with the ability to track and control their home heating and hot water from anywhere via smartphone, tablet, or laptop. How did they do it? They utilized lean thinking and agile development but kept a form of ‘docking’ with the main IT department and broader organisation, from which they sought ‘air cover’ and the freedom to proceed without getting rejected by the traditional business. Leveraging the trusted brand, they created a frictionless customer journey – thinking of the customer, not the technology. They also iterated with conviction alongside feedback – user experience over design. https://www.hivehome.com/
Travelex set out on a transformation journey with some key principles and avoided trying to ‘boil the ocean’. They emphasized the long game while racking up quick wins. They communicated relentlessly and integrated the changes throughout the organisation – avoiding the ‘cool kids in the corner’ syndrome. In short, they had a three-phase approach; build out capabilities, build new products, then launch transformation initiatives. These are important lessons to be learned from these two successful transformation initiatives.
There is much more to a successful Digital Transformation and while the road is littered with the carcasses of unsuccessful transformation initiatives, there are many successful examples from which to take ideas and learn lessons. A few points to remember:
- Centre your transformation around your target customers – don’t transform just for technologies sake, make sure you are improving the customer journey. Customer first.
- Develop, prototype, test, and adjust quickly – remember to keep a connection back to the core business and IT department along the way. Learn fast.
- Transform in phases – get the core capabilities in place, assemble those capabilities into offerings, then launch longer-term transformation initiatives. Deliver fast.
Daryl Dunbar is a master of business rescue and development combining entrepreneurial creativity and pragmatic discipline. He works with organizations ranging from start-ups to large multinational and not-for-profit corporations, particularly in the areas of strategy, innovation, technology, operations, business design, corporate development, and venture capital. He is the Strategy Lecturer for IME in Singapore and a regular guest lecturer at MIT on innovation in large organisations.