Beyond Digital Transformation

Beyond Digital Transformation

Digital Transformation still figures highly on many Board Agendas and Annual Reports. After several years of reactive behaviour, the focus has returned to setting new strategic goals to prepare for the future in what is becoming a highly disrupted world.

VUCA is the new norm. Economic troubles, war zones, supply chain issues, the widespread emergence of AI and the constant creation of new disruptive players in many sectors are all driving the need for transformational change in just about every industry, and much of this change is being driven by technology. Hence, Digital Transformation is still the term we use. And yet we still read reports daily about the persistent failure of digital transformation initiatives or those that fail to deliver the expected results. Delivering such fundamental change at scale in any organisation is challenging, especially with short-term pressures. Individual leaders must decide whether to jeopardise their careers against these odds or risk falling behind.

A recent report by Deloitte highlights that ‘Digital transformation has the power to transform the processes and culture of an organisation, while accelerating growth and creating competitive advantage.’ It is clear from this and other research that, whilst technology is essential, there are other significant factors are at play here in determining the success or failure of these transitions. Organisational inertia and resistance to change create substantial issues that can lead to an inability to transform, and transformation can only succeed when there is significant and sustainable change. The way cost and value are attributed to transformations is a significant factor that causes failure, and, finally, how organisations approach their current technology environment affects their ability to change.

What do organisations want to happen?

The Information Age began many years ago with the advent of affordable computing power. However, this was also characterised by inconsistent uptake, with some organisations capitalising on the advantages and others being late to the party. We are now in the Digital Age, and our previous thinking on communicating in all aspects of our lives has changed, rendering pre-Digital Age thinking obsolete.

As organisations have moved through these ages, this has resulted in the starting point for Digital Transformation being quite different for organisations as they are shaped by their heritage and previous approach in the Information Age.

Despite the different starting points, there are common drivers towards digital transformation that are consistent across sectors and company size, so the destination is seemingly similar. Some organisations simply accept the inevitability of a need to change and transform to survive, but many seek to transform to thrive. It is critical to understand within an organisation the underlying driver – survive or thrive?

Those driven by survival are reacting to an evolving business landscape, disruptive technologies and challengers, changing customer expectations, issues with legacy technology, outdated practices, and mounting technical debt.

The thrivers, on the other hand, see transformation as a strategic advantage and actively seek to innovate and create value. They usually prioritise their customers’ experience and recognise that agility and adaptability are crucial.

Beyond this underlying philosophy, there are a small number of outcomes that most transformational leaders aspire to. A better customer experience can create new markets for more customers or allow more effective selling to existing customers. Operational efficiencies to enable the delivery of products or services to customers faster, more accurately and/or cheaper. They are creating a more relevant, digital age approach that enables faster reactions in the future.

In essence, these three objectives sum up the majority of digital transformation drivers, irrespective of whether they aim to thrive or survive. There are nuances and granularity, but at the highest level, these are the core reasons organisations want to transform. The technology is important, but the technology is changing so fast with AI and Machine Learning, advanced cyber threats, machine customers and the ubiquity now of industry cloud platforms that any transformational change must accept that the only inevitability within the programme is that the technology itself will change constantly.

The other element to be aware of is that organisations that have implemented effective and successful digital transformation projects realise that it is a journey that must continue. Those that have had less success realise that they need to reverse that trend. This means virtually every organisation is exploring digital transformation at some level.

What marks out the organisations that are succeeding against those with less success? They tend to know the answers to three critical questions:

Why are we doing this? In other words, what are the primary drivers of any transformation initiative, and what value will be realised through the work? And are all stakeholders agreed on this?

What actions will we take to achieve the drivers established above? Unless we have a clearly articulated ‘why,’ the ‘what’ is unlikely to be truly transformative. The key is to ensure the ‘what’ is broken down sufficiently to make realistic targets but not so detailed that it becomes distinct pieces of work, as that is the final question to answer.

How will we achieve the actions we have described? This must embrace not only the actual, usually technology-based change but also the leadership, governance, resources required, and approach. It must also include how all parts of an organisation will be affected and contribute to ensuring any far-reaching change is accepted and sustainable.

Most successful transformations answer all these questions and, perhaps more importantly, accept that they need to be addressed and answered in the right order: why, what, and how.

What is actually happening?

We see increasingly more organisations initiating transformations as they fight to remain relevant. However, many of them are still failing to realise the expected value, suffering from slow adoption, fighting resistance to change, and, in many cases, being abandoned before they are complete.

Can we draw a parallel between the new Digital Age and the previous Information Age? Are there similar behaviours at play as we see some organisations speeding ahead on the digital journey? In contrast, others struggle, wasting effort, time, and money as they begin to abandon their attempts to ‘become digital’?

In short, yes. People have always been the limiting factor in any revolution, be it the Industrial Revolution, the Information Age, or the Digital Age. Whilst technology develops at a sometimes alarming rate, people are less able to adapt, creating a series of issues common across every sector and most organisations. We have seen this dual speed of change with technology running at pace and people lagging so many times in history that it should be no surprise we are facing the same issues again. Technology investment will be wasted if we do not bring people on the transformational journey.

Another limiting factor is technology itself. As technology accelerates, what we have built previously to enable us becomes the very thing that slows us down. Yesterday’s modern technology becomes today’s legacy, and that can impede our ability to transform quickly.

When we combine the inherent difficulty of driving effective change through people with the issues of legacy technology, we often run into the problem of cost. Too often, the cost of these limiting factors is not recognised before the journey begins, and so they emerge as nasty, unexpected items that can often derail the transformation budget. This issue is magnified because many organisations still view digital transformation as a cost and are unable to articulate value effectively.

Recent research by Deloitte tells how 75% of organisations ‘believe that digital transformation is the single most important investment they can make’ with the primary problem being that ‘UK business leaders understand the value of implementing new technology, but they don’t know how to measure it.’

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