As technological advances continue to impact all aspects of business at break-neck speed, the phrase “digital transformation” is on the lips of many executives. Companies are transforming to be more digitally competitive. Artificial Intelligence, augmented reality, and blockchain are just some of the technologies that are upending the way business is done. As the customer experience evolves, aided by these new technologies, businesses must evolve to meet customer needs in new ways.
Today’s executives wonder whether they have leaders at all levels of the organization capable of driving this sort of business transformation. But, what is it about digital transformations that make them different from any other sort of business transformation? Is it about knowledge of digital technologies? Is it about needing to accelerate new ways of working to keep pace with technological change?
You can find blog posts, articles and papers from various consultants who give their perspective on digital transformations and what companies need to do to, but they don’t explain what it is that makes digital transformations different.
Ram Charan’s HBR article on digital transformation from almost two years ago, draws lessons from GE’s transformation. He outlines 8 lessons:
- Think about the business model and the strategy for the ecosystem (not just the company) – expand the boundaries. Build a new platform that would not be possible without digitalization.
- Recruit digital leaders from outside.
- Focus where domain expertise and digital expertise intersect (stick with your core and rethink it with digital capabilities).
- Focus the senior leadership team on the end-to-end customer experience. They may need to spend time learning about digital to build understanding of it.
- Radically cut costs in the old business to fund the new one. Find the proper pace for extracting resources from the legacy business (e.g., cutting general and admin expense).
- Make tough calls on people – radically reduce those dedicated to the old business and motivate remaining legacy people for the transformation.
- Make the organization team-based and fluid. Cut layers – move towards speed of collaboration
- Communicate often so all stakeholders understand the steps being taken to become a new company – the “why” around shifting resources.
In a more recent HBR article Deb Henretta and Anand Chopra-McGovern discuss ways to help employees through digital transformations, based on their experience in the consumer packaged goods industry. These include:
- Commitment from the top: the rallying cry for new ways of working in the digital age must start at the top.
- Hiring a chief digital officer and making that person a member of the executive team
- Leadership training to build knowledge, mindset, and ways of working that would be needed – e.g., willingness to experiment, openness to external partnerships, autonomous teams
- Embracing the new technology – using digital platforms and channels to make it real to employees, partners, suppliers.
- Direct access to clients: User research, feedback, commitment to lean operations.
- Help employees embrace agility: establish a set of tangible day-to-day activities and behaviors that enable employees to act quickly (e.g., use of real-time dashboards and frequent reports to help keep a pulse on client activity).
- Invest in “employee experience design” – e.g., journey maps, persona development, user research. (reconsider recruiting, onboarding, development, and retention using these tools).
- Invest in lifelong learning – regular and frequent upskilling that is delivered in formats in line with demands on employees’ time.
Importantly, they note that “digital transformation is not just about technology. The way a company communicates with its employees, organizes them, and reskills them will play a fundamental role in its ability to take advantage of the new paradigm of the consumer products landscape.”
These are just two examples, but they reflect most views on digital transformations. Based on their recommendations, it seems that knowledge and adoption of digital technologies along with customer centricity and agile forms of management distinguish digital transformations from all others.
I would argue that customer centricity and agile forms of management are important tenets of any transformational change. And, the adoption of digital tools makes new ways of working possible – facilitating experimentation and feedback with customers and with employees. It seems to me that knowledge and adoption of digital technologies is what differentiates digital transformations from all others. Which is why many companies focus on hiring a Chief Digital Officer. (But, wouldn’t the CIO be responsible for digital technologies? More on that here.)
A big part of the Chief Digital Officer’s role is to drive change and, when it comes to driving change, leaders of digital transformations need the same capabilities as leaders of any other business transformation. Furthermore, in the case of digital transformations, everyone on the executive team should have a working knowledge of digital technologies and be comfortable adopting the use of digital tools. Transforming a business is not the solitary pursuit of a hero leader. Driving transformational change must be the responsibility of the entire executive team.
In the Boston Consulting Group’s paper on transformations that work, lessons from their analysis of successful transformations highlight the role of the leadership team:
- Assemble a diverse leadership team – including people from inside and outside the organization who understand the current core business as well as the actions needed to respond to or lead disruptive change
- Apply directive and inclusive leadership – set the ambition, articulate strategic priorities, hold management accountable for results AND involve teams to define and implement specific initiatives
Successful transformations, of any kind, follow tried and true change management principles:
- Articulate a clear and compelling purpose for the change
- Set clear priorities – focused on bringing value to the customer and growing revenue
- Put the resources in place to execute the change, including funding and talent.
- Play/practice with new things. Test things out by running small-scale pilots and get some quick wins to learn fast, and maintain energy and build momentum. In the digital age, this includes adopting lean practices and agile methodologies.
- Adopt an “always transforming” mindset. The speed of technological advances has been driving constant change. Engaging your people in defining what needs to change and how as situations evolve is the fastest way to make change happen.
Do your leaders have what it takes? Green Silk Associates help leaders and teams to transform their businesses.