Digital transformation is difficult, but is it enough?

22nd May 2017
Rod Nicolson

Transforming a company’s culture, people, processes, tools and business models is a lengthy and complex task.  The benefits from digital transformation can take years to realise, and while a change programme is running, it’s a sure thing that our competitors aren’t standing still.

The challenge facing CEOs of companies going through digital change is not just how to realise the benefits of the programme, it’s how to ensure that during the transformation the company doesn’t get left behind.  As if riding a bike and upgrading the gears at the same time wasn’t hard enough, suddenly we find we also need to fit two additional wheels and an engine.  

Here are four thoughts on how start a digital transformation right, and keep the company competitive.

1. Digital transformation is about business, not technology

It’s a cliche that really shouldn’t need saying again, but I’m going to anyway.  There are no technology projects, only business projects.  Focusing on digital technology or shiny digital geegaws is putting the cart several miles in front of the horses.  All options for the programme should be driven primarily by the business outcomes it hopes to achieve.  Getting distracted from this simple mantra can prove extremely costly in terms of budget, time, risk and opportunity costs.

2. Clear goals, connected to the vision

As Marc Benioff has said, “We need a new vision, not a new version,” and the company’s vision for its digital future should connect directly to the goals for the programme.  A transformation programme could run for multiple years, so from the start it’s vital to have complete clarity and consensus on the outcomes it intends to deliver.  This includes an agreed definition of each goal and how we will measure them.

3. What’s the most important thing to do right now?

With the goals established we now have the means to compare and prioritise the components of the programme.  Sales want a new CRM, but Marketing want a new social media management tool.  The agreed goals provide a transparent framework against which we can assess the ideas’ value.

4. Disrupt your own programme

How do we ensure that while our core business is modernising, we are bringing along products that will keep us relevant?  I don’t want to be alarmist, but it’s not just competitors, or potential disruptors that we need to be worried about.

Just ten years ago the first iPhone was released (29th June, 2007), disrupting the mobile phone and home computing markets, kickstarting at least two wholly new industries, transforming how we do business, how we consume media and communicate with one another, and leading to the demise of Blackberry and Nokia.

In Spring 2006 a well known online store launched a set of cloud services that put a massively disruptive spanner into the business models of companies selling hardware, software, digital storage, routers, server management solutions, and more.  It went on to impact how technology is delivered across almost every industry and in 2016 Amazon Web Services made $12.2 billion in revenue.

The speed of technological change was rated by recent graduates from the CEMS Masters in International Management program as the biggest threat to global business.  Assuming a digital transformation project takes two years to complete, what will the technology landscape of our industry look like two years from now?

Media companies are very familiar with digital disruption, although usually as the victims.  Axel Springer, the German publisher of Bild and Die Welt, bought its way into a digital future by acquiring stakes in Thrillist, Mic.com, Jaunt, and Business Insider in 2015.  On the upside, acquiring digital talent and their businesses certainly brings in fresh ideas, but the potential clash of cultures needs to be managed carefully.  

Banks aren’t exactly seen as thriving hubs of innovation, but ING created its own incubator and funded external startups and the winners of an internal innovation competition.  Not everyone has the resources to run their own incubator, but working with others to jump-start innovation brings in fresh thinking and reduces the risks of derailing the transformation programme.

Complacency about existing business models, lengthy decision cycles, or objections about cannibalising existing products are all reasons why companies don’t innovate, even if they’re not undergoing transformative change.  Meaningful change is difficult to realise, and a business still needs to keep running while that change takes place, so why would we pile on yet more complexity and risk by trying to disrupt it?

The rate at which technology is changing means that constant and accelerating change is the new normal.  If you’re not innovating now, by the time your transformation is over, it may be too late.

 

Featured image modified & used under Creative Commons. Image credit.

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