Strategy

It’s time to stop talking about digital transformation

Searches for the expression ‘digital transformation’ peaked in 2017. I was surprised and disappointed as I had hoped that this buzzword would have been forgotten just like “the year of mobile” was previously; but alas, this isn’t the case. I believe it is time to stop using the expression “digital transformation”, as it leads to more confusion than effective action.

Does anyone have a clear understanding of what digital transformation really means? I’ve read many expert accounts and they all provide endless variations on its definition and interpretation depending on whom you ask. Is it about business models or customer centricity or the digitization of business processes? However, when talking to technology professionals, it becomes quickly apparent that they do not understand the expression. Rather, only business people feel the need to transform their organizations because of “digital” in order to future proof their business. Personally, I find this line of reasoning to be quite tenuous; in other words, I don’t buy it.

In order to fully benefit from the transformative nature of digital technologies, companies must address them at the corporate strategy level.  If your organization is looking for a shift towards digitization, here’s a framework I suggest to use:

  • Strategy: Decide on the vision of the company (1-2 months to complete)
  • Execution: Create an execution plan to match  (12 -24 months to complete)
  • Organisational change: Pivot the company culture and the organisation towards a new way of thinking (24-48 months to complete)

Strategy comes first
Strategic choices lead to investments in technology, not the other way around. When many traditional organizations realize that they are disconnected from their customers’ behaviour, then they push for a change in strategic direction. For this change to be successful, it cannot be treated as a side project; it needs to receive significant attention from the board. You need to get the HIPPO on your side.

Execution is key
During the execution phase, besides implementing the right tools and processes, two key elements must be taken into account.
Firstly, the right team members must be hired to execute on the shift and to internalize key competencies. Companies can’t and shouldn’t always rely on third-party vendors & agencies especially on mission critical tasks; having the right internal team can not only challenge them, but also help elevate the quality of their production.
Secondly, management needs to collect, analyze and act on quality data. Available data must focus on business outcomes, specifically around product management, operational excellence and client experience.

Organizational change requires orchestration
Any large scale organizational change will require a significant cultural change in the company. Three key success factors of this change are as follows:

  • Incentives: the CEO’s bonus needs to be tied to the financial results of the new strategy, otherwise she won’t be motivated to spend any time on ensuring it is successful. In other words, incentivize your management team to ensure alignment on the new strategic direction.    
  • Risk tolerance: Setting aside a small percentage of the annual budget to experiment is crucial to allow innovation to occur. Take the example of Amazon and the creation of the Echo. Amazon failed massively with the Fire Phone and its inability to enter the smartphone market provided a key insight: it couldn’t get closer to its customers via their phones but rather by entering their homes. . In Amazon’s case, the Fire Phone failure represented a negligible percentage of its revenues, but is now benefiting the company via Echo sales.
  • Adaptability: the most important skill for an organisation in this century will be adaptability and the ability to learn continuously. This is why I’m such a fan of the agile method; the ongoing process of learning and re-iteration isn’t only useful for software development.

Over a hundred years ago, companies used to hire vice-presidents of electricity, which today is considered comical. However, a quick perusal of Linkedin these days shows thousands of people with the title of “VP of digital” and “Chief Digital Officer”. I’m not saying this to besmirch their importance today, but rather to emphasize that we are in a transitory period: as technology becomes increasingly seamless, “digital” roles will gradually disappear.  Traditional organizations must deeply embrace this transition in order for real transformation & long-term sustainability to occur.