Digital transformation is hard. But it is also a critical and necessary step for businesses that want to continue to grow and compete in the 2020’s. The reality is that the digital landscape is changing rapidly - and those who can’t keep up will be quickly outrun by companies that take action to stay modernized.
A recent survey of directors, CEOs and senior executives by Harvard Business Review (HBR) found that, in 2019, digital transformation risk was their number one concern.
However, 70% of the digital transformation initiatives reported in the survey did not reach their goal.
How does this happen, and why is digital transformation so hard?
Digital transformations have generated mixed results to-date, even though a digital capability is becoming widely acknowledged as a business imperative.
The HBR article, Digital Transformation Is Not About Technology, highlights five key lessons from digital transformations that have succeeded. Although an excellent read, I have found that there are 5 other, less discussed but fundamental challenges that must also be considered when initiating a successful digital transformation. Although not an exhaustive list, I find these 5 to be some of the most common make-or-break reasons why transformations end up being a lucrative success - or a major disappointment.
Reason #1: Employees Don’t Know the Definition of “Digital”
“Truth is ever to be found in simplicity, and not in the multiplicity and confusion of things.” - Isaac Newton
The whole concept of digital tends to cause confusion across organizations. Employees aren’t clear about what it means, what it encompasses, and how it will change what they’re used to. And it’s really quite simple. First, it starts with defining the term “digital” so we’re aligned when we use it.
Digital (adj): Involving or relating to the use of computer technology
Example: “Welcome to the digital revolution!”
It would benefit companies to spend more time telling employees that digital transformation is really a set of initiatives to expand the use of computer technologies. It doesn’t roll off the tongue, however, taking the time to define what it means would provide clarity for uncertain and unsettled employees that are wary about change.
Another thing to note about the definition of “digital” is that it is not a noun - even though it often gets used as one. Phrases like “go digital” and “do digital” aren’t clear, and aren't even grammatically correct. Digital is an adjective – it’s used to describe or modify a noun. For example, you’d typically add “digital” to nouns already in place in your business in order to create something of higher value. (And to help everyone understand what’s being discussed.)
Digital is initially about adding new computer technology to your business processes to create better outcomes for you and your stakeholders. It’s about Digital Customer Service, Digital Benefits Management, Digital Safety Incident Management, Digital Service Requests, and so on.
Reason #2: The Digital Gap Is Widening Exponentially
“Your margin is my opportunity.” – Jeff Bezos
Essentially everyone in a position of business leadership in 2020 is aware of the concept of Moore's Law, and the fact that Gordon Moore identified a trend in 1965, whereby the available processing power is increasing exponentially at a given price point. Every 18 to 24 months the processing power per dollar has roughly doubled, and this trend has held up for over 50 years now. There are other analyses showing that the equivalent curves for storage and bandwidth grow even faster, with the available capacity doubling at least once per year.
We are now in the sixth decade of this exponential growth, and processing power has roughly doubled every two years along the way, as forecasted. This means that the available power has doubled over 25 times now.
This is hard to understand conceptually, as humans tend to think linearly, not exponentially.
It is easy to read that something has doubled 25 times. However, it is much less natural to comprehend the meaning of that. In the case of processing power, those 25 doublings mean that there is now 33,554,432 times more processing power available than in 1965. That also means that in 2030 it will be 1,073,741,824 (that’s billion) if the trend continues to hold.
To be clear, the accelerating pace of change in technology is not the issue - it’s the symptom. If your business was able to harness the majority of this available technology productively as it became available, this would be a massive competitive advantage, not an issue.
The issue is that technology changes very fast and mature businesses are much slower to adopt the available technology.
The Digital Adoption Gap is the issue.
Technology is growing exponentially, yet many organizations are applying linear techniques. As the gap between what is possible with digital and what you are implementing in your business widens, this becomes a significant business risk. If competitors are more adept at adopting the latest technology, they can inflict significant damage to your business. And new, forward-thinking entrants gain an instant competitive edge within your industry because they are unencumbered by a mature organization’s legacy.
Reason #3: Culture Unwittingly Becomes A Barrier To Digital Progress
“Culture eats strategy for breakfast” - Peter Drucker
Digital is conceptually simple – add computerized technologies to improve your business processes.
However, it turns out that it’s quite tricky to pull off in a meaningful way that creates a solid return on investment.
At first blush, that would seem to be because the available exponential technologies - such as artificial intelligence and mixed reality - are so complex that they stymie adoption. Certainly, to tackle such initiatives, you’d require the right specialized technical expertise that can be hard to find.
However, advanced technology is not the biggest barrier.
Many companies are not even getting to the starting line for exponential technologies, and it is because they are unable to deal with the people issues that inevitably emerge.
People are the key variable when building a digital capability. The whole concept of digital can trigger a number of negative emotions if not managed carefully.
People don’t like change in general, and digital can kick off a powerful resistance to change. There is a fear of the unknown, and the agile and iterative nature of digital can be a concern to many employees. It can look risky compared to how things have always been done in the past.
Simply put, your culture may be squarely in the way of your digital progress.
Digital is about experimentation, agility, moving at a fast pace, testing in the market, and even being wrong sometimes. In digital, it is normal to stop an initiative that isn’t delivering the planned results and double down on the one that's working. This is how we deal with the accelerating pace of change – with a bias for action.
Many mature businesses have cultures that are built on safety, reliability, and predictability. There has typically been a lot of work done to remove costs from the business, and initiatives like Lean Six Sigma have been used to further optimize processes, improve quality and further drive out cost.
Those cultural elements are certainly valuable, but they also need to be managed so that you don’t have unintended consequences with digital. Companies that are successful with digital are spending a lot of time on understanding their culture. There are tools available that can help you assess your culture, understand it in-depth, and then treat it as a management system as you go on your digital journey. (More on this in future posts).
Reason #4: Digital Transformation Becomes a Catch-All for Technology Projects
“You must not fool yourself — and you are the easiest person to fool.” – Richard Feynman
When you create a statement in your business strategy related to driving digitization, what the in-scope initiatives are (and what they are not) needs to become clear.
It is necessary to clarify which initiatives have a direct impact on advancing digital business processes and to separate those from initiatives that may enable digital in some way, but don’t directly contribute to advancing the business strategy.
Issues occur when a lot of digital ambition is created at the business strategy level, and then much of the funding is consumed by projects that don’t directly drive the benefits of digital.
Oftentimes, as digital programs move through detailed planning, they end up adopting initiatives such as infrastructure upgrades, technical debt removal, out-of-support platform upgrades, and cybersecurity improvements.
It's tempting to lump these initiatives into digital programs because they are computer technology, potentially make some progress on a digital journey, and can be a convenient way to access available funding.
However, it’s important to keep the business strategy objectives set for digital in mind - and categorize initiatives accurately. It is unlikely that enabling initiatives like infrastructure and system upgrades will add a true digital capability to business processes that your stakeholders can experience - that is unless you intentionally add something else to create a true digital business process.
For example, upgrading your legacy HR system may or may not provide the digital capabilities required to provide a true self-service capability for your employees, which also makes the impact on recruitment and retention that you seek.
It is best to be clear on which projects are digital enablers, and which projects are true digital initiatives that generate the benefits that the program sponsors had in mind at the start.
Reason #5: Digital is a Marathon - Not a Sprint
“Be not afraid of growing slowly; be afraid only of standing still.” – Chinese proverb
Adding digital capability is difficult to pull off because it is often approached as a one-off digital transformation.
In some organizations, digital transformations have not aged well for this very reason.
The companies that focus on building an ever-evolving digital capability year after year perform better than those that focus on a one-time transformation. They succeed in maintaining an evergreen and sustainable business strategy built for growth.
Digital capability building is much like human nature in general.
For example - what typically works best for someone that wants to get in better and lasting physical condition?
Some people might muster a flurry of activity on January 1st - changing many facets of their lifestyle and habits all at once. Another person might focus on improving some basic elements of diet, exercise, and mindset, and slowly build on these new skills over time.
We all know what happens with those drastic New Year’s resolutions. They disappear.
That’s because a huge transformation push rarely works as well as sustained building over time. People tend to get overwhelmed and exhausted with so much change at once. The result is missed goals and a reluctance to try again for fear of repeated failure.
Organizations are not much different.
The Digital Fast Lane
The need for a sustainable and successful digital transformation still exists - despite challenges.
To make an impact in your industry, and keep up with (and surpass) your competitors, increasing your digital capability is a must.
Luckily, there’s an easier way to begin the journey and ensure results stick.
If you want tools and approaches to help structure the planning of digital in your company, and you’d like to validate insights, clarify focus areas, and solidify alignment with your overall business strategy, Second Spring can help.
We offer The Digital Advantage Gameplan™ Fast-Track System - a 3-week, hands-on, collaborative and consultative approach to laying the foundation and successfully transforming your company’s digital landscape.
If you aren’t sure your company’s ready for modernizing with digital, try our free Digital Capability Snapshot as an easy first step to find out.
Ready or not, the digital age is here - and evolving fast.