Digital transformation: Companies are either too scared or not scared enough
September 18, 2019
By now there are very few boardrooms around the world that have not discussed digital transformation.
Some will be unsure of the definition, unclear as to how it helps them and worried by the lack of precedent or proven methodology. Others will be fundamentally dubious about the potential of digital technology to transform their business, a complicated and fragile ecosystem held together by years of experience. Others will be all in, pointing at smart watches and their own credentials as avid digital consumers.
So why is it so misunderstood? Why has the latest strand of business transformation become a confusing, frustrating and mis-sold enigma, when its origins are no different than the approaches that led most consultancies to exist in the first place?
It’s because too many people focus on ‘digital’ and not ‘transformation’. They think in terms of building new digital things, not changing the way business is done. Even worse, so many people and firms claim to ‘do transformation’, simply by virtue of the fact that they ‘do digital’. They don’t.
At the heart of the transformation resistance is a changing of the guard and a resulting business leadership paradox. The digital natives or near-natives, do not have enough miles on the clock to run big businesses effectively, whilst the business elite often don’t have the inclination or expertise to make the right judgements on initiatives so far away from their successful formulas of the past (the wisdom and kudos of which gives them the right to the leadership position they hold).
It is hard to find people with digital creds and the proven business experience necessary to manage investors, colleagues and customers at scale.
Having discussed the topic with businesses of all sizes, industries and risk profiles, my experience is that this paradox leads to two types of digital detractors within organisations – those that are too scared, and those that are not scared enough.
Too scared of digital transformation
Transformation is not, and has never been, a straightforward process. It often requires an abandonment of the status quo and leaving the comfort of legacy (maligned as it is) in the rear-view mirror.
Considering the fact it can take years to achieve the business outcomes that programmes seek, it’s clear it’s not for short-termists or the squeamish. No matter how far you turn the steering wheel, it is only the motion of quarter-upon-quarter of ‘business as usual’ that delivers change.
When you consider the average tenure of most execs, it is not uncommon for business leaders to navigate the choppy seas of large scale change programmes, only for their successor to reap the benefits.
The incentives are also wrong. The greatest motivator for a lot of businesses is still their fiduciary duty to their shareholders, with ‘purpose’ an increasingly common second place. In other words, short-term profit seeking should take precedent over a long-term re-engineering of the system they flog to get it, no matter how broken.
Clearly management theory is moving beyond that as a thesis, but even if the business textbooks have been rewritten, the ‘old guard’ are real and they struggle to justify expensive and unchartered programmes to themselves, never mind their shareholders. Fair enough.
Maybe classifying these people as ‘too scared’ is an overly simplistic descriptor of these change blockers within organisations, but the sentiment is real. Their short-term focus and desire for predictability stops them from embracing digital transformation within their organisations.
Not scared enough
On the other side of the complacency continuum are the executives that don’t believe that digital could transform their business, even if they wanted it to. As one leading fast-food chain CIO once told me, ‘Our job is to sell more sandwiches in our shops, pretty hard to do that digitally’ – shortly before they re-invested their digital transformation budget into opening more locations.
For those of us that spend our days writing detailed and indisputable business cases for transformation programmes, it can be frustrating to encounter. Rather than pile in on the apocalyptic rhetoric in the market that urges action ‘or else’, I tend to focus on the positive.
There are very few businesses and industries that are exempt from the benefits of digital transformation. Any business with customers, channels and colleagues can benefit from identifying the efficiencies that digital can provide – whether that is helping more customers self-serve, rather than pick up the phone, or helping colleagues to do tasks once, rather than have ten separate tools and internet sessions open.
Digital transformation has rapidly become positioned as some sort of defence against the dark arts, and that’s a big problem for those of us proposing practical and commercially-driven transformation initiatives.
As long as digital transformation is viewed as a fight for existence, it will alienate those that don’t feel the need to fight for their fundamentals. They will always refuse to accept that any methodology (particularly one so poorly understood) can allay all of their fears and make them future-proof. Quite rightly.
Those at the heart of the digital transformation ecosystem, such as consultancies, agencies and tech providers, need to remove emotion from the process. It dilutes the message and cheapens its perceived impact.
A business is a system. A system of actors, processes and interactions. These combine to form layers within an organisation – a ‘proposition layer’ that packages up the products and services offered to customers (business or consumer), an ‘operational layer’ encompassing all of the ways you work together behind the scenes (people, tech and process) to enable that proposition, and an interaction layer (digital and analogue), which is the way your customers interact with you as you serve them.
This should all be underpinned by your business model, the way in which you make money and manage cost in the delivery of your organisation. The proliferation of digitally native companies means that customers’ expectations of an interaction layer are shifting. A customer’s best experience in one industry will very quickly become their minimum expectation in another.
At best, this puts pressure on the operational layer of a business to move to meet the expectations of their customers (like self-service). At its worst, this changing behaviour can create a more fundamental misalignment between proposition, business model and customer expectations (like publishers face today).
Digital transformation is the alignment of these layers to deliver the organisation that executes its business model, in a way that customers expect and desire. It can be as simple as shifting interactions from one channel to another, or it could be as profound as changing the underlying business model itself, like shifting to a subscription-based model.
An app alone is not a digital transformation. Nor is a core systems replacement. Nor is launching a beta business away from the core.
The sooner we position transformation as what it is – systemic change, and remove the fear-mongering tactics, the sooner that digital transformation will be seen in the light that it deserves. Hopefully that is something that we can agree upon – no matter how complacent.