Digital Transformation: It's about Strategy and Culture. No Surprise!
Everywhere around us in our daily lives, we see the opportunities and transformational impact that digital technologies bring about.We are now in an era where the impact of digital technologies and digital transformation is rising from the technology industry and innovation playgrounds and have become boardroom topics pan industry, to be viewed as significant opportunities and threat at the same time.
Digital transformation transcends using the latest technologies in solving a point challenge. Such solutions while innovative and seemingly solving specific problems do not go beyond creating a temporary impact, akin to creating ripples in a pond. Companies, organizations and talented individuals have invested much effort, resources and social media space in such digital initiatives via various avenues like internal incubators, external partnerships, M&A, digital innovation teams etc. but struggle to harness the true benefits and making a meaningful impact in topline, bottom line or societal impact.
While the impact of digital is industry and context specific, there are two common themes for strategic transformation digital to be truly transformational. These themes resonate across industries, geographies and contexts. Fair warning that none of these themes are about the latest technology hype that one comes about – be it IoT or Cloud, Automation, AI, Analytics etc.
The first theme is that for meaningful transformation that harnesses digital technologies, one need to integrate digital in the core of the organizational strategy. The second is that digital transformation rests on a cultural transformation.
Digital Should be Integral to the Organization’s Strategy
Not different from any of the industrial and technological revolutions preceding it, albeit with a rate of change that is exponentially faster, the changes, opportunities and challenges that come with the digital revolution should be closely integrated and be central to the organizational strategy. In many ways this turns out to be a classical competitive strategic analysis exercise.
Starting with understanding the impact digital has on the each sphere of an organization – be it the way the organization operates, serves its customers, conducts product research and development, performs sales and marketing, services supply chains and distribution channels.
Based on this understanding, organizational leaders can then start to decide what is the opportunity and/or the threat – is digital an opportunity to create new markets, define new categories, expand the customer base or is it another tool to operating costs by lowering customer acquisition and servicing costs and creating efficiencies in the value chain. Layer this with a competitive scan of not only of the within industry players, but also from adjacent industries, a view if native digital organizations pose a threat to disrupt the incumbent business models and overcome/obliterate the entry barriers. Very often, the insights are available from the frontlines of people within our own organizations who are closest to the customers and start to identify a value gap and an opportunity that can be exploited by complete disruption.
This strategic view and decision is on where and how to engageacross the digital leverage continuum – be it to leverage digital to create complete new markets and business models or use digital to create efficiencies within the organization’s operations. The goal should be to find the most value adding sweet spots along this continuum and then devising the execution.
Digital Transformation Rests on Adapting the Organization Culture
A successful execution of the digital strategy for realizing a transformation needs to be founded on bedrock of a ‘digital’ culture.
Management techniques which go back a few decades do not enable a successful digital transformation. Elements like command and control based management, well organized and specialized departments and functions executing a top down strategy, rewarding only success etc. do not work well in arena which requires multi functional and cross collaborative teams, rapid experimentation, failing fast, co-opetition and continuous strategy adaptation for being successful.
Understanding these and weighing them in balance against an incumbent culture, with the self reflection the readiness of the organization’s current leadership is to drive the necessary culture should become the cornerstone of execution and organizational decisions that make or break the execution of the digital transformation.
The outcomes that are treasured like wining customers, leaning operations, KPI driven decisions, focus on ROIs are still the same, the tools and paths to achieve these are fundamentally different in a digitally transformed organization. It’s a transformation that leads to digital (beyond the technology - it’s the culture and way of working) being embedded in the day to day working of the organization.
The leadership challenge is on how to create this cultural transformation without tearing the current fabric which makes the incumbent business so successful. Leaders should seek and groom talent as future digital leaders who are effective bridges between the two worlds and can play the role of the transplant surgeon who crafts their scalpel in an artful way to replace vital organs without damaging the whole.
In conclusion, digital transformation is not different in terms of earlier transformational eras – it is and will always be about setting the right strategy and creating the culture to execute. It’s about the people, not the technology.