There is no doubt that the global pandemic has accelerated digital transformation and created significant challenges for organisations worldwide.
To stay ahead of the curve, many organisations have rushed to jump on the bandwagon without actually fully comprehending what it takes to deliver a digital business transformation. Without a doubt, the digital transformation requires more than just technology; but rather, it entails collaboration and optimisation across processes and business ecosystems.
As a result, the human element is key across all organisation levels. In other words, digital transformation is actually making businesses more human, and this is exactly what organisations need in order to navigate these challenging times.
In this article, we will share valuable information on how to deliver a successful business transformation using technology. We strongly hope that this post will enable you and your organisation to undertake a successful and meaningful digital led transformation (if you didn’t create your digital transformation strategy yet).
Table of contents:
- Delivering a digital led business transformation – General background
- 5 critical steps to delivering a successful digital transformation
1. Delivering A Digital Led Business Transformation – General Background
Technology plays a key role in every business transformation.
But first, let’s define the term “digital”. There are lots of definitions around, so the meaning you could give to this term depends on your own perspective and situation.
As a general rule, you may agree that “digital” is a way of working that leverages technology to create value in new markets, enhances customer and employee experience, and builds foundational capabilities that support the enterprise.
In the current business environment, the term “digital” is related to helping businesses create new ways of working that automate some processes, connect them to their partners and staff more effectively, allow new products and services to be developed, and enable deeper insights and improved decision support.
Typically, people associate the term “digital” with relatively new technologies. But in truth, digital technology depends on some foundation technologies (e.g., technologies that include data management). Thus, digital enablers such as cloud computing, machine learning, or artificial intelligence, they all rely on foundation technologies.
Therefore, it would be best to see the term “digital” through the lens of both foundation technologies and innovation technologies.
Here is an example of how digital technologies have changed employees work experience and the way people run and operate their businesses.
Think of the energy industry where major changes occurred over the last years, such as the move to renewable and the digital adoption by customers and consumers. Technology plays a key part in this industry. For example, manual asset inspections have been replaced by drone technology.
So, drones have replaced humans in the energy sector as they can produce high-definition, 3D measures for utility assets.
Today, drones are slowly being replaced by satellite technology with high definition cameras. As a result, human-based inspection cycles that took 3 to 5 years have become 6-months cycles using drones, and this will soon become a daily cycle of inspection using satellites.
We’ve shared the example above to highlight how quickly technology and its applications change.
However, remember that technology can be costly, particularly if you’re not clear about the benefits and what you’re trying to do. Employee resistance is also likely as they may feel threatened by these changes.
For this reason, you need to define a clear digital transformation strategy to achieve your desired outcomes. Below you will find five essential steps that you may want to consider when structuring your plan to deliver a successful digital led business transformation.
2. 5 Critical Steps To Delivering A Successful Digital Transformation
1. Preparing and aligning the organisation (including the leadership team)
At this stage, you need to consider the following key aspects:
- Leadership alignment
Preparing and aligning your organisation and leadership team is a very important starting point. You need to invest time here before focusing on the delivery phase of the digital transformation.
So, start with your executive leadership team. Of course, don’t forget the very influential middle management. First, you need to develop and communicate clear business objectives that you all agree to work towards.
Therefore, it is critical to recognise the essential role that your board and the executive team play at this early stage of your transformation program.
This way, you achieve leadership alignment that flows throughout the organisation.
- The “why” statement
Answering this following question is imperative: Why is a transformation program needed? Your leadership team and key stakeholders (boards, shareholders, regulators, partners, staff, unions, lobby groups, etc.) must clearly understand the “why” behind the transformation.
For example, is the transformation competition-driven? Are regulatory changes being imposed on you? Do you need to improve your financial performance? Or, are your customers simply demanding more digital interaction with you?
- Organisational structures
You will need to ensure your organisational structures are aligned to what they need to deliver and the accountabilities for delivery. As a result, it is imperative for you to make sure that everyone understands their role and expectations of them.
Please be aware that the organisational structures can work against what you are doing. For example, you need to remove silos that work against collaboration and innovation.
- Organisational change management
Ensure you have organisational change management within your thinking from the beginning. You may need to get some external advice if you don’t have that capability within your organisation.
In the current business environment, an increasing number of organisations are giving this aspect of the program much more focus.
At this phase of the transformation, it is important for you to start early and have your organisational change considerations follow you right through the program lifecycle.
- Culture and digital culture
Culture is a critical aspect of your organisational change. The impact of organisational culture on successful transformations is huge, especially when introducing digitally enabled ways of working.
There is a famous Peter Drucker quote that says that “culture eats strategy for breakfast“. Thus, culture can totally derail any transformation program if you haven’t considered it. So, you need to identify those cultural attributes, what they are and what they need to do to successfully deliver in a digitally enabled world.
Have a plan on how and what culture you will need to shift. Remember that digital success requires a digital culture (a mindset that fuses the business with technology, creating new agile ways of working and new digital-based products and services ).
- Risk appetite
You need to understand your strategic risks and ensure your plan allows you to mitigate and manage them. Therefore, you have to determine your risk appetite and put them in writing to your board for them to agree and/or debate.
An agreed risk appetite statement will be extremely important down the track when you are making key decisions. In Australia, corporate governance practices are now expecting boards to have an agreed risk appetite statement for their executives to work for.
Risk appetite does need to be formed under relevant categories. For example, you need to consider your financial risk appetite, technology risk appetite, operations risks, industrial relations risks, etc.
2. Planning and prioritising initiatives to maximise business success and benefits
When planning and prioritising initiatives, you need to:
- Develop a master plan
At this step, you need to start with your master plan, which is your vehicle to explain how and when your organisation expects to transform itself.
Your master plan is actually your transition plan to a new way of working that supports your organisational change effects.
- Establish clear and transparent priorities
Your master plan needs to be based on a clear set of transparent priorities that reinforce why you need to transform your business.
So, you have to establish a prioritisation framework that everyone understands and provides consistency of decision making aligned to your strategy.
- Answer the “why”
Please be aware that your staff need to know what are the priorities and what’s in it for them. Your board also needs to understand the purpose of the digital transformation and the reason behind the program.
- Establish budget and financial goals
It is critical for you to set budget and financial goals that are meaningful to your board, executives, management, and even your staff. So, you need to define clear business goals that can be measured and tracked back.
These financial goals will be really important in order to track tangible benefits from your digital transformation.
3. Understanding how, when, and where you need to digitalise
Up until now, you’ve been focused on preparing the leaders and the broader organisation (people, priorities, strategies, and understanding your appetite for risk).
Now, you need to tackle the digital technology aspects:
- Technology risk appetite
Your technology risk appetite is extremely important when it comes to which digital technology you will adopt and how you will implement it. Are you comfortable with bleeding-edge technology, or are you more of a fast follower? Or, do you prefer tried and proven?
To be clear, this step is not about being risk-adverse, but it is about having a clear understanding of how far you will push the technology to seek reward and achieve success.
- Your “starting point”
Once you define your technology risk appetite, you need to understand your technology starting point.
How suitable is your current technology environment to undertake your digital-enabled transformation? Do you have the skills and knowledge of your systems? Or, do you need to reinforce or upgrade some of the technology foundations?
As outlined by a McKinsey report, there are three possible archetypes that drive technology transformations: repaint, renovate, and rebuild. Therefore, you need to answer this fundamental question: Are you going to repaint, renovate, or rebuild your core technology platforms?
This needs to be debated and agreed at the highest levels before you get much further on your journey, as it sets the timeframe for the systems investment and the approach you will take. This step is also a key determiner for realising your benefits.
Please be aware that you can’t afford to under or over-invest at this phase. Also, it would be best to be careful not to overcomplicate or over scope your program. Otherwise, you may never deliver.
- Data
For most digital transformations, the systems and data starting point is a clear first step to be taken.
How good is your data, both in quality and quantity? Who are your data custodians? Investing in your data is what the future will be built on for everyone, as new technologies all depend on good and plentiful data.
- Picking the “right” technologies
Once you’ve completed the previous steps, you need to ensure you pick the right technologies for the right purpose at the right price. As mentioned previously, you do not want to over-invest in technology, particularly in the new capabilities that are still rapidly developing and have short life cycles (they can be as short as 3 to 6 months).
Today, companies opt for smaller and agile incremental steps that prove to be relevant to these circumstances (this is the key reason why establishing a digital culture is so important).
Remember that you do not want to underinvest data. Technology needs to be able to do what you need, and it needs to have a functional fit to what you need.
- Technical capability – Buy or build?
The next step you may want to take is related to the technical capabilities you need to choose to implement these technologies.
The new technologies are always in high demand. So, are you prepared to compete for these tech skills? Are you able to attract and retain tech-savvy people? Would you instead build new technical capabilities within your team?
These are all key questions you need to answer before going further with your transformation program.
- Digital partner strategy
Once you answer these questions, the next step is developing a why to choose a technology or digital partner.
So, what strategy can you apply to choose your partner? What proven experience do they need to have? Which of your capability gaps do you need your partner to fill?
Answering all of the questions above is critical for the success of your transformation.
- Cybersecurity
No discussion about digital transformation is complete without mentioning cybersecurity.
Today, we are witnessing an increased digital footprint and offerings. So, you can’t not be investing in cybersecurity. Security can become a strategic risk for the organisation as dependence on digital ways of working increases.
Therefore, you will need to carefully consider whether you buy in or develop your own strategy for these capabilities.
4. Setting up for execution success
The execution phase is the phase where most mistakes occur.
At this phase of your transformation program, you need to make the following key considerations:
- Nothing beats experience
Since the execution phase is where mistakes can easily sneak in, you may need someone with some digital execution experience on board who has the lessons learnt from when projects did not go right and can help and guide the executive team and their business partners.
This person needs to be independent and does not need to have a direct role in the program (in order to have the best interests of the executives at heart).
- Establish a strong core team
Business knowledge is critical, so make sure you put your best people into the program. They need to know how your business runs, as well as the data and processes that are critical to your operations and customers.
- Execution capability
Execution capability is based on four interdependent elements that need to work together well: processes, systems, people skills, and partners. You need to be aware that all these elements need to operate in a coordinated way and at similar levels of effectiveness.
5. Creating tangible business value from your digital transformation
Finally, here are the last key elements you need to consider to ensure your program success:
- Understand the purpose of your investment
One of the final steps you need to consider is your digital business value. How do you generate tangible business value from the program? To make the benefits tangible, you always need to ask yourself: is this investment designed to make money, save money, or manage risks?
It’s okay to choose one or more of these outcomes, but you also need to make sure you have a clear reason for not choosing one or more of them.
- Track your benefits all the way
To get the most value from your digital business transformation, you need to track your benefits from day one all the way through the end of the program and possibly even beyond.
- Align KPIs to “Why” and “When”
You need to ensure you align your internal KPIs to deliver your strategy, address your “why” statement (that we previously mentioned) and commit to a clear time frame.
- Partner KPIs and agreements
Don’t forget to also align your partner KPIs with your own KPIs. Please note that these partner KPIs also need to create consistent behaviours that lead to overall success.
Conclusion:
In summary, there are 7 key steps you need to take to achieve success through digital transformation.
1. Start by aligning the organisation (the leaders and the organisation’s culture and structures). It would be best if you created a digital culture that fuses the business with technology and creates new, more agile ways of working and new digital-based products and services.
2. Set clear and transparent business goals and priorities.
3. Ensure you have a disciplined approach to delivering a program – from inception to delivery of tangible benefits.
4. Establish a strong core team, which needs to include strong program management, technical expertise and business owners who can manage data and processes.
5. Support your executive team with some independent and experienced advice.
6. Have a clear technology approach and strategy.
7. Ensure you pick the right technologies and execution partners as they are critical to your digital-enabled business transformation.
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