Give your digital transformation efforts the best chance to succeed by building a strong strategy. CIOs and other experts share the steps you should focus on.
You may have heard that 70 percent of digital transformations fail. The truth in this stat depends on how you define failure: According to Korn Ferry’s Melissa Swift, it’s more likely the majority of those efforts are simply stuck versus completely doomed. Still, it doesn’t inspire much confidence for those organizations just getting started.
How to build a digital transformation strategy
What can you do to give your digital transformation the best chance of succeeding? Experts point to a few critical pieces of the puzzle, such as changing the culture of IT, identifying and convincing stakeholders across the business, and connecting transformation to a meaningful vision for the company.
We know the possibilities of digital technologies are enticing and that mounting competitive pressure creates urgency. But don’t rush into digital transformation without first laying a solid foundation for success. Here are seven important steps to consider as you construct your digital strategy. You can’t skimp on any of them – especially number seven.
1. Tell a compelling digital strategy story
What will digital transformation do for your company? Figuring out how to answer that question and make it meaningful for everyone involved is the first major step in your digital transformation journey.
“A major step is connecting digital transformation to meaning,” says Jeff Skipper, a certified change management professional and consultant whose client list includes AT&T, Goldman Sachs, and other high-profile enterprises. “People toss around the term ‘cloud’ freely, but few employees really understand where the cloud is let alone how it works. As with any transformation, employees must understand what it is they need to support before you can drive buy-in and adoption. Tell a story. Walk through a day in the life of a typical employee living with all the features of a digital work environment. Highlight both benefits and challenges and tie it to strategy and winning. Give them a target they can identify with and aim towards.”
2. Align transformation with business goals
Once you know your story, make sure that others – especially other leaders in the organization – know how to tell it as well.
“Alignment is the most important step to a successful transformation, and it needs to be supported from the top down,” says Bernie Gracy, chief digital officer of Agero. “CEOs and boards need to communicate that the move to digital is the right strategy, outline the right outcomes, and mitigate the fear of the ‘substitutional effect’ whereby former processes or products get replaced by new or digital ones. Further, digital transformation cuts across every function and every budget, and all functional teams need to be on board. Transformation cannot be driven out of IT only; rather it must be fully aligned with the organization’s overall path, goals, mission, heritage, and planned future.”
3. Take time to run pilot tests
“Digital transformation nearly always requires many internal stakeholders to do things in a different way,” says Martin Henley, SVP, technology services sector for Globality. “That likely includes changing or breaking processes that have been in place and have worked well at some point, changing how stakeholders interact with their clients, even changing their roles. Finding ways of bringing the entire group on the same journey through major disruption is critical. Be sure to identify both obvious and non-obvious stakeholder groups. Even if it does not seem so from the outset, they are very important to the success of your digital transformation initiative.”
“To get stakeholder buy-in, take the time to run proofs-of-concept and pilots before moving forward with any solid plan,” Henley suggests. “If the technology you’re deploying is new to your business, it is always more difficult to anticipate how things will work. Be realistic up-front and build many stakeholder checkpoints into the plan to ensure transparent progress is being made. This will help ensure your stakeholders are actually ready for the journey, while your organization, team, and partners are learning how to implement effectively and successfully.”
4. Identify the skills mix you need in IT
After James Swanson, CIO and head of digital transformation at Bayer Crop Science, developed a transformation strategy, it was time to evaluate the team, he said. “Who are the people we need? What skill sets do we need to develop? It’s incredibly important to identify not just capabilities but competencies. On the capabilities front, of course, our organization needs data scientists, full-stack developers, user experience experts, and so forth.”
“We retooled the IT department to move away from some of the commodity skills to more forward-looking capabilities that align with our strategy. In addition, we have an ongoing need to build competencies that augment our skills, especially around business acumen. You may be the best UX person around, but if you aren’t competent with your business acumen, you won’t be successful.”
5. Make experimenting with digital technologies easy
What most companies consider digital transformation is the equivalent of collecting fondue sets, Nils Fonstad, MIT CISR research scientist, said at the MIT Sloan CIO Symposium. They are chasing digital products and offerings that don’t add business value at the end of the day – not unlike that fancy fondue set collecting dust on top of your fridge.
To avoid this, Fonstad said companies must set parameters around digital transformation that let them continually test hypotheses, gain actionable learnings, and either adapt or discard experiments along the way. Companies that do this well share three best practices: They link innovation to a big-picture vision, make experimenting easy for employees, and share responsibilities among everyone with a stake in the innovation.
6. Master risk management
Everything about digital transformation and disruptive business models seems to go against the traditional IT concepts of risk containment and controls. Digital transformation is about moving fast, challenging the status quo, and developing and scaling new technologies and operational mindsets. However, as Barry Brunsman, principal with KPMG’s CIO Advisory recently told us, these very characteristics demand the diligent design of risk management and controls around the digital transformation effort. CIOs who have mastered this aspect of disruptive change are more likely to be managing a successful transformation program, says Brunsman.
7. The critical piece: Prepare for culture change
“There isn’t a single ‘make or break’ step in a digital transformation,” says Michael Wade, professor of innovation and strategy at IMD. “Success can only come through careful orchestration of organizational capabilities in the services of a clear transformation vision. Of course, there are many different elements to this – from balancing incremental and radical transformation objectives to ensuring you transition from the start-up phase to the scale-up phase.”
“But if you were to push me on identifying a single critical piece of the puzzle – one that is often done poorly – then I would point to careful consideration of the cultural aspects of transformation,” said Wade. “Without addressing culture, transformation will probably fail. At its heart, this is a people challenge. Do you have the right culture to adopt change? To accept risk and tolerate failure? To embrace new ways of doing things, like new ways of working or new technologies? To accept speed over perfection for some (not all) initiatives? Overlooking cultural change is the biggest mistake in a digital transformation.”
The Enterprises Project