Most executives would probably say digital transformation is imperative. But they might be hard pressed to cite an example of a successful digital transformation.
As the senior vice president and president of Enterprise Solutions at a digital transformation company, I believe part of the challenge is that few people have a firm handle on what digital transformation actually means. Is it about adopting digital tools and processes? No, it’s not. Approaching things from that angle will only allow for digital optimization at best. What digital transformation is about is creating new streams of revenue. And that requires businesses to think about and do things in entirely new ways.
Another reason I believe it’s hard to point to successful digital transformations is that few actually exist. Everest Group analyzed the digital transformations of more than 328 companies in 2018 and found that 73% failed to get a sustained return on their investments.
Clearly, companies are struggling to scale and sustain their digital transformation efforts. But why?
I believe it’s because most companies simply won’t break out of their old ways of doing things and create the business plans and structures they need to embrace innovation and new ways of thinking. To do so, you can focus on the following goals:
• Inspirational leaders: That means CEOs — on whom boards of directors rely to lead digital transformation — should be able to inspire all stakeholders to move in the new direction together. When Satya Nadella became CEO of Microsoft (a Unisys client) in 2014, he reportedly turned the company from a “know it all” to a “learn it all” culture. To do this, you need to earn trust through mutual respect and empathy. And you don’t need to lead by tasking, but rather by inspiring each person to reach their potential.
• Vision of the future: When a digital transformation fails, that failure can often be traced back to the CEO. When a company’s leader (and leadership) mistakenly assumes that digital transformation is a technology initiative rather than a business initiative, it’s because he or she hasn’t examined the big picture. A CEO and his or her designated leadership should ask questions about the relevance of the technology to the company and industry as a whole and be able to project what innovations will be effective in five years when the technology has inevitably evolved. To do this, they need an intimate understanding of the business goals and the work and resources necessary to reach them.
• Eyes on the prize: Many large businesses overestimate how much technology is needed at the start of a transformation. That can result in a huge overspend — meaning millions of dollars are lost that could have been spent on other IT and business priorities. Yet companies continue to rush into technology decisions without a clear understanding of expected business outcomes or goals. Companies should slow down, gain an understanding of the goal and then determine what needs to change to achieve that goal — inclusive of operating structure, governance and technology. They need to start with organizational behaviors (what some call culture) and what incentives drive acceptance. It can be easy to communicate change. But it’s harder to accept it to realize sustainable results.
• Bird’s-eye view: Short-sighted IT departments can also serve as a barrier to digital transformation success. That’s often a function of budget, timelines and competing initiatives. With the rapid pace of technology, an IT department should be committed to innovation and an agile work process. That requires a willingness to abolish the old ways of development and hiring. To get the appropriate support in these areas, I believe CIOs have to be great storytellers, just like CEOs.
• Reward over risk control: Too often, companies rely on governance to control both processes and people. The truth is that all that control may actually be affecting performance. Businesses clearly need governance. But for digital transformation to succeed, governance may need to evolve. That means companies should embrace change to their structures, policies, personnel and risk tolerance. It means they should create an environment where leaders encourage experimentation and new ideas usher in the next round of innovations. And it means leaders should embrace failure as a step toward advancing innovation and delivering exceptional customer experiences. Business structures based on these concepts can enable companies to move into the future.
I believe the approach to digital transformation should be deliberate and progressive: It should start with a focus on building strategy, then structure and finally identifying and matching the appropriate skills needed to deliver results. But more than anything, the CEO should inspire this change to a culture of innovation. When you look at the CEOs of the market disruptors — like Amazon, Uber, and Apple — the phrases people often use to describe them are “visionary,” “focused on the future” and even “architect of tomorrow.”
As Nadella, who grew Microsoft’s market cap to $779.7 billion by the end of 2018, has proven: “learn it all” trumps “know it all.”