In my latest blog[1], I addressed why digital business transformations are even more complex and difficult than regular business transformations. Digital business transformations have a success rate of only 4-26%[2]. This of course bears the question what makes a successful digital transformation. Which factors come into play and what is there to learn from digital transformations from other companies? First, I share with you the case of General Electric before diving into the factors that support a glorious digital business transformation.
General Electric (GE) started in 2011 on their digital transformation road to transform its product and service offerings. GE called itself a ‘digital industry’ company and it started to create digital capabilities. Sensors were embedded into products, a new software platform was built for the Internet of Things and GE transformed its business model for industrial offerings. Next to that, GE also transformed internal processes regarding sales and supplier relationships. All these steps began to improve a certain amount of performance indicators, like service margins. But, investors did not appreciate this transformation enough and were not impressed by its speed. Under pressure from activist investors, the CEO had to depart the company. John Flannery, the new CEO, is primarily focussed on cost cutting[3].
There a several key lessons to draw from the GE example and other companies. The obvious lesson is that your company’s success does not totally depend on your digital capabilities. It also depends on your customer needs for your products and the readiness of your industry (competitors, customers and investors). Although working with new digital technologies can be exciting, it should not lead to less focus on the existing business.
Looking more closely at the design of your digital business transformation, there are seven factors of great influence on the digital ambitions of a company[4]:
1. Leadership team aligned and in the lead
You might think this is an open door for transformations. Although it might seem obviously necessary for a successful transformation, it often is not the case at companies. CIO’s that have a different direction than CEO’s or a management team that is giving mixed signals to the business with regard to priorities. I see that happen a lot. As leadership team, be sure to discuss clearly what you want to achieve and what problem you are solving. Not only for the customer but also for the business itself. When all agree, close the ranks. This is the essential factor that creates the trust of employees to get through the change together as a company.
2. Set business-driven, strategic goals
Too often, businesses are seduced by the possibilities and options technological components and tooling brings. As a result, the technology becomes the goal instead of the means to an end. Technology by itself should never be the answer. It is the problem it solves for the customer that underlines using a certain technology, may it be AI, Robotization or any other technology. Be sure to express clear, business-driven, strategic goals. Set these goals together with the digital and technology part of the business and communicate these goals yourself as the leadership team of the company. These goals should be easy to understand and articulating a clear roadmap with priorities for the whole company.
3. Talent
“You are only as good as your weakest link” is a phrase we are all familiar with. To be more explicit; you are only as good as the talent in your company and the team it forms. You need talented, inspired, collaborative people who work as a team and are empowered. Make sure you create a team spirit and have the right capabilities and skills on board to innovate and execute. Have a succession planning for each role and guarantee your workforce is trained in (digital) skills. Build a plan to create your future business leaders that also understand technology.
4. Open & agile culture
Your organization should have an open culture where failures are translated into learnings fast. In that way, the organization builds on the knowledge it receives instead of breaking the culture and people down. Stimulate working together enterprise wide and cross functional, disembarking the legacy silos. Transfer to a real network organization where people work together throughout the organization but also outside organization boundaries in, for example, ecosystems. Create an agile culture and way of working that means your organization is ready to react fast on changing market needs.
5. Technology & tooling
What is the specific technology and tooling doing for you? What is the business reasoning you are using this technology? Technology is the enabler of the strategic, business-driven roadmap. Choose technology that will enable you to move fast, flexible and react easily to customer needs. Sometimes this means you need to replace your core systems, but more often it means adding other technology to the current landscape.
6. Data management
Data structure, data governance and data organization are needed to be able to transfer data into suitable and usable information. “Garbage in is garbage out”, meaning that if you put the wrong data in, you will draw the wrong conclusions and make wrong decisions. First priority is the clean-up and structuring of data, before acting on it.
7. Deliberate change management & adoption of technologies
Throughout the organization, from a strategic to operational level, all employees need to be taken on this digital journey. This journey needs specific and deliberate change management, driven and lead by the leadership team. Sponsorship of the leadership is one of the key success factors of achieving a change adopted by the whole organization.
This journey also needs the adoption of technologies by employees. Only when enough employees are used to working with the technology, will it become a core part of the organisation.
I would like to leave you with the following. Digital transformations and the transformation of the business itself will not end with one ‘program’. It is a never ending change and learning process that requires a courageous and perseverant mindset with a focus on continuous innovation, transformation and learning. An exciting journey!
[1] Read: https://www.linkedin.com/pulse/k2-transformations-digital-business-anneke-veldink/
[2] Source: McKinsey – https://www.mckinsey.com/business-functions/organization/our-insights/unlocking-success-in-digital-transformations
[3] Source: Harvard Business Review – https://hbr.org/2018/03/why-so-many-high-profile-digital-transformations-fail
[4] Source: partly based on McKinsey – https://www.youtube.com/watch?v=qB7xh832MrE&feature=youtu.be&cid=other-soc-lkn-dmk-dmk-oth—&sid=3574516082&linkId=96763567
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