Digital Transformation: Strategy First
Digital disruption has had a tremendous impact on numerous industries and businesses leaders seek to replicate the results within their sector. Everyone wants better efficiency, productivity and insight through digital means; not all appreciate the strategy needed to implement transformative information processing systems.
Certainly, minor gains may be achieved with the adoption of a trendy new app or the execution of a successful tactical project, but your goal isn’t minor improvement. Digital Transformation, also referred to as DT, produces the disruptive change enjoyed by AirBnB, Uber, Apple, Google, and Facebook. DT requires a strategy-first approach and it starts with your leadership.
Strategic Leadership Orchestrates Success
Strategy begins in the C-suite and permeates all aspects of your company; otherwise, Digital Transformation is unlikely to flourish, despite good intentions. When all aspects of your business become orchestrated through strategic initiatives established from the top, probabilities rise greatly for DT success. A recent IDC study reported that up to “70 percent of siloed Digital Transformation initiatives” will fall short of their goal in 2018. The reasons listed include a lack of “collaboration, integration, sourcing, or project management,” which falls under the purview of executive leadership.
These numbers are backed by Forrester Research, which published an analysis that shows 73 percent of companies failing to establish an organization-wide digital strategy. The same survey revealed that upward of 125,000 large businesses are attempting to deliver their DT initiatives. If the predicted failure rate manifests, 87,500 large companies will be unable to realize fully the expected benefits, representing a staggering amount of waste. In most cases, a lack of strategic planning and aligned tactical execution will trigger failure.
Return on investment is certainly a critical key indicator for short term tech projects, but in the long run, short gains will be wiped out by competitors who successfully execute a strategic DT plan. A lack of DT implementation directly affects your competitive position within your industry. Your competitors will enjoy greater customer engagement, increased customer and shareholder value, enhanced collaboration and innovation capabilities. Through DT, your competitors have access to new market opportunities, enhanced business agility, and a stronger defense against both known and unknown threats to company survival.
Strategic leadership is the primary factor for DT success. Without your leadership, you risk becoming an industry footnote due to disruption and other competitive disadvantages.
Change Alone Does Not Equal Digital Transformation
A new world of empowered customers drives the need for innovation. Regardless of your industry or sector, competitors will always seek ways to use new technology and processes to disrupt your market share. Modern innovation efforts often focus on tactical technology initiatives without a sound foundational strategy.
A prime example of how a lack of strategy can affect the success of DT can be seen by examining the automotive industry. Google and Apple’s foray into autonomous cars provides a case study of disruption within the auto industry. As previously unknown competitors suddenly establish a new market share, many automakers scramble to partner or compete with these tech giants. Auto manufacturers operating at a higher level of DT maturity are better positioned to compete with the disruptors and protect their market share.
Instead of viewing their product as a singular, mechanical object, manufacturers should understand that vehicles represent a moving system of sensors and data that provides enhanced value to both the commuter and the company’s partners. Those who have embraced DT, and the new value chain of the automobile will thrive, fending off challenges from legacy rivals and all emerging competition, including the tech industry.
Common misperceptions exist when defining Digital Transformation. Simply adding a new piece of technology and asking IT to shoehorn the program into legacy systems isn’t transformation. Dumping all information systems into the cloud isn’t transformative, neither is the basic digitization of an existing set of processes. DT encompasses everything, including your thought processes and business models. Instead of focusing on piecemeal solutions, leadership must break down technology, organizational and process silos. For example, Google accomplished disruption by applying data algorithms to as many aspects of driving as possible, including human behavior, vehicle specifications, and visual processing, creating an all-encompassing, continuously improving solution.
Avoiding Strategic Pitfalls
Many companies place extraordinary demands on their IT departments to achieve Digital Transformation via technology-only solutions, frustrated with their inability to respond to market demand. Often, this stems from a lack of business insight regarding the value technology projects deliver. This lack of insight may create a strain on limited resources while creating dysfunctional relationships within the company. DT requires that technology and business departments collaborate deeply to achieve successful and company-wide transformation. As a result, the business better understands how the company can respond to competitive pressure, allowing IT to add real, lasting business value.
Another fundamental mistake companies make is jumping directly into DT without first assessing the company’s digital maturity level. Understanding your maturity baseline helps to direct resources to projects with the highest value when establishing a foundation for DT success. A baseline also saves time through the rapid elimination of existing technical debt that hinders the company’s ability to address market demands.
Naturally, some transformation projects are more complicated than others, depending primarily on the assessed maturity level. You may be tempted to believe your organization has the internal capability for DX implementation; however, the expertise required spans diverse disciplines, such as business modeling, bimodal IT development, big data analytics, industry innovation, organizational change management and industrial psychology, among others. Few businesses truly have the capability to unite all departments fully under a DT initiative without professional external guidance. At best, this inability leads to partial success in the process, opening gaps for the competition to exploit. At worst, overconfidence may lead to a disastrous transition, allowing established competitors, and even start-ups, to completely redefine your industry as you waste money on point solutions masquerading as Digital Transformation.
Active Leadership Must Seek Strategic DT Solutions
Executives leadership must lead and engage the DT process to ensure that technological innovation and newly discovered best practices mesh well across the entire company. Digital Transformation is not simply a set of tactical deliverables executed by disconnected departments; it requires active involvement throughout the corporate chain of command. Disconnected leadership guarantees failure, risking the long-term health of your business. The stakes are too high to entrust DT to inexperienced or disinterested participants.