Given both the ubiquity and also the ambiguity of the term “digital transformation,” there is no “typical” digital transformation project. Each one is different, responding to a different catalyst, and taking place within a unique organizational and cultural context. However, I’ve seen two distinct flavors of digital transformation: those driven by exogenous factors and those driven by endogenous ones.
In my experience, digital transformation programs emanating from an internal, endogenous impulse to capture a new opportunity, mitigate an emergent risk, sustain or grow a particular business line, or differentiate from a competitor – these programs tend to have more executive buy-in, more organizational investment, and greater momentum and longevity. It’s because the catalyst for change is rooted in something specific that the organization feels, senses, hopes. The change is con-textualized within the culture, the coda, the unique language, and artifacts of the organization. These organizations also typically enjoy a higher degree of “first- or second-mover advantage” – in many cases because the impulse for change was driven by a desire to break out of a particular competitive landscape into an adjacent (or sometimes altogether different) area of business.
When digital transformation projects are driven by endogenous factors, my experience has been that the likelihood of success is lower. There’s an element of “me too” thinking factoring into a decision to go on a digital transformation journey. These are often journeys with no specific destination in mind and driven by a sense that because competitors are embracing digital, the organization must too. Without a strong intrinsic sense of why the digital transformation is important, the organization creates a “burning platform” moment – but without any clear sense of what they’re jumping from, and jumping into.
Without a strong intrinsic sense of why the digital transformation is important, the organization creates a “burning platform” moment – but without any clear sense of what they’re jumping from, and jumping into.
In either scenario, one principle remains consistent: digital transformation programs are not about technology. The technology is simply the tool to deliver business value to the customers of the organization in more effective ways. This is a critical point. It’s all too easy for organizations to fall into the trap of a digital transformation program that becomes an exercise in arcane technical details and architectures. As mentioned earlier, being able to locate (and relocate) the program in the why, the context for change, is so critical. Digital transformation, like any other large-scale change, is typically about people, processes, and tools/technology. If organizations can focus on people and processes, invariably the technology will exist (in virtually every case) to capture the underlying business problem or opportunity that’s being solved for.
This places a significant premium on leadership styles that are comfortable with leading through ambiguity and driving large-scale cultural and organizational change. If you’re a leader expecting a technological silver bullet, a software panacea to all your business problems, without touching your people and processes, then you’re going to struggle to derive value from a digital transformation program. In fact, this type of scenario can be detrimental to business value, as it becomes a significant distraction to the business, a point of friction between technology teams and business units, and sows a (deeper) distrust of technology.
If you’re a leader expecting a technological silver bullet, a software panacea to all your business problems, without touching your people and processes, then you’re going to struggle to derive value from a digital transformation program.
In order to succeed at digital transformation, organizations need to have a strong, diverse, multi-disciplinary team drawn from across the business units impacted by the change. It needs technology expertise, but expertise that can bring business clarity and simplicity to technical details. It needs a strong alignment across the leadership team. It needs a well-resourced and clearly defined change management organization, as well as a program management office. It also needs to feed into more mundane elements such as performance and compensation plans – because to some extent, with digital transformation, as with any other initiative, “you get what you measure.” If you’re building a transformative initiative, but your organization remains compensated in old ways of working, then don’t be surprised when your initiative struggles. I’ve personally seen situations where companies have adopted the “change is everyone’s business” mantra; frankly, it’s a bit of a fallacy, as if it’s everyone’s responsibility, inevitably it’s nobody’s responsibility.
Measuring the success of digital transformation initiatives tends to be a balance of both art and science. You can absolutely measure qualitative impacts around both activity and/or outcome e.g. levels of inter-team collaboration, faster development of applications and processes, increased process automation and its impact on customer Net Promoter Score, etc. There’s also a qualitative element: how are the teams feeling about the impact on their work, the impact on customers experience; does it make their working day easier or better, etc.
Regardless of whether you’re measuring activity or outcome, qualitatively or quantitatively, it’s important to focus on what your measures are telling you: are you getting better, or worse? Is anything changing? Are different teams displaying different engagement levels, and if so why? It’s also important to set the expectations upfront that the measures themselves may change. Some measures might be replaced, retired, or reworked – which is fine, as long as you focus on why you’re measuring, and what your measures are telling you. And build as many “doors and windows” into your reviews/tuning of your digital transformation initiatives. The organizations that are willing to constantly tune, iterate, learn, renew are the ones best able to harness the potential of digital transformation. You won’t get it right the first time.
Ger Perdisatt leads Microsoft’s 180-person digital and technology strategy organization in Western Europe. He is a non-executive director at daa, an airport management firm in Ireland, and previously was Head of Retail Customer Management and Planning at Bank of Ireland. Perdisatt is among the contributors to the new book, 60 Leaders on Innovation.