Digital transformation can be a nebulous term. It refers to the process and results of everything from deploying internal business software to overhauling an entire industry.
So it’s natural for those unfamiliar with the process to wonder how a digital transformation process actually works.
In this article, we address that question, look at why digital transformation projects fail, and how to successfully lead them.
How does digital transformation work?
Digital transformation is the process of using software tools and methodologies to solve existing business challenges.
An easy way to think about it is in the context of optimization:
What aspects of our existing business process is inefficient or expensive to run? Is there a better way to do it by leveraging digital solutions and tools?
If there are, organizations embark on a digital transformation process.
Of course, digital transformation is more than just deploying tools or making an analog process digital.
It’s about shifting how a business thinks about solving complex problems.
Digital transformation processes have two sides.
1. Tools & Processes
First, organizations need to find the right new tools, processes, and methods they’re going to deploy to replace their existing solutions.
For instance, you might identify that collaboration is a problem, and if you can facilitate collaboration between different teams then you can deliver 20% better business outcomes.
Your solution might be a cloud-based project management tool integrated with an internal communication tool like Slack.
Identifying the problem (collaboration) and the software solution (PM tools & Slack) is part one.
2. Digital Culture
The second part is transforming attitudes and ways of working for the people in your organization — the adoption of digital culture.
A digital culture is one where the tools and methodologies of digital transformation can take root.
There’s a robust list of what this means, but broadly speaking, a digital culture facilitates lean development methodologies, so organizations are agile, can fail fast, are data-driven, and focus on real-time analytics.
Traditional business culture is slower, retroactive, and more focused on looking back and analyzing past activity rather than adopting current behaviour to maximize profit. Shifting from a traditional business culture to a digital culture is the hardest part of digital transformation.
It takes a lot of senior buy-in, an internal champion, and stakeholder engagement at every organizational tier.
Why digital transformation projects fail
In order for a digital transformation to be successful, both the tools/processes and a digital culture need to be engaged.
However, problems arise with digital transformation efforts when they focus entirely on getting the right tools in place with little to no focus on how to deliver the cultural change that it needs.
Basically, organizations focus a lot on getting the right tools in place and not enough on making sure people actually use them.
For instance, imagine you’re a bank driving digital transformation. You want to move from a retrospective decision-making process (“we tried this and six months later, have evaluated it to see if it worked”) to a real-time decision making process (“our results show X. Let’s tweak it to optimize what we’re doing and see the impact in real time”).
This change can only happen if the process and incentives for the people involved change AND those people are given the right tools.
For instance, imagine you’re a marketing manager. If you have the tools to deliver real-time reporting, but you’re evaluated on retrospective performance, you’re going to focus on the retrospective analysis, regardless of what tools you have access to.
How to make digital transformation successful
The best way to be successful with a digital transformation process comes down to leadership. Choosing the right technology vendor and finding tech solutions is only part of the challenge. And frankly, the more straightforward part.
Convincing people that the new way is better and managing the transformation of complex moving parts is more difficult.
How to lead digital transformation
To be a successful digital transformation leader you need to:
Securing buy-in from senior executives.
You’re going to be asking for an upfront investment and a complete change in how success or failure is defined. That can’t be completed without buy-in from senior executives, even if the tool you’re buying doesn’t necessitate high-level approval (as most cloud products today don’t).
Know your customer.
Digital transformation is all about building a customer-centric organization. And that isn’t possible if you don’t intimately know your customer and understand their objectives.
Know your employees.
They’re the ones who actually have to use the new tool and will be evaluated on the new way of working. It’s critical that they are both bought into the project, and the project reflects their reality, not the reality that organizations wish they had. Rose-tinted digital transformation projects are destined for failure.
Understand the digital landscape.
Finally, you need to understand the digital landscape so you know what solutions are possible and what tools are available. This may involve working with a partner with experience in the area who conducts and presents the research to you. This doesn’t mean compiling a dossier on every vendor, but rather, knowing the buckets that those vendors go into and creating a short-list of relevant options.
In closing: digital transformation is about empathy
The most important takeaway from digital transformation projects that we’ve worked on is that they’re fundamentally about empathy.
Empathy for customers, their needs and wants, and how your organization can fulfill them.
Empathy for senior leaders, and understanding their pressures and needs and how digital solutions can help them do their jobs.
Empathy for employees, understanding how they work day to day, how they’re evaluated, and what success means for them and their supervisors.
When you can empathize with these three key groups, you can craft digital transformation projects that are not only successful but produce meaningful change.