The adage “adapt or die” applies not just to nature but also to business. To grow and thrive amid today’s digital revolution, every company must learn to adapt. This means business leaders need to embrace digital transformation.
Digital transformation is the path forward for all organizations, but many are struggling to make meaningful strides that will have long-term impacts on their business. In a 2018 McKinsey Global Survey, more than 80% of respondents claimed that their organizations had attempted some form of digital transformation within the previous five years.
However, McKinsey’s research also revealed that “the success rate of digital transformations” is even lower now than it was when the firm conducted a similar survey in 2015—when “fewer than one-third of organizational transformations succeed[ed] at improving a company’s performance and sustaining those gains.” Even big-name brands such as GE, LEGO, and Nike have attempted digital transformation and failed, according to Harvard Business Review, as have Ford, Burberry, and Proctor & Gamble.
With just 16% of McKinsey’s 2018 respondents indicating that “their organizations’ digital transformations have successfully improved performance and also equipped them to sustain changes in the long term,” continuing to make the case for digital transformation is difficult. Yet we are doing just that. Why?
For one, being a digital leader can give you an advantage in the increasingly competitive business world. In fact, research from the MIT Center for Digital Business found that companies that have already embraced digital transformation are 26% more profitable than their average industry competitors. But this is about more than your immediate bottom line—it is about staying viable. In the 1920s, the average lifespan of an S&P 500 company was 67 years. Today, it is just 15. Put simply, failing to adapt might mean your company will go the way of the dodo.
Defining Digital Transformation
The first step in implementing the digital transformation process and ensuring the best possible outcomes is understanding what digital transformation actually is. But that is easier said than done and may just be the reason so many have failed in their efforts thus far. The research and advisory firm Gartner offers a definition that we feel hits the nail on the head: “Digital business transformation is the process of exploiting digital technologies and supporting capabilities to create a robust new digital business model.”
And what are the goals of digital transformation? Done right, this process should achieve the following:
- Improve the speed at which your team does business
- Bring costs of doing business down
- Improve your time to market
According to Silicon Valley innovation lawyer Louis Lehot, digital transformation should go further. “The leading growth companies go much further in their definition of digital transformation, and develop an innovation toolbox to constantly reinvent their businesses, and are not afraid of disrupting their own business models with new ways of doing things. Winning innovation toolboxes include skunk labs where new intellectual property can be developed and harvested, with new patent and licensing programs, commercial agreements, joint ventures, strategic corporate venturing investments, and acquisitions.”
With these key points in mind, let us focus on some key factors that can increase the chances an organization’s digital transformation efforts will be successful.
Six Keys to Digital Transformation Success
Balance Speed with Proper Tools and Due Diligence – One’s instinct when preparing to undertake a big, transformative process might be to go slow and take things one small step at a time. Although a slow and steady approach is often wise, in the case of digital transformation, it could actually spell trouble instead. Exercising too much caution in your transformation process puts you at risk of falling behind the competition, so you will need to embrace new tools and strategies quickly. In its 2018 survey, McKinsey discovered that the organizations that were most successful in their transformation efforts had embraced more tools than other, less successful, respondents. But take care not to let your desire to lead the pack keep you from doing your due diligence and allocating your resources wisely.
Ensure Executive Buy-In – As is true for almost any company-wide initiative, getting your leadership team fully on board is imperative. They must then make sure they clearly communicate the goals and expectations surrounding the company’s digital transformation efforts to others in the organization. Given that you are expecting your rank and file to do the hard work of learning new tools and technologies, effectively changing the way they do business, you need to present cohesiveness and consistency from the top down. This will help ensure your employees’ comfort, and therefore willingness, to embrace the changes as they happen.
Strategize According to Your Resources – Every company must decide where to begin its digital transformation, and prioritization plays an important part in developing a strategy. The best way of identifying a good starting point is by determining which of your business priorities can be addressed using resources you already have available or in place. Then, put these issues at the top of your transformation to-do list. As HelloSign notes, “When you’re able to recognize and effectively optimize your resources, the immediate returns can be reinvested right back into other crucial goals on your roadmap.”
Invest in the Right Technologies – Once you have made a transformation plan, you will likely want to focus on three types of tools:
- Cloud computing: These on-demand computer system resources—which range from data storage and computing power to SaaS such as Office 365—help companies create more agile, cost-effective technology environments.
- Process automation: Automation allows organizations to reimagine how they use their workforce, permitting employees to focus on tasks that require a human touch while computers handle repetitive or tedious tasks.
- Advanced analytics: Data analytics not only help companies gain insight into everything from customer behavior to the health of processes, but they also allow firms to break down silos, enabling teams to respond in real-time to changes and challenges.
According to Silicon Valley lawyer Louis Lehot, “truly innovative growth companies will go even further, committing capital and organizing teams to develop corporate venturing programs that work with engineers and business units to identify new technologies and businesses and invest in them, whether through commercial agreements, licensing programs, joint ventures, minority stakes to full acquisitions.”
Reimagine Your Processes (and Communicate Them Clearly) – As your organization becomes more fully digital, adjustments will need to be made to how your team works. For example, processes once done on paper, such as invoice payment or something as simple as approving a marketing brochure, may now be performed entirely online. In some cases—especially those involving automated processes—employees’ job descriptions and responsibilities might actually change. So be sure to have a thorough training process in place to help employees adjust and feel comfortable with the new digital processes.
Be Prepared for Ongoing Change – Digital technologies are constantly evolving. This is not going to change, so you need to be ready to do so yourself. Digital transformation is a continual process that demands regular reassessment, the addition of new tools when appropriate, and the modification of processes accordingly.
Achieving Digital Maturity – So, if the process of digital transformation is constant and ongoing, what is the end goal? Ultimately, you want your business to achieve “digital maturity.” According to the MIT Center for Digital Business, digitally mature companies are those with the capability not only to “build digital innovations, but also to drive enterprise-wide transformation,” adding that “Digirati [the nickname for digitally mature companies] have significantly higher financial performance than their less digitally-mature competitors.” MIT points to a combination of “digital intensity” (investment in digital technology-enabled initiatives) and “transformation management intensity” (having the necessary leadership in place to drive these initiatives) as signs a company has achieved digital maturity.
That digital maturity is not about ending the process of transformation, but rather about being ready to tackle new initiatives more efficiently and effectively, is telling. When you can respond nimbly to new challenges and opportunities, you have an advantage over your competitors. No matter what industry you operate in, beginning your transformation now will pay dividends tomorrow and help you survive to see another day.