We have organised the digital transformation into four phases. Part 3 of this book covered the first two phases: phase one of the transformation process revolves around launching and governing the transformation, followed by shaping as phase two. Part 4 contains driving and then executing transformative activities. In this chapter we take on driving, which is the third phase of the four.
Before driving the transformation, we have already completed the following steps. First, we have taken the decision to commit to the digital transformation and started its implementation (launching and governing), including getting the right management team on board and mobilising the organisation. Second, we have precisely defined what digitalisation means for the particular enterprise (shaping), for example by describing the future business portfolio, target architecture, transformation plan and capability needs.
At this point the driving begins and with it a tough work process for the CDO and other executives.
As seen in the graphic above, there are three main tasks involved in driving the digital transformation. The first task is to enable the organisation to implement the new strategy by teaching employees the appropriate skills and by providing organisational structures and resources. Next comes driving the transformation of the portfolio. At this point many aspects of the desired target state have already been defined at a coarse level. However, the target may change as we apply our strategy and gain experience, and details will be carved out more precisely.
Neither change nor experience will happen accidentally – we have to guide, push, lead, seduce, compel and urge, leaving no doubt that transforming the portfolio also means a change in the business model.
To complete the driving phase, we must also manage the changes in the business model and the corporate culture. This is an enormous task as any change of this magnitude will inevitably create resistance if not managed properly.
This may sound like a rigid plan that determines each step of the digital transformation. Unfortunately it is not a step-by-step process. Even though it is wise to make a transformation plan, the journey’s end remains unpredictable. Politics, unforeseen twists and changes in the market environment may interfere with nicely developed plans. The goal here is to think big, start small and scale rapidly. Here follows a brief exploration of this approach.
In contrast to industries like media and retail, where digital technology has been a significant disruptive force and is essential to their core business, process-oriented industries such as energy, transport, industrial goods and healthcare have yet to see its full effects. For management teams in these industries, it can be difficult to know how to start implementing digital technology – or even to see the need.
As a result, many companies have yet to take action to capitalise on digital. Some of these late adopters say they are hindered by legacy information technology (IT) systems or do not have the necessary capabilities in place. Others spend months studying the market and get bogged down in large-scale strategic and conceptual considerations, believing – incorrectly – that they need to understand exactly how and where the journey will end before they can take the first step.
The development cycles of digital technology are extremely rapid – far faster than for most traditional products and services – and this deliberate (and outdated) approach means that these companies are essentially fighting yesterday’s battles.
That does not mean no target state needs to be envisioned. However, to avoid a stalemate, starting to experiment with digital is the essential and suggested next step to explore the digital options and create solid ideas.
Given the pervasiveness, low cost of entry and potential impact of digital technology, it is imperative that companies act today. Late adopters, in particular, must step up the pace and follow early adopters in launching new digital products and services and digitise internal processes. This means they must implement far nimbler development processes and become far more comfortable making decisions amid uncertainty. In addition to a well-thought-out top-down, strategy-driven approach (which worked in the past), these companies need to innovate using ‘build-assess-learn’ cycles, even when not entirely sure of the outcome.
They need to focus on pilot tests and prototypes that can be developed and rolled out quickly, assessed for performance and scaled up (or shut down) accordingly.
They need to embrace the concept of ‘fail fast and fail cheap’ and build up their digital capabilities through direct experience.
And rather than making a single big, strategic bet, they need to manage multiple initiatives, trying out new business models with low sunk costs, killing off the losers and scaling up the winners.
Our experience with companies in virtually all industries shows that success with this kind of trial-and-error approach requires a structured transformation methodology built around three steps:
- Securing quick wins at the outset: Speed is more important than perfection. Companies should launch small-scale digital initiatives to improve the customer experience, bring new products and services to the market and digitise internal processes.
- Scaling up successful initiatives: Once they have identified promising digital ventures, companies need to scale them up and establish the right organisational model to integrate them with existing operations.
- Leading and sustaining change: Successful digital transformations require strong leadership, alignment between IT and the business units and a culture that celebrates risk-taking and rapid action.
Together, these steps can help management teams determine where to start, how to manage the process and how to generate sustainable progress with their digital transformations.
