70% of digital transformation processes fail, which emerges from more than one research by some of the largest consulting firms worldwide. This a disarming figure if we think of companies’ profound and growing need to understand and implement digitization.
This happens for many complicated reasons, including skills, digital culture, low management commitment, internal staff resistance, etc. All factors can be enclosed in a single term, “process.”
Well, what fails digital transformation processes is never a single element or factor but a complex conglomerate of internal and external variables, which in most cases is unmanageable for companies. Today we want to talk to you about the ideal digital transformation process by highlighting the risks and critical actions to be implemented. We are inspired by the famous book by Tony Saldanha: “Why digital transformation fails,” a best-seller in the sector that will elaborate on the path, or roadmap, helpful in bringing digital into the company in the best possible way.
The first step to be tackled is building the “Foundations,” which concerns implementing some single and circumscribed digital automation processes, implemented as a test with limited resources and in a short time. The aim is to test a first approach and methodology for corporate digitization and understand its potential.
The organization’s risk at this juncture is that of teams that could be more focused and aware of the value generated by the activities carried out or that roughly perform them. In this sense, the first-person commitment of the management with an acceptance of responsibility for implementing a digital transformation process is necessary, or rather, indispensable.
Some aspects to be evaluated in this sense are the presence of sufficient and widespread knowledge in the management of opportunities and risks in the digital environment, plans or signals capable of transmitting to company personnel in a precise and formalized way the commitment to undertake a path of change or transformation, the presence of a mechanism for the transparent involvement of all the “stakeholders” involved in the project so that any problem or obstacle can be suddenly detected. The active involvement of personnel allows us to connect to the second point necessary to adequately address this first step of the digital transformation, i.e., the iterative process.
From the very beginning of the generation of the Digital Transformation corporate strategy, a collaborative and shared approach is appropriate that supports management in the creation of a project plan that addresses issues such as:
- The identification of business opportunities
- Identification of “transformative ideas,” i.e., those ideas helpful in responding to the opportunities that emerged in the previous point
- Creation of a portfolio of projects
- Design and iterative execution of projects
- Selection and scaling of successful projects
This approach to the generation and management of a project is similar in several respects to the already widespread “Lean Startup” model for testing and developing new business models by young companies with high potential.
The second step concerns the partial implementation of digitization processes limited to some business contexts, such as marketing, the sales department, or others. This is a degree that we can define as “Siloed” because, despite being transformative, it is limited to an area of the company.
This specificity is generally due to the initiative of individual managers or managers able to use the work carried out in the setup phase as a starting point to make the most of digital in their field. Common risks in this context have few economic, technical, cognitive, or human resources in the specific transformation area to be able to carry out good digitization, or again there is the risk of dedicating resources to the wrong or non-priority function/area.
Also, in this case, two strategies can be undertaken to mitigate or cancel the above mentioned risks. In the first place, we have the “transformation enablement” activity, i.e., on the one hand, the ability of leaders to identify and reward those areas and those managers capable of improving performance through the implementation of digital processes, on the other hand, carrying out that set of activities useful for effectively putting cutting-edge teams in a position to test and experiment with digital.
On the one hand, these activities are motivational and personal support, therefore oriented towards creating a climate of tranquility and staff support. On the other hand, training and responsibility are essential to enable the knowledge and autonomy to activate a flexible process.
The second key aspect to consider is selecting the projects or digital activities most capable of bringing results to the company. Activities or business areas must be aligned or integrated into the corporate strategy. In this sense, it may be helpful to carry out Business Analysis activities regarding the existing system, perhaps with the support of frameworks such as the Business Model Canvas or SWOT analysis. While as regards the generation of new ideas or corporate strategies or for the individual department, a dynamic capable of supporting creativity is that of Design Thinking.
Having laid the foundations of the transformation and supported the first vertical digitization processes by integrating them and helping them with strategic work, we will move towards a digital transformation of the company. However, due to mechanisms of resistance from personnel or inconsistency of the digital projects launched, they could block or slow down. In this sense, selecting a suitable “Change Management” model is crucial.
Different strategies may be necessary to adopt the change depending on the type of company and needs. Creating an internal interdisciplinary team can be a solution to have a cutting-edge team capable of understanding resistance and defining a plan that allows gradual diffusion of digital culture and thus addressing fear through awareness and knowledge of digital tools and their benefits.
This model may concern an utterly internal process within the company, with the support of external subjects, through partnerships or acquisitions. Adopting a system of rewards and rewards can be an excellent strategy to deal with resistance. Another aspect of crucial importance is the quantity and quality of the processes launched, with particular attention to their systemic value.
More than an excessively limited or low-impact number of projects may be required to trigger an effective and widespread transformation. About the type of projects considered, the 70-20-10 model can be a support, which respectively provides for the launch of assignments for 70% relating to core activities related to company operations, for 20% associated with the improvement of the core through a continuous improvement activity and finally a 10% of the resources dedicated to “disruptive” or radical innovation projects.
A complete digital transformation is a corporate goal. By appropriately addressing the risks exposed in the previous chapters, it is possible to aspire to this goal. However, this context can present structural problems for a company that, even if it is starting to digitize, is still based on a traditional organization. Furthermore, it is crucial to consider that this objective cannot be seen as a definitive point of arrival but as a new normality to be managed and monitored.
From the point of view of the corporate organization, there are two aspects to consider. The first concerns the IT department, which will probably have to be reorganized with a more excellent aptitude for innovation, and a broader role in the corporate structure capable of enabling the rest of the company to understand digital activities and tools.
Finally, he will have to be trained or retrained to have valuable skills to manage the new role. Another important aspect relates to generic organizational elements such as the definition of policies for the use of digital technologies, for the management of company data, for continuous and transversal management training, and more. Once the organization has been set up for digital transformation, it becomes necessary to set up a system capable of “keeping up with the times” by not limiting oneself or being satisfied with the results achieved since, in times of rapid and accelerated technological evolution, new technologies, competitors or models of business can be generated in a short time.
In this sense, the management or other dedicated departments will constantly monitor and study the external environment and the innovations inside and outside the sector. A good practice in this sense is that of Future Foresight, a discipline linked to “future studies” which aims to put rules and skills into a system that enables the company to explore the external environment by catching trends and weak signals to outline from these a multiplicity of possible consequences in the future and therefore providing the company with valuable tools to anticipate risks or opportunities.
The final stage corresponds to a company comfortable in “perpetual transformation,” a case in which it is likely to imagine a technological, innovative, or performance leadership position in the reference sector. Also, in this case, there is no shortage of risks. To keep the company on the wave of change, agile Project Management methodologies and a corporate culture constantly oriented towards the future must be applied. Strategy is critical, but culture is everything when we talk about transformation. An innovative organizational culture is conventionally reduced to a few fundamental principles:
- Customer-centric innovation: listening, collaborating, and supporting customers are central activities in corporate innovation
- Adaptive environment: agile organizational approach composed of short and iterative work cycles where hierarchy leaves room for flexibility
- Common and shared purpose: the company has a purpose and philosophy capable of going beyond the pursuit of profit to also focus on generating a benefit for its people, the community, or the environment itself.
Another determining factor linked to the concept of foresight described in the previous chapter is risk sensitivity. An aspect that is certainly not easy to generate and maintain among personnel but, at the same time, crucial for maintaining a high level of responsiveness and readiness towards changes.