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The Essence of Digital Transformation: The Qualities are the Outcome

91% of businesses are engaged in some form of digital initiative, and 87% of senior business leaders say digitalization is a priority. At its core, digital transformation is about building a set of capabilities in an organization that accelerates the velocity of innovation and operations. It is forecasted that half of the companies in the S&P 500 will be replaced in the next decade, as the average tenure of most companies on this list has halved from 30+ years to roughly 15. And while modern technologies like cloud, data and analytics, IoT, blockchain, etc. are instrumental in these transformations, they are not sufficient to elicit sustainable results all by themselves. In fact, research shows that 70 percent of complex, large-scale change programs don’t reach their stated goals. Common pitfalls include a lack of employee engagement, inadequate management support, poor or nonexistent cross-functional collaboration, and a lack of accountability.

Typically, less than a third of the companies that attempt large transformations succeed in creating meaningful outcomes on a sustained basis. Given the scale of investments that go into such transformations, it is critical to examine what it takes for these efforts to bear fruit.

Approaching this challenge broadly, there are three key ingredients for success:

  1. Leadership
  2. Capabilities
  3. Talent

The Role of Effective Leadership

While leadership will certainly craft the various strategies and plans needed, they also need to be up front enabling the execution across all levels in the organization. Leaders can recognize the key qualities needed in the business and plan for how to customize those qualities for their respective organizations. This can take many forms and applies to branding, internal communications, talent and performance management, training, and more.

What this means is that while it is necessary to be bold and place big bets, it is equally important to regularly take stock of how those bets play out. The honesty and courage to inspect and reallocate capital and personnel if needed separates the top leaders from the rest. In other words, the most effective leaders are placing big bets, but are simultaneously quick to act when these bets don’t work out. The philosophy of experimenting, inspecting, and correcting is necessary down and across the organization.

Leaders will also need to ensure that the culture they are trying to build has not only the reward mechanisms to inspire and motivate, but the support for staff to feel safe when taking actions to advance transformative initiatives without the fear of failure.

In addition to the ambition to transform their companies, leaders will have to be thoughtful about what the right kind of transformation looks like for their organization. This is informed by examining where the company has been successful in the past as well as looking at areas that are critical for it to be successful in the future. They have to be keenly aware of their current organizational culture with defined aspirations for what they want their culture to be. Research indicates that 95% of the typical workforce does not understand what the strategy of their company is, making it that much more important for leaders to paint a clear vision with explicit goals. It is their job to ensure that staff—at all levels—have clarity on what the strategy is and how it maps to what they do. The messaging has to be clear and relentless. For any vision to be translated into reality, leadership skills will need to transcend the organization. Even with well-laid plans in place, leaders must still ask themselves: is my organization capable and ready to execute?

Developing the Right Capabilities

What does it take for companies to become transformative? If the traditional products are now being reimagined as a blend of services and experiences, what then are things that companies can anchor in to build a sustainable edge? Regardless of the industry or geography, there are certain qualities and characteristics that are vital for successful transformations:

  1. A focus on continuous experimentation
  2. Commitment to relentless learning
  3. Speed in execution
  4. Being nimble and adaptable
  5. Instilling trust and building a blameless culture

With the speed at which products are being introduced by traditional incumbents as well as technology-led companies, customer experiences are being shaped continuously not only by those providing the experience, but by their competition. Knowing what resonates well with customers cannot be left to chance. It is critical to learn fast so that necessary changes can be made in real time based on customer needs. This is where the feedback loop comes into play. Organizations must engineer products/services—as well as their processes—in a way that allows them to collect customer feedback and to act on it. Sometimes it may very well be that a major shift in the strategy or design is needed. In other cases, the product/service may need to be halted altogether.

The ability to stop investing time and energy on initiatives that customers have not taken to necessitates an honest and transparent way to continuously evaluate the performance and ongoing financing of the initiatives. This is where the ability to rebalance portfolios relentlessly and create a culture wherein taking chances is encouraged is critical. These qualities are not only necessary for the initial success, but are central to the foundation needed to sustain it.

Finding Talent That Can Execute

Successful transformation efforts rely on talent with the right combination of technical, business, and digital skills as well as the aptitude to operate through sometimes disruptive organizational change. Most businesses will not have the luxury to hire up entirely for a new transformation, and that may not be productive even if they have the resources to do so. Typically, there are existing relationships, trainings, and skills that can and should be leveraged. What is critical, however, is to have a clear understanding of the present capabilities across the organization. Rarely can enterprises take on a large-scale transformation without it touching every part of the value chain within the company. Organizations need to base their talent management on the set of capabilities that they desire at the macro level and ensure that this is well understood and integrated with the employee lifecycle from hire to exit.

A significant part of this involves ensuring that there is a growth mindset instilled by leadership at all levels. To enable continuous learning and staff upskilling, training and enablement teams need to be identified across all business functions.

Final Thoughts

Digital transformations should focus on building a core set of capabilities, centered around people, that will help them adapt, learn, and thrive as they innovate and grow. Throughout these transformations, they will create new products, services, and customer experiences, but the most important outcome they will have realized is that they have adapted to the new mode of operating and better prepared themselves for the inevitable next wave of change. Further, each of these byproducts of transformation will help produce an outcome that is centered on organizational mettle and agility. Therefore, the qualities that they build in their organizations are themselves going to be the foundation for sustaining transformations of any kind – now, and in the future.

 

Author: Kary Kalapanda, Client Services Partner

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