Digital transformation is on top of every company’s agenda. According to a McKinsey Global Survey, more than eight in ten respondents say their organizations have undertaken such efforts in the past five years. GlobeNewswire estimates the market at more than 3 Billions $ (yes, not a typo) by 2025, with CAGR in excess of 22% from 2019.
What the market pundits are not saying yet is, how much of this investment avalanche will result in profitable, sustainable results? You may choose to be an optimist or a pessimist (aka an optimist with experience), but even in the rosiest of visions, the rate of success will be far from 100%.
In fact, according to Forbes, the majority of digital transformation efforts, a staggering 70%, hit roadblocks and fail. The digital transformation graveyard is already hosting some famous digital bloopers:
- GE, with its Predix platform, created a new digital business unit, which has been floundering since 2015
- Ford, who created a new segment called Ford Smart Mobility, but failed to exploit its traditional strengths by setting it up as a separate unit
- P&G, already in a leading position, set a vision to become “the most digital company on the planed”. Talk about a lofty vision, not supported by sharply focused initiatives
In all three cases, the failed transformation cost the CEOs their jobs.
You might also be interested in: Coming Back From The Brink: Stories of Product Failure and Success
If we want to concentrate these lessons in a single powerful message, I think it would be that you must have a clear understanding of the reasons for your transformation, where you are, and where you want to go. Deceptively simple.
In fact, let’s think about the first part, the why transform. Do you need to transform your products, your business, the way you sell? In order to find the answer to this question, you first need to find out where digital will help you succeed and grow. A couple of examples: Kodak needed to change to a digital product, Uber transformed the business of cars for hire, Amazon transformed the business experience.
These are rather glamorous, and obvious, examples. But think about a grocery store chain: it would not fit in any of the scenarios above, but an even more profound digital transformation has been happening. Most of it is behind the scenes, but some of it is right in front of you when you shop. For example, when you pay, or when you scan your articles before you put them in the chart for a fast check-out. To make this possible, store chains had to completely digitalize their entire delivery chain, focusing their attention on internal data and processes.
What have these examples in common? A new way to deliver value to your customers, of solving their problems, of making their life easier and more interesting. Is this enough? Possibly, if you are a startup, but if you are already a successful company, your chances of success will increase dramatically if you design your transformation on the solid foundation of your current strengths. They may be in your product, your culture, your business model, your people: these are the forces that propelled you to where you are, so you may want to build your future on them.
So, let us bring this together and see the why and what:
- Why transform: to deliver superior value to your customer
- What to transform: what is separating you from where you are and where you want to be to deliver such value
OK, so you may now be wondering about the missing element, the How. Well, answering the how is probably the core of the $3 Billion business, and would be somewhat challenging to do it here. However, there is an interesting white paper by PMI (Project Management Institute), The Brightline Transformation Compass, sharing some powerful advice on the focus areas of a transformation areas (not limited to digital):
- The North Star: A crisp, inspiring articulation of the vision and strategic objectives for the transformation. A good example? Here’s Amazon North Star: “To be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavors to offer its customers the lowest possible prices.”
- Customer Insights & Megatrends: Embedding a deep understanding of the customer in every change you make, and in every employee – the customer you may have today, and the customer you want tomorrow, as well as the “megatrends” affecting them.
- The Transformation Operating System: A flat, adaptable and cross-functional organizational structure that enables sustainable change.
- Your Volunteer Champions: A mechanism to identify, recruit, motivate and harness many thought-leaders from across your organization to drive transformation.
- Inside-Out Employee Transformation: A set of tools to make the transformation personal for your employees – to connect their aspiration to the North Star and to your customers.
If you are currently engaged in a digital transformation, or about to launch one, the Compass provides a very simple “test” to gauge your chances of succeed:
- Is my transformation authored and driven by my employees?
Transformations driven internally, by leaders, managers and your front line, not by consultants are more likely to deliver their targets.
- Will my employees be transformed during the change?
To deliver benefits, you must change mindsets and behaviors during the transformation – identify and build your future leaders and transform other employees.
- Are my strategy and vision crisply articulated?
Your transformation cannot deliver strategic targets if the strategy is not clearly defined and placed in the context of an inspiring vision.
- Is my transformation team agile and flat?
The operating model during transformation needs to support rapid, effective and bold decision making without hierarchy or silos.
- Is my transformation shaped by customer needs and trends?
A deep understanding of your customer/consumer – and the trends that impact them – should shape every change you undertake and should be embedded throughout the organization.
Any question with a “yes” answer is a step in the direction of a successful transformation. Focus your attention where the answer was “no” and you will be moving closer to the happy club of the successful transformations.
Meet the Author
Franco Gatti is a Senior Product Manager with almost 20 years of experience with ABB in several technical and management positions. He is currently engaged in a Product Management Excellence Journey to enhance the professional level of ABB large product management community. The journey develops around the key levers of organizational and individual development, optimal processes and efficient tools.
Franco is based at the ABB Country Headquarters in Italy, and can be reached at [email protected].