A practitioner’s View on Digital Transformation

Transformations are hard and digital transformations are even harder!

According to a recent McKinsey study1), only 16% of B2B companies claim performance improvement. There are numerous post-mortem analyses, recommendations, and approaches to transformations. However, in my experience, of over 25 years, there are four key critical success factors that repeatedly determine success from failure for any digital transformation and, as such, deserve particular focus. To be clear, there is no silver bullet as every individual organization faces a distinct set of challenges, but the following factors are fundamental to all successful transformations.

The critical success factors are (see graphic below)

• Smart leadership
• Relentless buy-in and business acumen
• Conscious decision making and rigorous execution
• Excellence in governance

Smart leadership

The first step is to have a well-defined, simple, clear and future-oriented digital vision. This should be courageous but at the same time, provide a digestible roadmap and a distinct value story. A fundamental decision to take, is exactly how courageous or respectively, how defensive the transformation should be positioned and marketed within the organization. Comprehensive and consistent backing from top management is paramount to enabling the change within the organization and to prevent the many points of resistance from derailing the transformation process.

Smart leadership works best by being transparent: going the extra mile to explain the vision, the steps that are necessary to achieve it and underlining the commitment to change must be prioritized. The establishment of a digitally savvy team, fully empowered by top management, is indispensable to progressing the transformation and should incorporate trusted company veterans, digital experts, and complementary ecosystem partners.

Relentless buy-in and business acumen

One of the most critical tasks, and also one of the hardest, is to gain the buy-in from operationally responsible stakeholders, who are in many cases, happy with the status quo and therefore, resistant to change. Very often, typical statements from such stakeholders include: “It is different in our country”, “our customers require an alternative approach”, “I don`t want to risk customer relationships” or “this will create a big channel conflict”. On the one hand, such stakeholders` knowledge of the company’s internal structures and processes (formal and informal) is essential to integrate into the program. However, whilst valuing their real contributions, any fear of change should not be allowed to derail the program and it is here that the commitment of top-management to the program must funnel through the organization.

In some organizations small steps with pilots are necessary for success, others take a bolder, faster track approach by transforming countries or even whole business units or divisions. It is a tricky path to navigate, a balancing of speed vs. stakeholder buy-in. Another strategy in negating the risk of derailment is to build in quantitative as well as qualitative business outcomes into the process as early as possible. Choose the most open minded and forward-looking part of the organization to make the first steps of the transformation –hostile managers can be incredibly damaging to the program. Sharing successes across the team and within the organization and designing a reward scheme will ensure continued buy-in. Never underestimate the importance of interpersonal relationships when driving transformations: the buy-in from established networks in achieving an acceptable transformation target might be worth more than pushing through the “right” agenda without such buy-in.

Conscious decision making and rigorous execution

Pragmatism along with discipline and consistency in execution are of the utmost importance to the success of any transformation. Key areas to consider are:

• Balance short-term with long-term wins. Consider areas for “window-dressing”, necessary for quick wins vs. others which take longer to achieve but have more far-reaching benefits. Short-term wins are important to cultivate trust and create the necessary momentum and backing for the overall transformation

• Don’t go for a 100% solution. The 80:20 rule brings rewards as speed is of the essence as first movers gain disproportionate market share. An agile MVP3) approach and two-speed IT will help to gain fast results.

• Choose between evolution and revolution. Often, improving and/or digitally upgrading existing and underperforming systems such as websites or buying platforms with new technology will create less resistance than introducing brand-new systems, e.g, a new customer portal. Improving existing systems requires far less explanation of how it will impact the business and stakeholders and will likely lead to easier adoption.

• Decide on which capabilities will be core and in-house vs. which will be outsourced within your ecosystem.

Again, conscious decision making and rigor in execution will depend on your company’s situation, culture and people and must be a “standing” agenda point for the transformation team.

Excellence in governance

Finally, excellence in governance is essential. The ability to make timely and tough decisions is crucial, otherwise programs are at risk of going astray. A successful transformation program must be agile and have the capability to make rapid adjustments and refocus when necessary. That being so, the right decision makers and multipliers need to be on board. As a second layer, the establishment of small, cross-functional teams that are fully empowered and with operational autonomy will help drive the program, take strong ownership and provide a clear direction when bringing key program decisions back to the governance board.

Decisions on the operating model, clarity on business processes (changes), business outcomes and/or KPIs should be taken as early as possible. The courage to adjust in light of setbacks, new insights or changing market conditions underlines the importance of being agile and the communication of such adjustments should be a modus operandi, encouraged and should happen without worry of negative consequences.

To conclude, whilst there is no “one size fits all” for digital transformations, embedding these critical success factors into your program will substantially increase your chances of success. Courage, collaboration, and an open mindset cannot be underestimated and are crucial for all stakeholders if the transformation is to succeed.

1) Unlocking success in digital transformations, McKinsey

2) Digital commerce success formula – a combination of Marketing x Content x Offering x Price/Conditions x Technology. If one factor equals zero – the success of digital commerce is at risk

3) MVP – minimum viable product