The digital transformation (DX) buzz is reaching new heights in 2018 as news about digital transformation has gained the attention of the C-suite of many forward-looking organizations. Digital transformation is increasingly being accepted as an important business agenda and not just an IT project. In many organizations, Digital transformation is being spearheaded by the Chief Marketing Officer (CMO) or the Chief Information Officer (CIO) while some have appointed a dedicated Chief Digital Officer (CDO) to lead this initiative.
Organizations must undertake digital transformation initiatives with the objective to improve their long-term competitive positioning through innovative business models, delightful customer experiences and efficient business operations. Digital technologies such as cloud, big data, machine learning, Internet of Things (IoT) and blockchain are key enablers to help organizations achieve these objectives.
Digital leaders typically post better business results than digital laggards. In addition, the transformative power of digital technologies has recently come into the limelight with a few success stories from companies such as Porsche, Burberry, Adidas, Nordstrom, Tesco, etc. The urgency for digital transformation especially in industries such as Retail is heightened by the failure of companies such as Toys R Us and Sears and increasing penetration of giants such as Amazon in all industries.
However, the vast majority of digital transformation Initiatives struggle to make progress and demonstrate tangible results. This is because digital transformation initiatives are 10X more complex than a typical IT change program.
Here are top five reasons why digital transformation projects run aground:
- Lack of sponsorship from key leaders
- Organizational silos
- Cultural challenges
- Skills gap – insufficient talent
- Legacy IT infrastructure and applications
What should a CIO tasked with leading a digital transformation initiative do to ensure a better chance of success?
I recommend CIOs follow the VOCAL model outlined below to drive the desired digital transformation outcomes:
V – Vision clarity
Before starting on the digital transformation journey, CIOs and key business stakeholders must establish a common vision and understanding of the long-term business objective, need/urgency to transform, why NOW is the right time to transform, and what “digital” really implies in your industry.
CIOs must engage business leaders or external consultants to understand your organizations current strengths, weaknesses, opportunities and threats (especially from emerging startups or other digital leaders) and define the key measures that would be required to dominate your industry. If your organization has been around for a few decades, you must attempt to re-imagine how your business would operate if you were to start with a fresh canvas in 2018 and use digital technologies as your coloring kit. You must also survey your business/users to develop a deep understanding of the key challenges/pain points being faced by your business and users.
An effective technique to accomplish this is to facilitate design-thinking sessions that include an empathize, define, ideate, prototype and test process. An output of this step should include a clear definition of expected outcomes, timelines and success criteria along with details for business model innovation such as platforms, new digital products, or new value/offerings that will help gain a strong competitive advantage.
O – Organizational alignment
Once a clear and common vision has been established, it is vital for CIOs to reach across the organization and gain buy in for the transformation initiative. Key stakeholders must be identified not only across executive and managerial ranks but also within key customer facing and operational staff. All stakeholders must be provided with information that will help them align with the “digital transformation mission.” The digital transformation will NOT succeed if there is only a top-down push. It will require employee engagement at a level that will cause a “viral” effect across the organization.
One of the most important forms of organizational alignment will include gaining the budgetary support required to drive this transformation. Your CEO/CFO and IT Finance must come together to develop a clear budgetary estimate for achieving the desired outcomes. A solid business case identifying the key metrics that will be improved along with a forecast timeline will help provide the data required to procure the necessary funding.
Next it will be essential to restructure the organization if you currently operate as silos. Barriers to information flow will kill any chance you have of operating at lightning speed like a nimble startup. You must analyze which groups must have deeper collaboration to better serve the customers need and achieve the desired outcomes. In many organizations, this may involve breaking down the silos across “business” and “IT” or between “development” and “infrastructure” and reorganizing as “product” teams designed to serve your customer in the most efficient manner.
An operational technique to ensure continuous alignment is to develop a monthly “transformation council or town hall,” an open forum where key stakeholders can be briefed and provided feedback on progress.
C – Cultural transformation
“We’ve always done it this way” is a challenge that most organizations face when attempting to drive meaningful change across the organization. A culture that does little to encourage information sharing or collaboration cross the organization will struggle through a digital transformation. Similarly, a corporate culture where the employees are not provided the freedom to provide feedback to management will likely head for the digital graveyard as well. Authoritative leaders will likely fail to influence and gain support for driving digital change in their respective departments as digital transformation requires more of a “servant leader” operating within relatively flatter organizational hierarchies.
The digital leaders are not afraid of challenging the status quo and encourage a customer-centric mindset where employees think about and recommend what they believe will be the best for the customer.
A – Agile evangelists
CIOs must become agile evangelists to drive digital transformation. CIOs must allow a “fail fast” culture to foster innovation and drive agile development and devops automation across the IT organization along with cloud adoption. Agile software development will provide the platform for rapid prototyping and testing of ideas that are generated through design thinking processes.
Devops automation involving automation of the entire continuous delivery and deployment pipelines including support for test automation is key to ensuring new features can be released to delight customers in a fast and reliable manner. Leverage innovative solutions such as chatops or voice-enabled applications to communicate across your dev and ops teams and realize rapid deployment timelines.
Cloud Adoption will serve as the core foundation for digital transformation. Cloud technologies will not just help with reducing the total cost of ownership (TCO) for existing applications but also help provide infrastructure at scale for advanced solutions such as artificial intelligence (AI).
CIOs must develop a concrete roadmap to retire their legacy applications and decommission their data centers by migrating applications to cloud infrastructure and enforcing policies to ensure cloud-native development is the de-facto standard for green-field applications.
L – Leverage data
Once a digital transformation initiative is underway, CIOs must establish a solid system to collect metrics on an on-going basis. This begins with identifying the metrics, socializing the metrics to all key executive stakeholders, managers and employees. Relevant metrics such as TCO, customer satisfaction (at a product line level), customer churn rate, employee engagement, top-line revenue and gross margin (by product line) must be collected on a regular basis (at least monthly) and reviewed at an executive steering committee meeting. If your digital transformation initiative involves rolling out new applications, application adoption metrics must be measured as well. Innovative techniques such as gamification to drive metrics in the right direction must be explored.
In summary, leading digital transformation initiatives can be a roller coaster. CIOs must continue to be the “Linchpin” for digital transformation and ensure they are being heard by the board and business leaders by being VOCAL.
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