Spoiler: Start with People.
A recent survey of CEOs and top managers revealed that risks associated with digital transformation are the number one discussion topic in 2019. However, 70% of all transformation initiatives do not achieve their goals. It is estimated that out of the $1.3 trillion spent on digitalization last year, $900 billion went to waste. But why are some transformation initiatives successful while others are not?
Opinions among players in the Russian market regarding new business trends are divided. At a discussion during one of St. Petersburg's major IT conferences, "White Nights," there were statements suggesting that digitization is just another hype that has proven unsustainable and will quickly pass. Opponents argued that digital transformation is an inevitable new reality that must be adapted to now.
Nonetheless, studying the experience of foreign companies brings to mind several failed examples, such as the cases of General Electric and Ford.
Failures of Transformation
In 2015, GE announced the creation of GE Digital, a company focused on digital products and, primarily, on digitizing sales processes and supplier relationships. Despite the division's successes, the company's CDO was forced to resign under pressure from some shareholders due to stagnation in stock prices.
GE is not the only company whose performance has declined amid digitalization. In 2014, Ford's CEO, Mark Fields, announced ambitious plans for the company's digitalization. However, the project was later closed due to falling stock prices amidst rising costs.
What Does Success in Transformation Depend On?
Many Russian companies view digital transformation as the implementation of new IT systems to optimize business processes, while evangelists of this process insist that digitization is not only investments in infrastructure but also a shift in strategy, the development of new competencies, and a restructuring of business processes.
At the core of the process, according to advocates of digital transformation, is the shift in business focus from production capabilities to customer needs, structuring all processes around enhancing the customer experience.
Why are people important?
The KMDA study “” shows that ordinary employees and top management evaluate the level of transformation in the company differently.
Top management assesses the use of digital technologies in the company as higher than ordinary employees do. This may indicate that management is possibly overestimating the situation, while ordinary employees may not be informed about all projects.
Researchers unanimously assert that no organization can benefit from next-generation technologies without placing employees at the center of its strategy. To understand why, we need to consider three key elements of digital transformation.
First — speed
Machine learning and automation can accelerate all business functions, from supply chains and customer service to finance, human resource management, security, and IT collaboration. They also allow business processes to adapt and improve autonomously.
Second — intelligence
Traditionally, companies relied on KPI 'look back' — analyzing past results to formulate new hypotheses. These metrics are quickly giving way to tools that use machine learning to monitor the situation in real time. Embedded in the workflow, this principle accelerates and enhances human decision-making.
The third and most important element — the importance of human experience
Thanks to digital technologies, companies can improve the brand interaction experience from both the client’s and the employer’s perspectives. This experience requires continuous quality enhancement to achieve business objectives.
And yet, as with any technological change, adjusting mindsets and behaviors can become the most challenging and crucial task to overcome.
Each of these elements can be destructive on its own. Together, they represent one of the largest shifts in the history of labor. Companies can invest in acquiring advanced technologies to accelerate their digital transformation process, but these investments will be wasted if employees do not embrace the change. To benefit from this shift, businesses need to create a solid internal framework.
5 Lessons from Successful Companies
In March 2019, an article was published in the Harvard Business Review, written by four active CDOs of companies. Behnam Tabrizi, Ed Lam, Kirk Jirard, and Vernon Irvin combined their experiences and penned five lessons for future CDOs. In summary:
Lesson 1: Before investing in anything, define your business strategy. There is no one technology that guarantees 'speed' or 'innovation' as such. The best combination of tools for a particular organization will vary from one vision to another.
Lesson 2: Utilize insiders. Companies often hire external consultants who use universal methods to achieve 'maximum results'. Experts advise involving internal experts in the transformation, as they know all the processes and pitfalls of the business.
Lesson 3: Analyze the company's performance from the customer's perspective. If the goal of the transformation is to increase customer satisfaction, then the first step should be to speak to the customers themselves. It is important that executives expect significant changes from the implementation of several new products, while practice shows that the best results come from numerous small changes across a wide range of different business processes.
Lesson 4: Acknowledge Employees' Fear of Change. When employees realize that digital transformation may threaten their jobs, they may consciously or unconsciously resist changes. If digital transformation proves ineffective, management may eventually abandon the efforts, thus preserving their jobs. It's crucial for leaders to acknowledge these concerns and emphasize that the digital transformation process is an opportunity for employees to upskill in line with the future job market.
Lesson 5: Embrace Silicon Valley Startup Principles. They are known for their rapid decision-making, prototyping, and flat structures. The process of digital transformation is inherently uncertain: changes need to be implemented first and then fine-tuned; decisions must be made quickly. As a result, traditional hierarchies can hinder progress. It's better to adopt a unified organizational structure that is somewhat detached from the rest of the organization.
Output
The article is extensive, but the conclusion is brief. A company is not just about IT architecture; it’s about people who can’t leave work and return in the morning with new skills. Digital transformation is an ongoing process of several major implementations alongside a multitude of small tweaks. The best approach combines strategic planning with continuous testing of micro-hypotheses.
Source: habr.com
