Spoiler: start with people.
A recent survey of CEOs and top managers found that the risks associated with digital transformation are the #1 topic of discussion in 2019. However, 70% of all transformation initiatives fall short of their goals. Of the $1,3 trillion spent last year on digitalization, it is estimated that $900 billion went nowhere. But why are some transformation initiatives successful and others not?
The opinions of the Russian market players regarding new business trends were divided. Thus, during the discussion of this issue within the framework of one of the main St. Petersburg IT conferences “White Nights”, there were statements that digitalization is another hype that has shown its inconsistency and will quickly pass. Opponents argued that digital transformation is an inevitable new reality that needs to be adapted to now.
One way or another, studying the experience of foreign companies, one can recall several failed examples, for example, the cases of General Electric and Ford.
Transformation Files
In 2015, GE announced the creation of GE Digital, a company that should focus on digital products and, first of all, on the digitalization of sales processes and supplier relationships. Despite the division's success, the company's CDO was forced out of office under pressure from some shareholders due to stagnant stock prices.
GE is not the only company whose performance has fallen amid digitalization. In 2014, Ford CEO Mark Fields announced his ambitious plans to digitalize the company. However, the project was later closed due to the fact that the company's share prices fell amid ever-increasing costs.
What determines the success of the transformation?
Many Russian companies perceive digital transformation as the introduction of new IT systems to optimize business processes, while evangelists of this process insist that digitalization is not only an investment in infrastructure, but also a change in strategy, the development of new competencies and the restructuring of business processes .
At the heart of the process, according to the adherents of digital transformation, is the shift in business focus from production capabilities to customer needs and building all processes around improving customer experience.
Why are people important?
KMDA study” shows that ordinary employees and top managers assess the level of transformation of the company differently.
Top management rates the use of digital technologies in the work of the company higher than ordinary employees. This may indicate that management may be overestimating the situation, while ordinary employees are not informed about all projects.
Researchers unanimously argue that no organization can reap the benefits of next-generation technology without putting employees at the center of its strategy. To understand why, we need to consider the three main elements of digital transformation.
The first is speed
Machine learning and automation can accelerate all business functions, from supply chains and customer service to finance, HR, security and IT sharing. They also allow business processes to adapt and improve on their own.
The second is intelligence.
Companies have traditionally relied on KPIs to “look into the past” — the analysis of the results obtained to build 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 improves human decision making.
The third and most important element is the importance of the human experience.
Thanks to digital technologies, companies can improve the brand experience for both the client and the employer. This experience requires continuous quality improvement to achieve business objectives.
And yet, as with any technological change, adjusting thinking and behavior can be the most difficult and most important task to overcome.
Each of these elements in itself can become destructive. Together, they represent one of the biggest shifts in labor history. Companies can invest in acquiring cutting-edge technology to accelerate the digital transformation process, but that investment will be wasted if employees don't embrace the change. To capitalize on this shift, businesses need to create a strong internal framework.
5 Lessons from Successful Companies
In March 2019, Harvard Business Review published an article written by 4 current CDO companies. Behnam Tabrizi, Ed Lam, Kirk Girard and Vernon Irvine have combined their experience and written 5 lessons for future CDOs. In short, then:
Lesson 1: Before you invest in anything, define your business strategy. There is no single technology that provides "speed" or "innovation" per se. The best combination of tools for a particular organization will vary from one vision to another.
Lesson 2: Using insiders. Companies often involve external consultants who use generic methods to achieve “maximum results”. Experts advise to involve in the transformation of experts from among the employees who know all the processes and pitfalls of the business.
Lesson 3: Analyzing the work of the company from the point of view of the client. If the goal of transformation is to increase customer satisfaction, then the first thing to do is to talk to the customers themselves. It is important that leaders expect big changes from the introduction of a few new products, while practice shows that the best results come from many small changes in a large number of different business processes.
Lesson 4: Recognize employees' fear of innovation. When employees understand that digital transformation can threaten their jobs, they may consciously or unconsciously resist change. If the digital transformation proves ineffective, management will eventually abandon the effort and their work will be saved). It is very important for leaders to recognize these concerns and emphasize that the digital transformation process is an opportunity for employees to improve their skills in accordance with the market of the future.
Lesson 5: Use Silicon Valley startup principles. They are known for their fast decision making, prototyping, and flat structures. The digital transformation process is inherently uncertain: changes must be made first and then corrected; decisions must be made quickly. As a result, traditional hierarchies get in the way. It is better to adopt a single organizational structure that is somewhat separate from the rest of the organization.
Hack and predictor Aviator
The article is long, but the conclusion is short. A company is not only an IT architecture, it is people who cannot go home from work and come in the morning with new competencies. Digital transformation is an ongoing process of several large implementations and a huge number of small “twisting”. What works best is a combination of strategic planning and constant testing of micro-hypotheses.
Source: habr.com