Let's Get Real -- What is Digital Transformation???
The Digital Leader Newsletter — Strategies and Techniques for Change Agents, Strategists, and Innovators.
It’s late 2021, and most companies are still chasing their “digital transformation”? When did this start? Will it ever end? What are we learning? Does it pay off? What the heck is “digital transformation”? What comes after? Does “digital transformation” mean we’ve just hired a busload of consultants in perpetuity??
How do we change the trajectory of our digital transformation?
Current State: Digital Transformation = Buzzword Bonanza
Cloud computing. Artificial intelligence. Digital robots. Remote work. Mobile ordering and many more — all are part of the digital transformation buzzword bonanza.
It’s easy for us all to agree that most companies have a digital transformation strategy. Estimates are between 90% and 70%1. And the market of digital transformation keeps growing. We are all aware of the likely failure or disappointment in these transformation programs. According to the Everest Group
A whopping 73 percent of enterprises failed to provide any business value whatsoever from their digital transformation efforts, according to an Everest Group study last year. Furthermore, 78 percent failed to meet their business objectives. Put another way, only 22 percent achieved their desired business results.2
The digital market is growing; leaders understand they have to “transform,” but they also know the likelihood of not achieving their goals is high. Interesting…go on.
The complexity starts with building a common language and taxonomy on what “it” (digital transformation) is or why “it” fails. Having this encompassing, squishy, and amorphous buzzword bonanza of “digital transformation” is fine at the macro-market marketing level. But this lack of shared definitions and taxonomy is a massive issue if you are trying to succeed in the transformation.
Each company wants transformation and is investing in transformation, but most lack the common language needed to succeed. In this week’s edition of The Digital Leader, we tackle this critical truth:
You can’t “transform” if you don’t have a definition for the future state
What is “Being Digital”?
In Think Like Amazon: 50 1/2 Ideas to Become a Digital Leader, I give this definition for “being digital”:
But what does “being digital” mean? A lot of companies believe it means investing in your mobile experience and handheld devices and e-commerce. Others think it’s about cloud computing, on-demand capabilities, and application programming interfaces (APIs). While these are all important enablers, they are not what being digital is. Digging down, digital is about two things: speed and agility—externally to your customers and market and internally within your organization. More specifically, it is about speed and agility wrapped in new business models, innovation, and the collection and use of an immense amount of data. Speed is a very precise repetitive motion. It’s about moving in one direction very efficiently, very precisely. Operational excellence at scale is the business equivalent to speed. Agility, on the other hand, is the attribute or skill to sense key facts, indicators, and market shifts and to quickly make changes and adjustments. Innovation in your business is driven by agility—that is, the ability to make both big and small change happen. Becoming digital is about your business building these traits and competing differently.
Becoming digital means using all the available tools to develop our speed (aka operational excellence) and our agility (aka innovation and change). Tools like data, ML, agile methodologies, measuring the customer experience are the means to an end. No one tool or set of tools defines “digital.” We use tools to develop speed and agility in our business.
Future State: Tangible Outcomes & Capabilities
There are many reasons why most digital transformations fail. To “transform” means to evolve and change. In the case of a business, this change needs to happen in a directed or guided manner; it needs to happen at pace, has an ROI, and create business value. Incorporating these two steps will improve the outcomes of digital transformation.
Action #1: Define the “What if…”
Build a vast catalog (25 to >100) of specific “what if …” use cases, processes, examples of prior behavior, or pain points that could be transformed. These are not just the current state (the “from”) but much more critical is the future state (the “to”).
What if … 25% of revenue will come from subscription revenue enabled by “smart devices”+ services by 2025 (comment: this future state would force a business model and product innovation agenda to be developed as part of the digital transformation)
What if … customers will enter information once and never have to enter redundant information as part of the loan process (comment: this future state would force the customer experience redesign, integration of systems and data flows, and likely the application of AI)
What if … office staff productivity will improve 10% every year for the next five years. (comment: Shazam! This “simple” statement opens up a Grand Canyon-sized set of topics and needs. We need to measure productivity; we need to define outcomes; we need to rationalize activity; we need to re-engineer processes; we need to apply digital agents, robotic process automation, and other technologies)
These “what if…” examples provide three different outcomes and goals, all of which are under the vast umbrella of digital transformation. But now we can get to work. We can make decisions, provide further definition, apply budget, build a business case, and most importantly, we can communicate in a tangible manner versus a confusing and ill-defined manner. This leads to the second step — rationalize.
Action #2: Rationalize
If you are at all creative in the first step of building use cases, you will have a vast (25 to >100) of potential concepts. You can’t do them all, at least not at once. Build a simple rubric for evaluating these concepts and then set a course. An example of a simple rubric might be evaluating concepts by “potential benefit” versus “potential risk.” I’d recommend having distribution in the portfolio.
It’s pretty simple. You can’t transform if you don’t have a definition of the future state. The best way to define the future state is to play the “what if…” game and then rationalize the ones to pursue.
What if … a customer could have an online order delivered tomorrow (or in an hour)? What if … a programmer could just rent on-demand computer infrastructure and tools. Do these use cases sound familiar? This “what if…” game is a big part of the Amazon culture and is the starting point for your digital transformation.
About The Digital Leader Newsletter
This is a newsletter for change agents, strategists, and innovators. The Digital Leader Newsletter is a weekly coaching session focusing on customer-centricity, innovation, and strategy. We deliver practical theory, examples, tools, and techniques to help you build better strategies, better plans, better solutions — but most of all, to think and communicate better.