Everyone wants to transform their businesses, and everyone who’s alive knows that transformation now depends on digital technology. Everywhere I go I hear about “amazing,” “fabulous,” “terrific” and “incredible” transformation projects underway, projects that will “disrupt” and “revolutionize” companies. When I ask transformation teams about specific projects, however, I often get blank stares. Sometimes it feels like transformation projects are ordered (like burgers) by outsiders, like financial analysts who cover public company stocks, and not insiders who are often threatened by change.
It’s hard to find really smart, well-funded passionate digital transformers.
In the 1990s, we called all this “business process re-engineering.”
But many of these re-engineering initiatives failed spectacularly.
Every consultant on the planet today has a suite of products and services that enable digital transformation. When well managed, consultants will help you save money and make money by leveraging digital technology. Some of them will also help anticipate the impact that emerging digital technology will have on your industry and your company. But only the really good ones can predict the future: clairvoyance is still a tough skill.
But what is digital transformation (DT)?
My Forbes colleague, Jason Bloomberg, talks about digital transformation ignorance in no uncertain terms:
“Altimeter Group released their new report on The 2014 State of Digital Transformation by Brian Solis earlier this week. The central conclusion of the report, which is available for free download: ‘Only one-quarter of the companies we surveyed have a clear understanding of new and underperforming digital touchpoints, yet 88% of the same cohort reports that they are undergoing digital transformation efforts.’ In other words, the vast majority of people Altimeter interviewed for this report claimed they are undergoing Digital Transformation, even though most of them don’t know what it is.”
For the record, and with the help of Wikipedia, let’s think about digital technology as:
“Digital transformation refers to the changes associated with the application of digital technology in all aspects of human society. Digital transformation may be thought as the third stage of embracing digital technologies: digital competence → digital literacy → digital transformation. The latter stage means that digital usages inherently enable new types of innovation and creativity in a particular domain, rather than simply enhance and support the traditional methods. Digital transformation affects both individual businessesand whole segments of the society, such as government, mass communications, art, medicine or science.”
So with all this in mind, let me suggest 5 steps to successful corporate DT.
Some of these are obvious, but some are not. Put another way, not every company can – or should – be digitally transformed. So before setting up an “Innovation Lab” or funding huge transformation projects, do your homework:
- Formally map your business with tools – like business process modeling (BPM) – that enable creative, empirical simulations. If you cannot model your existing business processes and your overall business model, you cannot transform anything. Use external vertical industry consultants to model the processes and use internal subject matter experts (SMEs) to develop transformation hypotheses. Run the hypothetical models over and over again by changing the variables that predict to transformational improvements.
- Identify the leverage points in your business models and processes. Do this by collecting empirical data about the costs and benefits of the existing processes and models and through “what-if” simulations of alternative improvements. You should also look at what your competitors are doing as well as companies in adjacent industries. If simulation results fall short of measurable transformation, stop testing. Not every company, process or business model will benefit from digital transformation.
- Prioritize the transformational options. What is the transformation goal? Is it to save money, increase market share, increase profitability, retain employees, disrupt a company and industry … what? You must know where you’re going to get there. You also need to reality check your prioritized objectives according to budget, time, talent and market constraints: use outside consultants who have no vested financial interests in their recommendations to screen transformation alternatives. Never rely on internal professionals to adopt or reject transformational options. Their recommendations will be influenced by too many vested interests. From the options list identify and integrate specific transformation projects to be led by outsiders: insiders may sabotage transformation processes.
- Identify the range of available operational, strategic and emerging technologies that might enable the prioritized transformational options. Simulate the current and expected technology capabilities to the prioritized transformational functions. Find the smartest consultants you can find to describe future technology capabilities. Bet on a suite of transformational operational, strategic and emerging technologies. Note demographic trends here as well as behavioral trends especially around customer journeys and buying processes. But also note the manufacturing, distribution and service processes enabled by emerging technology and how integrated processes and technologies can be optimized.
- Find leaders with courage. They are hard to find for all sorts of reasons. If steps 1 – 4 have been taken, we can assume that there’s a healthy appetite for change, but that change must be tested with widespread, public support for digital transformation and with multi-year financial support. Without open leadership and big budgets, nothing will change. Leadership should also be demanding: if the ROI on transformational projects is negligible, then the projects should be killed. If results achieve or exceed expected ROI, they should be accelerated.
Some of you will see the five steps as obvious. Some will see them as necessary but not sufficient for DT success. The essence of success, at least in my view, is structure and measurement. There’s also that nagging requirement to disrupt everything all the time. If only Blockbuster had become Netflix and Borders had become Amazon.
If only.
The fact is that industries do not transform themselves overnight: Facebook, for example, was founded in 2004, Airbnb was founded in 2008 and Uber was founded in 2009.
Transformation takes time.
Mistakes are encouraged.
But there’s a process.
