Digital transformation is considered the 4th Industrial Revolution. To survive, all companies must go through it. Forrester reports that Digital Transformation is the number one business challenge (or opportunity) that will affect business results. Meaning that’s higher than the impacts of the economy and global markets, higher than the competition, and higher than political uncertainty.
The exciting part of Digital Transformation is that it is something that a company can do something about – it is not an outside factor like the economy. The downside is that according to Bain & Company, only 5% of companies have achieved or exceeded expectations in Digital Transformation.
Bain study of hundreds of companies:
So, why is it so challenging? As a mathematician, I always like to write a problem down as a formula so I can then break things down into its components and prioritize which elements I want to focus on. So here is my formula for Digital Transformation:
We can take the math further and change this into a regression equation where the dependent variable is Digital Transformation Success (DTS) or the result we are trying to predict. The independent variables are customer needs (CN), data democratization (DD), smart technology investments (STI), smart people (SP), clear goals (CG), leadership alignment (LA), and a culture of growth (GC).
An example of what a regression model could look like for Digital Transformation success could be:
Where b subscript 0 through b subscript 7 represent the regression coefficients of the model that describe the weight or size of the effect the independent variables are having on the dependent variable. Still with me here? The bigger the absolute value of the coefficient, the more effect the independent variable has on the dependent variable.
And that’s why it is hard. Each of the 7 variables on its own is a significant undertaking. Yes, it is hard. Yes, it can be expensive, but this is what companies need to embrace to thrive. If it was easy and didn’t cost much, then any and all companies could achieve Digital Transformation. So, how much weight does each variable play in success?
Let’s break each of the variables down:
Customer’s Human Needs: The change in consumer behavior is a significant impetus in the need for companies to accelerate their digital transformation. Smartphones are powerful computers that run personal and business apps, connect to any business, entertainment, and provide all forms of communication. Consumers live online and have super high expectations of any business interaction. Fundamental to digital transformation is understanding your customer’s needs and how they are changing. Consumers today demand convenience, self-service 24/7, empowerment, efficiency, value, and many times, elegance. How can your business adapt and evolve to the new modern consumer? Conduct a needs assessment of your customer. That will inform you of what goals to set needed for your digital transformation.
Democratized Data: There is a broad acceptance that companies need to be more data-driven in their decision making and enable data democracy. Data democratization is empowering your employee population to have access to the available data in a timely and equitable way. Companies first need to move away from separate silos of data to a centralized platform that connects to all data points. There are great third-generation business intelligence platforms that make this possible within reasonable budgets and achievable timelines. For our clients, we have chosen the Domo platform to connect to the various digital marketing systems, eCommerce systems, analytics systems, inventory systems, accounting systems, and ERP systems. The goal with data democracy is to make it easy, simple, and rewarding for employees to look at data through intuitive visualizations and gain insights to recommend actions for improvement.
Smart Technology Investments: The technology investments for digital transformation are steep. The objectives are to reinvent and streamline processes, automate as many repetitive tasks as possible, visualize performance, and modernize customer interactions. Chose technology that is ready for prime time for core functionality and experiment with emerging technology for competitive distinction. Be selective and make sure that you have established appropriate measurements and KPIs. And always allot more time than expected.
Smart People: Every company hopes that they consistently hirer smart people at all levels. When adding new staff, have a check-list of questions about their digital experience, excitement, innovative spirit, and appetite to streamline processes. For existing staff, invest in training. New digital processes can be scary and confusing at first. Give them time to learn and adjust. Make sure all staff know and appreciate the importance and value of transforming all aspects of the business. Digital transformation enables the company to remain competitive, scale products and services, reach new audiences, and increase sustainability.
Clear Goals: Digital transformation is not a single project but a long-term and continuous program. Pivot to high growth, high-value areas to automate. Don’t just automate an existing process and expect transformation. Don’t automate your excel spreadsheets or create visualizations of your excel spreadsheets. Instead, start by reviewing what the right business questions you should be addressing in this digital world. For example, instead of measuring same-store growth YOY as the goal, measure how much the metropolitan statistical area (MSA) performance improved including sales from the store and also sales through eCommerce, marketplaces, and wholesale. Digital transformation requires that the right infrastructure is in place. Building the infrastructure where you can house data in one place must be an early goal. Then, look at all the repetitive tasks and set goals to automate or eliminate them (if they serve no current value). And always be reviewing your customer needs assessment and set goals to digitize, enhance, and provide more value in all of your customer interactions.
Leadership Alignment: The C suite (CEO, CIO, CTO, CMO, CRO, etc.) has to have clear alignment. And so does the board of directors. If your board is older (as most are), make sure that you add digital transformation expertise from the outside the organization that will be respected and taken seriously (typically through a consultancy). The leadership needs to agree on priorities, measurements of success, and the allocation of time to train and bolster communication. Accept that it won’t go entirely to plan and remain agile making adjustments along the way. Iteration and failure (fast failures hopefully) are all a part of change.
Growth Culture: Changing the way your staff operates is a complex process. You need to have a digital growth culture that incorporates the belief that we can do more if we embrace automation of repetitive tasks, collaborate more frequently, move to data-driven decision making, and become more customer-centric. Things don’t always go smoothly, but if your leadership and staff work together and take an iterative approach, then you can seize the moment and capitalize on your opportunities. Digital transformation is more about people than technology. Hire and train staff for growth mindsets. The hearts and minds of your team must embrace change before you can realize the benefits of digital transformation.
Hopefully, this blog post has given you the inspiration to create and maintain a growth mindset in your company culture. We get it, digital transformation is hard. But we also understand that one of us isn’t as smart or as strong as all of us.
Have questions? Feel free to drop us a line to see how we embrace digital transformation. Or, let us know down in the comments.