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Five Ways to Fail at Digital Transformation 

February 4, 2022

In my last post (What’s IT got to do with digital transformation?) I claimed that for an organization to truly succeed with digital transformation, IT needs to be front and center among the organization’s functions. Any strategic direction, change initiative or product innovation must have a clearly defined, sufficiently funded and well-managed IT component. 

In this post, I list five ways to make sure your digital journey gets derailed. Oh, and if you want to succeed, here’s what to avoid! 

The board of directors 

Deep and lasting digital transformation in any organization only happens if it’s a strategic goal. As such, it must be properly understood among the board members. In many companies, digital savvy is not found at the board level. Everybody will claim that they want to go digital, but most will not grasp the ramifications. 

Some organizations will make sure that at least one board member has a deep understanding of both the potential of digitally transforming the business and the fundamental requirements that must be met to realize it. This board member will have to explain, cajole, maneuver, and convince to achieve the required shift in priorities that will move IT from the basement to center stage. It will be an uphill struggle. 

To help in that struggle, you can initiate a proper education in digital transformation and its implications for the entire board, conducted by an external digital coach. It will often help to get the message across if an “expert” from outside the organization says the same thing as the struggling board member.  

It all starts from the top. If it’s obsolete, so will your digital strategy be. 

The executive management team 

One of the core things that must change when an organization attempts digital transformation is the traditional siloed way of approaching workflows, activities, information exchange, IT-systems etc. It must be broken down and reassembled along value streams. A value stream is made up of the activities and information that flows from start to finish within the boundaries of the organization (and, increasingly, even across entire ecosystems of parties), where every step has a clear connection to the value creation that the organization offers its customers.  

The reason for shifting to a value stream focus is that a fully digitalized enterprise ideally automates most, if not all, of the steps using IT solutions, both to achieve efficiency and to collect harmonized data along the way to enable a deep and personalized customer experience, innovative digital products and services, and operational excellence.  

It is not uncommon that executives in a management team lack both a deep understanding of digital transformation and a comprehensive insight into the entire value stream, of which their department only sees and manages a part. Old siloed organizational structures, designed for a different age, incentivizes tribalism, which will impede the holistic, collaborative spirit that characterizes efficient and effective digitalization. If this is coupled with a lack of insight when it comes to digitalization you have a recipe for something less than full digital transformation. 

There are no easy fixes for this, unfortunately. All organization need “somebody” to step up and be the kernel from which change can start. It must be a leader that people look up to rather than a manager (although a manager can be a leader). But sooner or later, all of management must get with the program. Again, a digital coach can be brought onboard to help.  

We’re talking about a cultural makeover here, which means that insightful and sustained change management must be deployed.  

If your organization lacks change management skills, external expertise may be necessary. Eventually, however, the capacity to continuously drive change must be an intrinsic capability. It can be bootstrapped by external support but must ultimately be owned inhouse. 

Failure to fully embrace this dimension is one of the best ways to botch any digitalization effort. 

People and processes 

Digitalization has been, and still often is, considered primarily a technical concern. It’s all about cloud and AI and IoT and what not. In my last post I defined digital transformation as that which happens when the changed behavior among customers and employees exploiting the technology leads to realizing these values (where the values referred to are all the potential goods inherent in said technology).  

This means that any digitalization effort must have at its core a clear understanding of how any proposed changes influence people. You must be able to explain, motivate and excite people to come along for the journey. You must have a setup that continuously involves both employees and customers in your digitalization efforts. This will typically involve designated roles like process owners and process support. These roles will also play a crucial role in continuously improving the processes, including interacting with the development of IT solutions (more on this in the next section).  

Fail at this and expect to see your digitalization dreams fly out the window. 

Enterprise architecture (EA), IT governance and agile development methods 

EA is something that has traditionally been the purview of large enterprises. It aims to bring together business development and the development of IT resources supporting the changing needs of the organization. To truly digitalize an organization, some flavor of EA must be deployed as soon as more than a handful of persons and IT systems interact. 

IT governance is about defining and enforcing common policies and guardrails to make sure that the organization and its IT landscape can leverage all the existing and emerging services that embody the tech goodies we’ve been talking about. It’s also required to make sure that short-term suboptimization doesn’t render the entire IT landscape obsolete and incapable of rapid change. In the era of digital, some common areas that need continuous focus and alignment include where to run your IT (on-premises or in the cloud), what IT to run (buy or build), security, data, and integration. Increasingly, AI and machine learning will also become relevant to more and more organizations. 

Agile development methods have risen in popularity over the last decade or two, because it offers a solution to the challenge of developing new processes and IT resources in an environment of high uncertainty both regarding exactly what problems need to be solved and what the solutions might look like. Digital transformation is characterized by a lot of so-called fail-fast initiatives. This means that to innovate, an organization deploys design and development methods that quickly can confirm or refute a hypothesis regarding customer preferences or end-user needs and then iterate towards a better and better fit with evolving business demands. 

All these aspects of “doing IT” (architecture, governance, and agile development) must be conducted in a coherent way across the organization. In the end, it boils down to assigning roles, setting up well-defined, regularly occurring collaboration forums, and systematically documenting and breaking down ideas into actionable development tasks carried out by DevOps teams. As stated in the previous section, process owners and process support persons should be an integral part of this structure.  

Ignoring this area is another surefire way of failing at digitalization. 

The bottom line – show me the money 

As I elaborated on at some length in my last post, IT is no longer a peripheral support thing, like an office, or telephony, or power. It’s the business enabler of the 21st century. I have interacted with many clients who are waking up much too late to the fact that their stagnant business performance can be traced back to inadequate capabilities to leverage their data. Very often, their lackluster results stem from a lack of customer insight. They can’t personalize the customer experience, or capture e-mail addresses in interactions with potential customers, or any number of other data-related shortcomings. 

But fixing crappy customer data is only the beginning. There are endless opportunities for innovation and improvement if you start perceiving digital capabilities as a core component of your business development. 

This will require a shift in priorities, not least when it comes to your budget. Too late have many woken up to find that the required change in their digital capabilities is no longer possible because they don’t have the money to fix it. The lesson here is that procrastinating results in a double whammy: the longer you wait, the messier your IT landscape gets. The messier your IT landscape gets, the costlier fixing it gets. Plus, every day you dally is another day of lost opportunities. So, indecisiveness will eat at both your top and your bottom line. 

Deep digitalization isn’t cheap. But it is a mandatory strategic direction for any organization who wants to prosper in the upcoming years and decades. You can’t walk away from it.  

The final tip for anyone who wants to not succeed in digital transformation is to be cheap about it. 

Conclusion 

So, here’s your cheat sheet if you want your organization to not join the digital future. If you do want to join, just do the opposite! 

  • Make sure your board is clueless about the promise of digitalization and the implications of realizing it 
  • Have an executive team that is incentivized by 20th century siloed organizational models and make sure most of them are digital newbies 
  • Ignore people and processes and go straight to all that glorious tech! 
  • Skip architecture and governance. Let everybody do what the please – after all, it’s much faster and cheaper, no? 
  • Keep IT on a tight leash. The less it costs, the better! 

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