Digital transformation has grown increasingly en vogue over the past decade. But even after years of investment, most initiatives still fail to deliver.
Organisations have come to see the potential offered by new technologies and today’s hyper-connected, data-rich existence. Consumer behaviour has made seismic shifts as digital and mobile technology becomes ever more pervasive in our lives. Disruption has been a reality for sector after sector, as new platforms, new business models and new entrants seized upon digital’s potency and ubiquity to upend the status quo.
‘Analogue age’ businesses have had to adapt. This has become a boardroom priority – for some, a matter of survival.
So it’s troubling that despite all the countless conferences, books, research studies and expensive consultancy assignments, most digital transformation initiatives are unsuccessful. Research last year from management consultancy Boston Consulting Group (BCG) claimed that an overwhelming 70% of digital transformations fall short of their objectives.
These failures could be expensive. In 2020, market intelligence firm IDC forecast that worldwide spending on the digital transformation of business practices, products, and organisations would reach $1.3tn. The BCG study, then, implies that some $910bn of digital transformation investments last year would fall short of expectations. That doesn’t account for the inevitable risks to revenue, profitability and cashflow for those who fail to keep pace with a changing marketplace.
The impact of the pandemic
Then came Covid-19. Almost overnight, the world changed. We couldn’t travel, shop, commute, work, communicate or socialise in the way we had the week before. Shops were shuttered, offices lay dormant, and trains and airports conveyed the abandon of an apocalyptic movie.
The flight to digital was profound. The UK saw the equivalent of 12.5 years of ecommerce growth in just one year. In the US, according to research by consultants McKinsey, a staggering 75% of consumers have tried a new shopping behaviour since the onset of the pandemic, with 77% intending to continue with these changes after Covid-19 subsides.
Transformation and business-as-usual have to become one and the same
Businesses were forced to respond at pace. McKinsey found that in Europe, the pandemic accelerated the digitisation of customer interactions by three years and the part- or full-digitisation of products and services by seven years, compared with the average rates of adoption in 2017-2019.
Rich Corbridge, CIO of pharmacy and healthcare retailer Boots UK, argues that digital has historically faced three pillars of doubt – its tangible benefit to a retail store estate, its speed and its costs. “These were quickly overcome as we saw a fundamental shift in mindset across the executive team and throughout the entire organisation,” he says. “We learned new behaviours and were given new permissions to move faster and do more, because we had to support our customers, our patients and the NHS in new ways.”
For the retail sector in particular, the need to adapt to a digital era and embrace new technologies has been discussed with a seeming sense of urgency for the best part of two decades. “In many cases, this was really only lip-service, but the pandemic made it all real,” adds Corbridge.
Covid-19 has undoubtedly been an accelerating force. However, there is a risk of complacency.
“Progress over the past 18 months has been out of necessity, not ambition,” says Daniel Rowles, programme director for digital transformation strategy at Imperial College Business School. “As we plan for a world beyond Covid-19, too many businesses are already looking to steady the ship, to bring about some calm and normality and for a return to ‘business as usual’. This is the difference between responding to a crisis in the moment and committing to genuine, long-term transformation.”
Rowles’s views highlight a common mischaracterisation – digitisation and digital transformation are not one and the same. We’ve seen a lot of digitisation during the course of the pandemic but not necessarily a lot of fundamental transformation.
Rowles argues that successful digital transformation isn’t about technology, but about creating an organisation that can continue to change. At the heart of this lies culture. “Over the last 18 months, however, most organisations will have seen new behaviours and a cultural shift that may prove not to be permanent,” he adds. “What we didn’t do is set out to create a purposeful culture – these need to be intentional, they need to be engineered, and they need to be reinforced. Otherwise they won’t endure.”
The need for a clear vision
Pandemic or not, one of the most critical ingredients for a successful digital transformation is a clear vision.
It’s a crucial starting point because of the uncertainty, unpredictability and unknowns that characterise the digitally fuelled world we live in. The traditional three- or five-year plans previously used to establish objectives and budgets, assign accountabilities and guide investments and corporate initiatives have fast become redundant. When it comes to digital transformation, an agile and fluid approach are needed, with a clear vision or destination to guide efforts.
This is something executives can embrace. It can motivate and inspire a workforce, as well as instilling confidence in stakeholders. It can build anticipation and trust among customers.
There will almost always be quick wins which can yield an in-year, attributable payback, but many investments – financial or otherwise – in digital transformation are unpredictable
What’s more, argues Rowles, it can help overcome one of the biggest hurdles in securing commitment to transformation – return on investment (ROI). “Traditional corporate planning hinges on ROI, but this is where many organisations come unstuck. There will almost always be quick wins which can yield an in-year, attributable payback, but many investments – financial or otherwise – in digital transformation are unpredictable.”
There’s a huge amount we don’t know about consumer behaviour and adoption, technology and the market, or about how quickly things can change, Rowles notes. He also points to the importance of a test-and-learn approach to innovation and investment, and the inevitable need to tweak plans in a constantly changing environment.
“Against a traditional plan and budget, pivoting might be considered a failure. But if your executive team and wider organisation are truly aligned around a common vision and share conviction, you have the foundations of a culture of continuous change.”
Taking people with you
For some, digital has become something of a dark art. Those outside of an IT or digital function can feel confused or overwhelmed by the pace of technological development, the scale of innovation over the past decade alone and the complexity of digital, perceived or otherwise. This can leave some feeling confused or overwhelmed, far from ideal when they’re being asked to commit to change.
Ash Roots is managing director of digital for BT’s consumer division, covering brands including BT, EE and Plusnet. For him, dispelling this potential confusion is key, and he outlines a vision for change in three steps.
The first is co-creation. As digital teams grow in size and status within an organisation, it’s important that digital doesn’t become a silo or create a group of people detached from the operations of the business and lacking a connection to customers.
“Working together and really involving people in defining problems, needs and an intended future destination can generate actionable insights, and help to build buy-in,” says Roots. “If you want to take people on a journey, why not work on the destination with them?”
The second is working back from outcomes. It’s easy for any aspect of digital transformation to focus on the technology or the work that will go into creating something. When you’re trying to work collaboratively, however, and to bring diverse thought and experience into project teams, this can be problematic.
“Not everyone will share a passion or enthusiasm for a widget, a bit of code or a step in a process,” Roots adds. “The technology isn’t the goal, it’s a means of delivering it.”
However, everyone can be galvanised by outcomes, he says. “Focusing teams or entire strategies around outcomes and ensuring those are rooted in customer value and/or business value helps to keep everyone aligned on why we’re really doing what we’re doing.”
The third step is what Roots calls radical transparency. “Digital cannot operate like a black box,” he adds. “Inviting people into the process, communicating constantly and openly, and encouraging both participation and scrutiny is key to demystifying digital.”
Transformation is, by its very definition, a significant undertaking. The word implies something complex, likely expensive, probably painful for some, and fraught with risk.
The term has possibly become its own worst enemy. In most cases, digital transformation is an initiative, an endeavour or project that sits on top of “business as usual’. It’s almost extracurricular in nature. The majority of an organisation continues with their work as usual, while a small minority battles to change or rewire that. It doesn’t seem like a recipe for success.
For Roots, it’s critical to view transformation as an ongoing endeavour, not a time-bound project or something separate from the core business. “Transformation and business-as-usual have to become one and the same,” he says. “Ongoing transformation is the priority for the business… we’re modernising the organisation and seeking out ways to create value for the organisation, its customers and its stakeholders.” This should be every employee’s daily mission, he adds.
“If you want a digital transformation to succeed, don’t call it digital transformation,” says Rowles.
Critical questions for leaders
Whether you’re already on a journey of transformation or about to begin, there’s real value to be found in pausing and recalibrating as a leadership team. BT’s Ash Roots advocates five important questions for executive teams to ask themselves.
- How are we enabling our people? “The pandemic has accelerated a long-building change in how we work, how we interact and collaborate with colleagues. It’s important to ask ourselves if we’re providing people with the tools they need to work in their best way as part of this transformation. It’s also about practising what we preach.”
- What are the fundamental impediments we are facing? “I love using the word ‘impediment’… people really lean-in and ask ‘what do you mean by impediment?’ It’s a great way to stimulate meaningful debate.”
- How do we create space for transformation? “Few businesses are running on 50% capacity, just waiting for a major transformation programme. If you’re to introduce a new set of priorities and initiatives for the organisation, it’s critical to have a frank discussion about what needs to be stopped or sacrificed in order to create the breathing room for people to apply themselves.”
- What are our top priorities? “Transformation programmes can yield dozens, even hundreds of projects and initiatives. The critical question for executive teams is ‘what are we going to tackle this month or quarter, and in what sequence’? Taking the time to agree priorities as a collective team will ensure that tensions or missed expectations don’t occur further down the line.”
- Are we still aligned on outcomes? “Transformation is both ongoing and never static. While it’s important to co-create a future destination and desired outcomes, it’s just as important to revisit these regularly, as things can change – and working on assumptions alone carries a risk.”
