Digital transformation is a top priority at most enterprises today. In case your organization isn’t engaged in one already, or has not vowed to launch one soon, your board or CEO is probably wondering what is holding you back.
Indeed, digital technologies and their widespread adoption have created opportunities for radically new business models, unique customer experiences, and streamlined internal processes. If they are deemed to be so strategic, why do so many efforts stall or fail?
Here are the five most common sins of digital transformation that we have observed throughout the technology, media, advertising, banking, and retail industries, as well as practical approaches to avoid them.
1. Greed: Trying to transform everything at the same time
It is tempting to use digital transformation as a rallying cry for major, sweeping change. Revolutionizing customer relationships, keeping up with born-digital competition, boosting employee satisfaction, generating cost efficiencies, and even rejuvenating a brand image can all fit under the “digital transformation” umbrella. As a result, many transformation efforts are too greedy: They cover too many business areas at once or tackle the most complex activities first.
Successful transformations follow a step-by-step approach, with each step aiming at attainable change in one key transformation metric. The operative words are “attainable” and “key transformation metric.” Choosing and communicating these metrics is one of the most important tasks leaders have. They should directly impact the P&L or customer satisfaction yet be easy to understand inside and outside of the organization. They may include share of sales via digital channels, average customer acquisition cost (CAC), digital subscription revenue, and percent of digital-only service interactions. Once they agree on a key transformation metric, leaders must dissect it into its underlying drivers and address each of them.
2. Sloth: Boycotting the transformation through inertia
Does everyone at the C-level actively share ownership of the key transformation metrics? Digital transformation efforts stall not because of a lack of vision or good intentions, but because of internal inertia. Often leadership teams assign the responsibility for digital transformation to a chief digital officer (CDO), chief revenue officer (CRO), or other individual responsible, while the rest of the organization ends up de facto boycotting any meaningful change. IT is sluggish in enabling new services or tools, HR resists adjusting compensation to attract top digital talent, finance shaves off investment funds, sales takes a wait-and-see approach before staffing the digital sales team, and product groups find it impossible to adjust roadmaps. Then, as soon as the transformation ruffles too many feathers, finger-pointing starts, the CDO or CRO is out, and the leadership team promises to make a better hiring decision next time.
Instead, to succeed, the top team must own the attainment of key transformation metrics as a group and agree to share responsibility for the overall digital transformation--with the understanding that each of their teams will need to evolve. The CDO’s or CRO’s role is to moderate the development of the transformation agenda by the leadership team as a whole, measure progress, identify roadblocks, and drive cross-functional coordination.
3. Pride: Pursuing misaligned plans across the organization
Not aligning across departments on the specific steps needed to improve a key transformation metric, or overzealously launching a myriad of disparate initiatives, can be very ineffective and wasteful.
The best transformations rely on a single, companywide plan covering all elements of a value chain. They also require business areas to collaborate closely. Instead of running a “transformation team,” effective CDOs or CROs work closely with peers who are aligned on their key actions and understand how they jointly affect each key transformation metric. They have few direct reports but participate in many department-level initiatives to ensure companywide alignment.
4. Gluttony: Asking everyone to transform
Countless digital transformations start out with the grandiose ambition of transforming the entire organization and postulate that everyone will have to transform and be a change agent. Paradoxically, the best transformations are deliberate about minimizing the number of people involved and what roles they need to play. Unless an activity needs to change to improve a key transformation metric, it is better left untouched.
It might sound motivating to put an entire company in “digital transformation mode,” but this message carries very real risks: It distracts from the current revenue-generating business and leaves many teams wondering about how exactly they should transform or reskill, causing a flurry of fruitless initiatives. Eventually, as business results are achieved, the new digital business models and processes will replace existing practices and involve a majority of employees and partners.
5. Lust: Believing that technology will solve all problems
Technology is, of course, at the heart of digital transformation, but it is a means, not an end. It should come last, not first. CIOs, CMOs, and even CEOs are being courted with endless shiny toys, and it is tempting to believe that the right investment will bring precisely the capabilities the organization needs. In practice, technology is rarely the bottleneck. Skipping the necessary homework will only lead to struggles in using to their full extent the functionality of digital tools for sales, support, marketing, analytics, etc.
Without first defining key transformation metrics, rethinking customer-centric business models and processes, addressing organizational inertia, putting in place ways to align and track progress at the very top, and leveraging the right talent, technology efforts are moot. As is so often the case, it boils down to the leadership team having a clear and shared understanding of what business results they want to achieve with their investments.
What about the other two cardinal sins? Avoiding the above pitfalls should shield practitioners from shareholders, customers, and employees’ Wrath. And causing competitors to feel some Envy for a flawless and successful digital transformation is not necessarily a bad outcome.