What Is Digital Transformation?
In its simplest definition, digital transformation means using technology to do your business more efficiently and effectively and to increase your gains.
The point I really want to highlight here is that the terms ‘Digitalization’ and ‘Digital Transformation’ are often used interchangeably and treated as synonyms. Yet there is a difference, however subtle. While ‘Digitalization’ means choosing digital tools to do your work and digitizing the devices you use, ‘Digital Transformation’ is more about change in the cultural dimension of the business. In fact, it would not be wrong to call it evolution. ‘Digital Transformation’ means developing your organizational structure, the way you do business, your business processes, your employees and their skills, and redesigning them to deliver better results.
Why ‘Digital Transformation’?
The secret lies in its definition: gain, or simply ‘improvement’.
The pandemic taught us very well how carefully we need to treat our employees, how we need to review our strategy to expand their opportunities and/or options, and how we need to be willing to invest more in this area.
To keep our business running and our employees physically safe, we had to put the possibilities offered by technology to work. Having used home/remote/mobile working arrangements, which we were not very keen to adopt under normal conditions, even if somewhat by force, also boosted our courage in this area. Many companies with large workforces decided to make this practice standard and to close some physical workplaces. They did not do this only because the pandemic forced them to: they discovered that the same or even higher levels of efficiency could be achieved at lower cost, and they put what they learned into practice.
How can we achieve Digital Transformation?
Starting again from the simple definition in the introduction, by definition the first area of focus is ‘technology’, meaning systems and software assets. With the reflex this focus creates, we immediately start looking for software packages and/or systems. We assume that once we put technology in place, digital transformation will follow naturally, without objection or resistance.
If only it were that easy. Then we could create a recipe solution and recommend it to every organization.
At this point, my recommendation is McKinsey's 7S model.
Figure 1 McKinsey 7S Model
You can think of these ‘S’s as seven stations you need to stop at when defining your approach. If we translate them into the language of ‘Digital Transformation’ and put them in order:
Figure 2 McKinsey ‘S’s in the language of Digital Transformation
To summarize the flow: start by creating a ‘Digital Transformation Strategy’, check how well the current organizational structure (hierarchical, flat, matrix), our employees and their skill sets align with this strategy, and identify the gaps. To close these gaps, we should work out how to shape the corporate culture, redesign our organization and restructure our business processes to fit the new structure. Only at the very last stage should we start researching the technology that fits the resulting design.
Why do Digital Transformation initiatives fail?
The fact that failed initiatives outnumber those that reach their goal (according to a study by Forbes, 70% of initiatives fail) automatically brings the question ‘Why?’ to mind.
The biggest reason is that organizations dive in without creating a strategy. Organizations that think changing technology will complete the job focus only on the technology dimension. They try to find the software package or system integrator holding a magic wand and focus all their energy on this task. When they think they have found it, they hope the magic touch will happen and all their problems will be solved at once. As the saying goes, “easier said than done”, but even saying it turns out to be hard. Even though it is hard to say and to believe, so many organizations follow this pattern that one cannot help being surprised.
According to the Forbes study, all the reasons listed are somehow related to the lack-of-strategy syndrome we mentioned above:
- Being unable to manage data effectively because it has grown very large and become distributed. Being unable to serve large volumes of data spread across cloud and on-premises systems where and when operational efficiency needs it.
- Failing to get the organization to embrace the goals and implementation methods of the initiatives. Failing to set up the responsibility matrix and task distribution properly.
- Trying to move forward without building an Organizational Change Management structure. Trying to build and/or run new technology on broken or inadequate infrastructure.
- Failing to manage employees' resistance to change. Not planning or taking the steps that cultural change requires.
- Failing to foresee the effects of change on operations. Ignoring the effects on end-user experience. Taking customer satisfaction out of focus and thus creating fertile ground for customer dissatisfaction and loss.
- Not clearly defining the goals of the transformation project and/or failing to communicate them properly to stakeholders.
- Not cascading transformation goals down to departmental performance goals. Failing to coordinate team goals.
- Confusing the concepts of ‘Digitalization’ and ‘Digital Transformation’.
- Insisting on continuing to use outdated technical equipment.
- Lack of commitment, especially lack of belief and commitment in the leadership team.
- Failing to take initiative because of an inability to take on the possibility and risks of short-term, temporary failure.
- Not expanding and developing employees' skill sets properly.
- Exaggerating the benefits and underestimating the costs.
In conclusion, all the items listed above essentially stem from transformation initiatives handling the issue with a one-dimensional, shallow approach.
You need to take change seriously, try to see all its dimensions and plan for them. Because if you ignore your business processes, your corporate culture and your employees, and if you disregard the changes they will go through, I am sorry to say your initiative will do no more than add to the failure statistics of the Forbes study.
İlhan Kesken
PMP, Project Office Manager
Sources
https://dergipark.org.tr/tr/pub/nisantasisbd/article/1459265
https://dergipark.org.tr/tr/pub/beyder/article/1163107
https://www.microsoft.com/insidetrack/blog/digitally-transforming-microsoft-our-it-journey/
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