According to McKinsey, 70 per cent of digital transformations fail. That sounds like an awful lot of failure. But, the fact is, digital transformation has become overused terminology that can describe a whole host of digitally-led enterprise projects. These are often undertaken under the misguided conception that a technology investment equals transformation. This couldn’t be further from the truth.
That’s why we’re going to look at some of the most common questions surrounding digital transformation, in an effort to dispel some of the myths, explore the benefits and give a little practical advice on how to get started.
How has the meaning of digital transformation evolved in the enterprise world?
The big change we have seen in the enterprise is who owns digital transformation. Previously, digital transformation may have been a programme of work that affected one or two business functions and was typically owned by a CTO or CIO.
However, digital transformation and business transformation have now become synonymous. The breadth of the impact of digital on enterprises means that there are virtually no areas of business that are not impacted. This means digital transformation is becoming the top agenda item for CEOs and adapting to a digitised world is at the core of most business transformation programmes.
What tends to drive organisations onto the digital transformation journey?
We see enterprises at all stages of the journey. For traditional businesses, the driver often comes from marketing departments, who are making significant technology investments and, more importantly, changing the way that they work to serve up data-driven experiences, 24/7 for their customers.
Which industries are racing ahead in digital transformation?
Rather than take an industry-led approach, we find it is more useful to compare the business models of organisations. For example, the technology industry often benefits from faster moving products and services with ongoing release patterns and schedules, lending itself better to transformation initiatives. Businesses with legacy products and services often have slower moving process and technology, meaning they are not as well structured to effect transformation.
Those pushing boundaries when it comes to digital tend not to compare themselves within their own sector. One of our clients, a global automotive company, recently said that their own industry does not push them hard enough. Instead, they aspire to follow in the footsteps of other category leaders such as Amazon, Apple and Red Bull.
What is the value that enterprises can gain through digital transformation?
The value is that they remain in business! There is a lot of research out there that suggests digital disruption will wipe out 40 per cent of FTSE 350 and Fortune 500 firms in the next 10 years. We can already witness this in the fact that only 60 companies remain of the Fortune 500 from 1955. Enterprises need to stay competitive and relevant, they need to be efficient and adapt to change. Ultimately the value will be delivered in one of two ways: bottom line growth through operational efficiencies or top line growth through increased revenue, brand equity and customer loyalty.
How does digital transformation help drive efficiencies in enterprises?
Digital transformation is not a project with an endpoint, rather a journey that enables your business to keep up with customer demands and industry trends. Gartner has remarked that 60 per cent of global 2000 companies will double productivity by the use of software-based processes by 2020. This will be enabled by digital transformation initiatives. Those that go through successful digital transformation have technology as an enabler that drives their business forward and it does not finish there.
What technologies are most driving digital transformation in the enterprise?
Where we see the most successful digital transformation is in those enterprises that are evolving and investing to become platform businesses. These are businesses whose whole organisation is rallying around a single platform to drive value for their customers. The technology leaders we see in this area are Adobe, Salesforce, IBM, Microsoft and Google. However, the sheer volume of digital technologies (circa 7000) means that digital transformation is not just being driven by the implementation of a small number of technology platforms.
There are obvious examples of organisations that are leaders in digital who have platform-centric businesses. Spotify that connects artists and listeners, Airbnb hosts to guests, Uber drivers to riders, Netflix media producers to viewers. Those organisations that demonstrate this value have digital platforms that connect their customers with the services being offered.
What is your advice to organisations looking to embark on a successful digital transformation? What are the learnings from others who have already done so?
Technology on its own is not enough. A frequent mistake is for organisations to think that a technology investment equals transformation. The most common failure we see is where technology is not adopted by the business. Successful transformation is about aligning technology, people and processes. There is no point investing in technology if you aren’t prepared to change the way that you work with it.
A common denominator of all successful digital transformations is the ability of an organisation to derive business value from its outcomes. Tightly coupling business strategy to the transformation will not only ensure the relevant stakeholders have a vested interest but also demonstrate its value in terms the business understands. As these transformations often go through a number of budget cycles, tangible progress is key to keeping everyone engaged.
Further to this, research has revealed that customer experience is now the core driver of most digital transformation programmes. As a result, customer experience should be the starting point for any digital transformation journey.
Here are some practical pieces of advice for organisations in the push to be digital, creating closer ties to clients through all of their channels with technology as an enabler.
- Do design around your customer, not your own organisation.
- Do be prepared to change the way you work, transformation does not just come as a result of technology investment.
- Do calibrate use cases for real impact.
- Don’t go for the same niche as everyone else.
- Don’t do digital for digital’s sake.
Ben Field-Johnson, Head of Business Development, WPP's Cognifide