World Economic Forum estimates that digitisation could deliver $100 trillion in value to businesses across the next decade. From basic services like healthcare and education to asset-intensive industries like Energy, every organisation has a digital transformation initiative and footprint.
Yet well-known organisations like BBC, Lego, Nike and many others have found digital transformation as a challenging transformation.
The Challenges of Digitisation
Digital transformations are highly significant, affecting all aspects of a business and as implementation begins, businesses are progressively finding out about the challenges they have to face. Lego recently defunded its Digital Designer virtual building program. Nike reduced its digital unit in half by discontinuing its Nike+ Fuelband activity tracker and a few other investments. We are seeing more and more high profile companies fail in digital conversion. In a world that is quickly transforming into the digital landscape, why are so many digital transformations failing?
These companies appeared to be on the rise in the digital landscape, but ended up failing due to performance complications. BBC's £98.4m Digital Media Initiative (DMI) failed due to confusion and lack of planning. The company reported a huge lack of communication between leadership and the actively engaged IT community. A failure to understand the problems the project faced and lack of regular project reviews during the development phase also contributed to the cancellation. Let’s take a look at the 4 key challenges to digital transformation projects.
#1. Digital Transformation is a multi-year playbook
By the time a digital transformation project is deployed, its business dynamics are changed which requires a new digital transformation project - It is an ongoing, milestone based multi-year playbook.
A study from Wipro Digital has concluded that "Only 50 per cent of companies are successfully executing on their digital transformation strategies despite demonstrated efforts and investments." The report also indicates that while 91 per cent of business owners understand what digital transformation means and have tried to apply it, only 4 per cent are actually seeing the results and implementation. Other companies say it has taken at least 2-3 years to see any digital investments come to fruition.
Around 35 per cent of companies reported that while CEOs suggest they understand what digital transformation means, they don’t understand how to put it into practice. In order to make a successful digital transformation, everyone in the company needs to fully understand what the strategy is and maintain focus. A successful strategy needs to be flexible and agile, but remain inside mainstream corporate goals as to not go beyond the corporate scope and induce confusion. The best digital strategies are focused, efficient, and integrated in everyday business goals. All of these techniques require consistency, strong business leadership and appreciation that digital transformation is a long-haul cycle.
#2. The rate of Digital Change requires ongoing calibration
Many executives also admitted they are not ready to adopt new work processes and are locked into strategy-development procedures. New forms of technology can be daunting, especially to a company that has been using the same process for decades. For a successful digital transformation, every aspect of the business has to change. Digital transformation is comprehensive and doesn’t just involve technology; it requires continuing development of changing the way you do business. It entails initial investments in skills, infrastructure, and acclimating IT systems. It also requires observation and involvement from executives to make sure that both IT and Operations are making the right decisions.
Forbes magazine held an interview with Michael Gale, a leading industry expert on integrated technology marketing, in which he stated "This is a fundamental shift in how people had to think about how they interact, how they collaborate and work and if you don't spend time changing people's behaviours, you don't spend time changing culture and how people make decisions, all of this falls flat." Consistent and continual review and reflection of digitisation goals and objectives are monumental in transformation success. One of the biggest gaps is the appreciation that digital projects can be optimised after they are launched. In a traditional IT project, the opportunity to test and iterate was limited because the underlying technologies were not web-based. For contemporary web-driven digital projects, the advancement in A/B tests and Multivariate tests provide a robust launch-test-iterate-succeed framework.
#3. Digital Transformation requires Multi-Level Communication
Business leaders were found to be overly reliant on old methodologies and processes rather than allowing the IT team deal with the complex organisational issues the digitisation faced. Communication between business leadership and active engagement of perceptive individuals is a major factor in digital transformation success. Large IT projects require a specific strategy and direction that involves all aspects of the business.
Recruiting outside expertise that is unbiased towards office politics is also a viable option. Most importantly, executives and stakeholders need to be on the same page and work towards a common goal. The CEO needs to encourage everyone to support the new strategy and embrace change. Everyone in the company needs to back the initiative. Organisational structure plays a key role in communicating digital strategy. Organisations tend to have hierarchical or flat structure, for communication to be effective, the communication cycle needs to top-down, bottom-up and sideways.
#4. Digital Transformation Deliverable: A Better Customer Experience
The deliverable of any digital transformation initiative is better customer experience and hence more revenue – it is not about digital technology itself. The customer experience can be enhanced by digitising front-end of your business or operations/back-end of your business. Take GE Aviation for example, it deployed a digital mechanism to record every movement of its airline engines whether on the ground or in the air. As a result, GE can offer all its airline customers a maintenance service which is personalised to their aircrafts/engines – A core operational level digital change which resulted in better customer experience and more revenue.
The key to success in digital transformation lies in the ability to create new and unique forms of maintaining customer relationships and experiences, and to understand the challenges that will arise. Leveraging the latest technology can't be completed overnight, but it doesn’t have to be waste of time or resources either. Thorough preparation, encouragement and direction from the CEO, communication, and focus are the essential factors in prosperous digitisation.
Prasanna Kulkarni, Founder and Product Architect, Comparesoft
Image Credit: Konica Minolta Business Solutions UK