Digital transformation: Why companies fail despite having the intent and even the wherewithal to transform

As the year comes to an end, there are bound to be articles and lists making the rounds about the top trends to watch out for in 2017. Technology will play the lead role in all these listicles, as it continues to disrupt every industry and business around us. The rate of institutionalization of disruption is at its highest ever.

Technology has changed how we shop for groceries (e.g., Bigbasket), share (e.g, Facebook live), socialize (e.g., Whatsapp) and travel (e.g, Uber/Ola). Which is why, existing business models, even the successful ones, need to evolve and disrupt before they get disrupted. To remain competitive and stay relevant, companies are increasingly undergoing transformation.

The flavor of transformation may differ, but there are five broad dimensions around which these changes are occurring. Let’s take a look at what it entails:

i)                  Organizational and structural: Often, the first step is to create a transformation committee and / or hire a transformation leader / a Chief Digital Officer. This introduces focus and structure to the process, and signals a sense of urgency. It also helps to bring in external expertise to kick-start the process.

ii)                Cultural: This is critical and perhaps the hardest to execute. Redefining the culture in successful companies is not easy, but a crisis, even if imminent, can become a rallying point for change. Introduce values like agility, risk-taking and a learning mindset. Ensuring that just about everyone in the company starts building an appreciation for technology and data is an investment worth making, sooner than later. Many companies now recognize that they are intrinsically data and technology-led businesses.

iii)              Operating model: Speed up the decision-making process. This can be done only by reducing layers, especially in large organizations. Also, explore rolling out a product model instead of the traditional project management approach to get work done. Companies are increasingly going agile. This forces an iterative way of development, which helps when customer expectations and needs are fast evolving.

iv)              Prioritization: Reduce the number of projects, many of which are a strain on resources and finances and have dubious projected ROIs, and hold leaders accountable. Move to a constrained resource model and aggressively choose what not to do. This will help draw focus to what’s most important.

v)                Innovation and external focus: Companies can’t grow through just cost optimization or by merely driving operational efficiencies. Innovation is the only sustainable way to growth. Many companies have set up dedicated verticals with a license to disrupt and look for new revenue streams. Partner with the startup ecosystem and engage externally with disruptors and researchers. This is different from promoting innovation as a way of working, which needs to be more pervasive across the company.

Each of these dimensions are important for digital transformation. When implemented in a holistic manner, these can help companies succeed. Yet, despite the will and the wherewithal to change, few companies are able to effectively transform. Even if they do, the results are often incremental in nature. What hinders these efforts? Is there an x-factor that can help accelerate transformation?

When change impacts individual leaders and teams, they tend to rationalize incremental as transformational. There is also an element of risk involved in any transformation. Building this risk appetite is tough, especially for those who’ve been given a mandate to deliver quarterly financial results. It takes a functional or business leader with two key skills – expertise and risk-taking to significantly accelerate transformation.

Expertise could mean knowledge about the business and / or someone with strong process, data and technology acumen. Often in the midst of change, mid-level managers tend to argue that too much change is detrimental to business or that incremental change is enough. It falls on the leader to lead with data, challenge status quo and get his/her hands dirty to deliver transformational results.

Risk-taking is about having the courage to provide air cover to teams pushing the boundaries. This works only if the leader understands the business and its risks, has earned trust and credibility, and has the support of the CEO / Executive Leadership.

Such leaders are hard to find and often companies shy away from putting experts at the top, indexing towards general athletes, who are good at navigating the organization. As companies think about transformation, having a structured framework like the one outlined above would be key to enabling sustainable results. Having experts with a solid understanding of process, data and technology and a real appetite for risk taking, in key leadership roles might just be that elusive x-factor to accelerate transformation!

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