How to create the best conditions for digital transformation success

Dig­i­tal trans­for­ma­tion has grown increas­ing­ly en vogue over the past decade. But even after years of invest­ment, most ini­tia­tives still fail to deliv­er. 

Organ­i­sa­tions have come to see the poten­tial offered by new tech­nolo­gies and today’s hyper-con­nect­ed, data-rich exis­tence. Con­sumer behav­iour has made seis­mic shifts as dig­i­tal and mobile tech­nol­o­gy becomes ever more per­va­sive in our lives. Dis­rup­tion has been a real­i­ty for sec­tor after sec­tor, as new plat­forms, new busi­ness mod­els and new entrants seized upon digital’s poten­cy and ubiq­ui­ty to upend the sta­tus quo.

‘Ana­logue age’ busi­ness­es have had to adapt. This has become a board­room pri­or­i­ty – for some, a mat­ter of sur­vival. 

So it’s trou­bling that despite all the count­less con­fer­ences, books, research stud­ies and expen­sive con­sul­tan­cy assign­ments, most dig­i­tal trans­for­ma­tion ini­tia­tives are unsuc­cess­ful. Research last year from man­age­ment con­sul­tan­cy Boston Con­sult­ing Group (BCG) claimed that an over­whelm­ing 70% of dig­i­tal trans­for­ma­tions fall short of their objec­tives.

These fail­ures could be expen­sive. In 2020, mar­ket intel­li­gence firm IDC fore­cast that world­wide spend­ing on the dig­i­tal trans­for­ma­tion of busi­ness prac­tices, prod­ucts, and organ­i­sa­tions would reach $1.3tn. The BCG study, then, implies that some $910bn of dig­i­tal trans­for­ma­tion invest­ments last year would fall short of expec­ta­tions. That doesn’t account for the inevitable risks to rev­enue, prof­itabil­i­ty and cash­flow for those who fail to keep pace with a chang­ing mar­ket­place.

The impact of the pandemic

Then came Covid-19. Almost overnight, the world changed. We couldn’t trav­el, shop, com­mute, work, com­mu­ni­cate or socialise in the way we had the week before. Shops were shut­tered, offices lay dor­mant, and trains and air­ports con­veyed the aban­don of an apoc­a­lyp­tic movie.

The flight to dig­i­tal was pro­found. The UK saw the equiv­a­lent of 12.5 years of ecom­merce growth in just one year. In the US, accord­ing to research by con­sul­tants McK­in­sey, a stag­ger­ing 75% of con­sumers have tried a new shop­ping behav­iour since the onset of the pan­dem­ic, with 77% intend­ing to con­tin­ue with these changes after Covid-19 sub­sides.

Trans­for­ma­tion and busi­ness-as-usu­al have to become one and the same

Busi­ness­es were forced to respond at pace. McK­in­sey found that in Europe, the pan­dem­ic accel­er­at­ed the digi­ti­sa­tion of cus­tomer inter­ac­tions by three years and the part- or full-digi­ti­sa­tion of prod­ucts and ser­vices by sev­en years, com­pared with the aver­age rates of adop­tion in 2017–2019.

Rich Cor­bridge, CIO of phar­ma­cy and health­care retail­er Boots UK, argues that dig­i­tal has his­tor­i­cal­ly faced three pil­lars of doubt – its tan­gi­ble ben­e­fit to a retail store estate, its speed and its costs. “These were quick­ly over­come as we saw a fun­da­men­tal shift in mind­set across the exec­u­tive team and through­out the entire organ­i­sa­tion,” he says. “We learned new behav­iours and were giv­en new per­mis­sions to move faster and do more, because we had to sup­port our cus­tomers, our patients and the NHS in new ways.”

For the retail sec­tor in par­tic­u­lar, the need to adapt to a dig­i­tal era and embrace new tech­nolo­gies has been dis­cussed with a seem­ing sense of urgency for the best part of two decades. “In many cas­es, this was real­ly only lip-ser­vice, but the pan­dem­ic made it all real,” adds Cor­bridge.

Covid-19 has undoubt­ed­ly been an accel­er­at­ing force. How­ev­er, there is a risk of com­pla­cen­cy.

“Progress over the past 18 months has been out of neces­si­ty, not ambi­tion,” says Daniel Rowles, pro­gramme direc­tor for dig­i­tal trans­for­ma­tion strat­e­gy at Impe­r­i­al Col­lege Busi­ness School. “As we plan for a world beyond Covid-19, too many busi­ness­es are already look­ing to steady the ship, to bring about some calm and nor­mal­i­ty and for a return to ‘busi­ness as usu­al’. This is the dif­fer­ence between respond­ing to a cri­sis in the moment and com­mit­ting to gen­uine, long-term trans­for­ma­tion.”

Rowles’s views high­light a com­mon mis­char­ac­ter­i­sa­tion – digi­ti­sa­tion and dig­i­tal trans­for­ma­tion are not one and the same. We’ve seen a lot of digi­ti­sa­tion dur­ing the course of the pan­dem­ic but not nec­es­sar­i­ly a lot of fun­da­men­tal trans­for­ma­tion. 

Rowles argues that suc­cess­ful dig­i­tal trans­for­ma­tion isn’t about tech­nol­o­gy, but about cre­at­ing an organ­i­sa­tion that can con­tin­ue to change. At the heart of this lies cul­ture. “Over the last 18 months, how­ev­er, most organ­i­sa­tions will have seen new behav­iours and a cul­tur­al shift that may prove not to be per­ma­nent,” he adds. “What we didn’t do is set out to cre­ate a pur­pose­ful cul­ture – these need to be inten­tion­al, they need to be engi­neered, and they need to be rein­forced. Oth­er­wise they won’t endure.”

The need for a clear vision

Pan­dem­ic or not, one of the most crit­i­cal ingre­di­ents for a suc­cess­ful dig­i­tal trans­for­ma­tion is a clear vision.

It’s a cru­cial start­ing point because of the uncer­tain­ty, unpre­dictabil­i­ty and unknowns that char­ac­terise the dig­i­tal­ly fuelled world we live in. The tra­di­tion­al three- or five-year plans pre­vi­ous­ly used to estab­lish objec­tives and bud­gets, assign account­abil­i­ties and guide invest­ments and cor­po­rate ini­tia­tives have fast become redun­dant. When it comes to dig­i­tal trans­for­ma­tion, an agile and flu­id approach are need­ed, with a clear vision or des­ti­na­tion to guide efforts.

This is some­thing exec­u­tives can embrace. It can moti­vate and inspire a work­force, as well as instill­ing con­fi­dence in stake­hold­ers. It can build antic­i­pa­tion and trust among cus­tomers.

There will almost always be quick wins which can yield an in-year, attrib­ut­able pay­back, but many invest­ments – finan­cial or oth­er­wise – in dig­i­tal trans­for­ma­tion are unpre­dictable

What’s more, argues Rowles, it can help over­come one of the biggest hur­dles in secur­ing com­mit­ment to trans­for­ma­tion – return on invest­ment (ROI). “Tra­di­tion­al cor­po­rate plan­ning hinges on ROI, but this is where many organ­i­sa­tions come unstuck. There will almost always be quick wins which can yield an in-year, attrib­ut­able pay­back, but many invest­ments – finan­cial or oth­er­wise – in dig­i­tal trans­for­ma­tion are unpre­dictable.”

There’s a huge amount we don’t know about con­sumer behav­iour and adop­tion, tech­nol­o­gy and the mar­ket, or about how quick­ly things can change, Rowles notes. He also points to the impor­tance of a test-and-learn approach to inno­va­tion and invest­ment, and the inevitable need to tweak plans in a con­stant­ly chang­ing envi­ron­ment. 

“Against a tra­di­tion­al plan and bud­get, piv­ot­ing might be con­sid­ered a fail­ure. But if your exec­u­tive team and wider organ­i­sa­tion are tru­ly aligned around a com­mon vision and share con­vic­tion, you have the foun­da­tions of a cul­ture of con­tin­u­ous change.”

Taking people with you

For some, dig­i­tal has become some­thing of a dark art. Those out­side of an IT or dig­i­tal func­tion can feel con­fused or over­whelmed by the pace of tech­no­log­i­cal devel­op­ment, the scale of inno­va­tion over the past decade alone and the com­plex­i­ty of dig­i­tal, per­ceived or oth­er­wise. This can leave some feel­ing con­fused or over­whelmed, far from ide­al when they’re being asked to com­mit to change.

Ash Roots is man­ag­ing direc­tor of dig­i­tal for BT’s con­sumer divi­sion, cov­er­ing brands includ­ing BT, EE and Plus­net. For him, dis­pelling this poten­tial con­fu­sion is key, and he out­lines a vision for change in three steps.

The first is co-cre­ation. As dig­i­tal teams grow in size and sta­tus with­in an organ­i­sa­tion, it’s impor­tant that dig­i­tal doesn’t become a silo or cre­ate a group of peo­ple detached from the oper­a­tions of the busi­ness and lack­ing a con­nec­tion to cus­tomers.

“Work­ing togeth­er and real­ly involv­ing peo­ple in defin­ing prob­lems, needs and an intend­ed future des­ti­na­tion can gen­er­ate action­able insights, and help to build buy-in,” says Roots. “If you want to take peo­ple on a jour­ney, why not work on the des­ti­na­tion with them?”

The sec­ond is work­ing back from out­comes. It’s easy for any aspect of dig­i­tal trans­for­ma­tion to focus on the tech­nol­o­gy or the work that will go into cre­at­ing some­thing. When you’re try­ing to work col­lab­o­ra­tive­ly, how­ev­er, and to bring diverse thought and expe­ri­ence into project teams, this can be prob­lem­at­ic. 

“Not every­one will share a pas­sion or enthu­si­asm for a wid­get, a bit of code or a step in a process,” Roots adds. “The tech­nol­o­gy isn’t the goal, it’s a means of deliv­er­ing it.”

How­ev­er, every­one can be gal­vanised by out­comes, he says. “Focus­ing teams or entire strate­gies around out­comes and ensur­ing those are root­ed in cus­tomer val­ue and/or busi­ness val­ue helps to keep every­one aligned on why we’re real­ly doing what we’re doing.”

The third step is what Roots calls rad­i­cal trans­paren­cy. “Dig­i­tal can­not oper­ate like a black box,” he adds. “Invit­ing peo­ple into the process, com­mu­ni­cat­ing con­stant­ly and open­ly, and encour­ag­ing both par­tic­i­pa­tion and scruti­ny is key to demys­ti­fy­ing dig­i­tal.”

Trans­for­ma­tion is, by its very def­i­n­i­tion, a sig­nif­i­cant under­tak­ing. The word implies some­thing com­plex, like­ly expen­sive, prob­a­bly painful for some, and fraught with risk.

The term has pos­si­bly become its own worst ene­my. In most cas­es, dig­i­tal trans­for­ma­tion is an ini­tia­tive, an endeav­our or project that sits on top of “busi­ness as usu­al’. It’s almost extracur­ric­u­lar in nature. The major­i­ty of an organ­i­sa­tion con­tin­ues with their work as usu­al, while a small minor­i­ty bat­tles to change or rewire that. It doesn’t seem like a recipe for suc­cess.

For Roots, it’s crit­i­cal to view trans­for­ma­tion as an ongo­ing endeav­our, not a time-bound project or some­thing sep­a­rate from the core busi­ness. “Trans­for­ma­tion and busi­ness-as-usu­al have to become one and the same,” he says. “Ongo­ing trans­for­ma­tion is the pri­or­i­ty for the busi­ness… we’re mod­ernising the organ­i­sa­tion and seek­ing out ways to cre­ate val­ue for the organ­i­sa­tion, its cus­tomers and its stake­hold­ers.” This should be every employee’s dai­ly mis­sion, he adds. 

“If you want a dig­i­tal trans­for­ma­tion to suc­ceed, don’t call it dig­i­tal trans­for­ma­tion,” says Rowles.

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Critical questions for leaders

Whether you’re already on a jour­ney of trans­for­ma­tion or about to begin, there’s real val­ue to be found in paus­ing and recal­i­brat­ing as a lead­er­ship team. BT’s Ash Roots advo­cates five impor­tant ques­tions for exec­u­tive teams to ask them­selves.

1. How are we enabling our peo­ple? “The pan­dem­ic has accel­er­at­ed a long-build­ing change in how we work, how we inter­act and col­lab­o­rate with col­leagues. It’s impor­tant to ask our­selves if we’re pro­vid­ing peo­ple with the tools they need to work in their best way as part of this trans­for­ma­tion. It’s also about prac­tis­ing what we preach.”

2. What are the fun­da­men­tal imped­i­ments we are fac­ing? “I love using the word ‘imped­i­ment’… peo­ple real­ly lean-in and ask ‘what do you mean by imped­i­ment?’ It’s a great way to stim­u­late mean­ing­ful debate.”

3. How do we cre­ate space for trans­for­ma­tion? “Few busi­ness­es are run­ning on 50% capac­i­ty, just wait­ing for a major trans­for­ma­tion pro­gramme. If you’re to intro­duce a new set of pri­or­i­ties and ini­tia­tives for the organ­i­sa­tion, it’s crit­i­cal to have a frank dis­cus­sion about what needs to be stopped or sac­ri­ficed in order to cre­ate the breath­ing room for peo­ple to apply them­selves.”

4. What are our top pri­or­i­ties? “Trans­for­ma­tion pro­grammes can yield dozens, even hun­dreds of projects and ini­tia­tives. The crit­i­cal ques­tion for exec­u­tive teams is ‘what are we going to tack­le this month or quar­ter, and in what sequence’? Tak­ing the time to agree pri­or­i­ties as a col­lec­tive team will ensure that ten­sions or missed expec­ta­tions don’t occur fur­ther down the line.”

5. Are we still aligned on out­comes? “Trans­for­ma­tion is both ongo­ing and nev­er sta­t­ic. While it’s impor­tant to co-cre­ate a future des­ti­na­tion and desired out­comes, it’s just as impor­tant to revis­it these reg­u­lar­ly, as things can change – and work­ing on assump­tions alone car­ries a risk.”

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