The Elements of a Digital Transformation
When a carpenter wants to build a chair he has to make sure that he has good quality wood to build with, a plan to follow, the proper tools with which to craft, and the necessary skills to handle the tools and wood correctly. Any of these four pieces can be improved upon, but without all four he will not have a chair at the end of the day.
Like building a chair, digital transformations need four elements: a well defined value proposition, a strategic vision, the right people, and the proper technologies. Unfortunately most digital transformations fail because too much focus is given to any one element, rather than a balance between them all.
Successful digital transformations take into consideration all four of these elements. starting with the value proposition each element builds upon the other to drive the transformation forward.
A digital transformation must start with an understanding of an existing value proposition, and end with a clearly defined organizational improvement that technology can enable.
“We want to use AI” is a value proposition that sets up a transformation for failure. “We want to offer more targeted up-sales to our customers based on their purchase history and other similar customer histories” is a clear business goal, one that may actually require the introduction of AI.
Digital transformations are the same as any other business transformation, they require business leadership buy-in and an understanding of clearly defined improvements to the way business is done, regardless of the technical execution. Without a value proposition that clearly improves the business, whether it be reducing costs or increasing revenue, the transformation will quickly get bogged down as snap decisions will be made with no clear point of reference.
To implement a successful digital transformation a high-level view of the changes to be made, and their effect across the entire organization, is necessary in the pursuit of the end goal.
A digital transformation has wide ranging affects across an organization, just like any business transformation. Operational principles such as revenue streams and cost structure will need to be considered. Key partnerships, resources and activities need to be evaluated, as well as effects on customer interactions and communication.
Often the desired value proposition directly enhances one of those areas of the business, but all of them will be changed in some way over the course of the transformation. This is often a hidden cost that goes unconsidered when a transformation is tackled without a single strategy that is updated and maintained as the transformation continues.
The Right People
While the team makeup will vary depending on the business and the overall transformation goals, there are two key roles that are necessary for a successful digital transformation.
The strategic leader should be as unbiased as possible, keeping in mind the overall strategic vision of the transformation, and weighing all decisions against it. Often this is done by a high-level executive or an outside consultant. The strategic leader should only have a vested interest the transformation as it pertains to the pursuit of the value proposition.
When the strategy for rolling out a transformation is owned by a single interest, such as an engineering department, the decisions made will be influenced by what is most desirable for them. This is a major failure point for digital transformations as they get bogged down in internal in-fighting.
Secondly, there should be a considered approach to the technological execution necessary to implement the transformation. Hand-in-hand with the strategy, this should be an individual that considers the historical context of technology usage, the costs, both in time and money, of expanding into new technology. The time element is an often overlooked piece of the puzzle, as it can feel necessary to get to some technological end-state immediately, disregarding the true costs of moving so quickly.
The existing technological makeup of the business and the vision of the transformation will be the key drivers for technology decisions. While an exclusive focus on any of the four key elements at the expense of the other three will cause a digital transformation to fail, a focus on a specific technology first is the most common variety of failure.
Technology is exciting, buzz-words like Agile, AI, and Big Data invoke thoughts of overtaking competition with the next big innovation. Often disregarded are the existing technology choices, the team members with expertise in the usage and implementation of those technologies, and the management costs.
This is not to say that any of those exciting technologies will not be useful in the pursuit of the digital transformation, only that they must be brought in in service to the strategic vision, rather than attempting to create a vision based around a specific technology. This approach allows for more iteration over time, often there is a cheaper, and quicker, way to implement core pieces of the digital transformation. This allows for testing over time, to see if the vision makes sense and is achievable.
Twice Four Times, Cut Once
Most digital transformations fail, only half as many are successful as a traditional business transformations. Having a defined value proposition, well planned vision, good strategic oversight, and choosing the proper technologies will ensure success.