5 Requirements for Successful Digital Transformation Implementation

In 2016, Forbes assessed the risk of failure in digital transformation to be 84%[1].?According to McKinsey, BCG, KPMG and Bain & Company, the risk of failure today falls somewhere between 70% and 95%.?Clearly, we’re doing something wrong in digital transformation as initiatives are facing significant challenges to realise the expected business benefits.

Emerging technologies are rapidly evolving, transforming industries and creating demand for more innovative customer and employee experiences and operating models.?Workforces—and leadership teams—are not evolving as quickly.?Indeed, fewer than a third of companies are sure they have the talent they need to thrive through digital transformation, according to a recent survey conducted by Heidrich & Struggles (H&S) for the book “Goliath’s Revenge ”[2].

The Digitalisation Iceberg

The reality is - digital transformation is not just about technologies and processes – it’s about the transformation of skills within the workforce!

This image depicts the systems thinking “Iceberg” model.?We know that an iceberg has only 10 percent of its total mass above the water while 90 percent is underwater. ?But that 90 percent is what the ocean currents act on, and what creates the iceberg’s behaviour at its tip. Transformation endeavours, and Digital Transformation specifically in this article, can be viewed in this same way.

Technologies, tools, techniques and processes are the 10% that we can see.?What is not immediately apparent are the aspects that lie below “see-level” – that are not immediately apparent, but can have huge impact on the 10% that we can see.

Digital transformation not only changes the way of working, it also accelerates the speed of change that companies are facing.

Both implications lead to five major requirements that have to be accomplished to be successful:

• Alignment with organisation strategy and goals
• New forms of leadership
• New organisation capabilities
• New skills and competencies
• A new culture and ‘digital mindset’.

Current studies clearly show the importance of managing people and organisational issues in digital transformations[3].

Alignment with Organisation Strategy and Goals

Business strategy is a clear set of plans, actions and goals that outlines how a business will compete in a particular market, or markets, with a product or number of products or services.

Today, technology has integrated with business to become something more than hardware or software. ?As digital technology becomes more pervasive and companies move further along the journey of digital transformation, digital strategy and business strategy will be the same thing.

Digital Transformation focuses on using technology to improve business performance, whether that means creating new products or reimagining current processes.?It defines the direction the organisation will take to create new competitive advantages with technology, as well as the tactics it will use to achieve these changes. ?

This usually includes changes to business models, as new technology makes it possible for innovative companies to provide services that weren’t previously possible

For example, in B2C businesses, digitisation has restructured the value chain, reduced the value pools for intermediaries and helped large retailers shift to a platform based business interacting with customers directly.

B2B businesses have experienced similar value chain redefinitions and also increased the speed with which they can go to market, service customers and deliver a higher value add.

New Forms of Leadership

Leading a digital transformation places particular stress on the senior team because, the pace of technological change is fast, the competitive pressure is typically high, and success requires skills that relatively few C-suite leaders have needed before.

As organisations focused mainly on survival during the pandemic, many virtually ignored their leadership succession programs, and their ability to build new leaders fell behind. ?The DDI “Global Leadership Forecast 2021”[4] report showed that, in every industry, bench strength is 10–25% below current capabilities. ?That means that, when the economy grows and organisations recover, they will struggle to have “ready-now” leaders.

Organisations today have six generations in the workplace, ranging in age from people in their late teens to vibrant workers in their 70s and 80s. ?The idea of a linear, progressive leadership pipeline must change.?Companies must also adopt a new model for leadership, driven by the idea that “everyone is a leader” and that leadership must be developed continuously.

As companies wrestle with new and changing business models and ways of working and make stronger commitments to purpose, sustainability, and diversity and inclusion, they need leaders who are constantly ready for anything, who can have impact today and also evolve with the organisation in the future.

Through in-depth research on how leaders lead, H&S have created a comprehensive, data-driven understanding of the capabilities executives possess when they are seen by their colleagues as having both impact today and potential for future growth.?This analysis was based on characteristics known to accelerate organisational performance: Mobilising, Executing, and Transforming with Agility, (META). [5]

At a high level, organisations where leaders succeed across all the aspects of META adapt and pivot in areas that add value faster than competitors.???These critical META capabilities are:

Mobilise

• Continuously scan the market for disruptive business opportunities
• Design solutions for transformative customer experiences
• Link innovation to a higher purpose with societal impact

Execute

• Cultivate digital talent by supporting ongoing learning and development
• Collaborate on innovation initiatives across organisational boundaries
• Push for rapid action when scaling innovation initiatives

Transform

• Examine new angles to solve innovation problems
• Leverage emerging technologies to unlock the business value of data
• Be willing to strategically cannibalize current offerings in favour of new innovations

Agility

• Step out of comfort zone to adapt to changes in the innovation landscape
• Seek out new digital experiences and resources for learning
• Persist with innovation initiatives, even after failure.

New Organisation Capabilities

Organisation capabilities are the intangible, strategic assets that an organisation draws from to get work done, execute its business strategy, and satisfy its customers.?These capabilities are acquired and refined internally, from multiple interactions to be organisation-specific, and externally. ?They can include expertise, activities, information, knowledge, procedures, processes, skills, systems, technologies, or unique adaptive features.?The strength and alignment of these assets define the organisation’s identity and differentiate it from competitors.

According to an article in “Digital Business” published by in 2022 entitled “Mastering the digital transformation through organisational capabilities: A conceptual framework ”, “As digital transformation is changing entire industries, organisations are struggling to keep up with these changes.?Scholars are viewing organisational capabilities as a central means for organisations to master digital transformation.”

Based on a comprehensive literature review, the study identified a broad set of relevant organisational capabilities clustered into seven relevant themes for managing digital transformation.?These themes are:

• Strategy and Ecosystem - Organisational capabilities in this theme refer to abilities to adapt the business models during the digital transformation and enable the formation and management of ecosystems spanning across multiple organisations, functions, and industries, initiated by the digital transformation.
• Innovation Thinking – Enabling the emergence of innovation from inside or outside the organisation (open innovation), including the customer in the innovation processes (co-creation) as a key element of innovation thinking, by focusing efforts on the enhancing of customer experience and includes the ability to enhance products with digital technologies.
• Digital Transformation Technologies – Capabilities relating to new and/or disruptive technologies defined as technologies that “change the bases of competition by changing the performance metrics along which firms compete.”
• Data – Data has a decisive role in the digital transformation process. These are capabilities regarding the exploitation of data including the handling, security, and capitalization of data and extending to strategic decision-making based on data driven insights.
• Operations - Existing business operations need to remain competitive and profitable to fund exploratory processes.?These capabilities relate to ordinary business activities and value creation along with basic technologies.
• Organisational Design - The capabilities relating to the design of the organisational structure, infrastructure, and the flow of information and knowledge to support digital transformation strategies.
• Digital Transformation Leadership - A suitable organisational culture is a key requirement for the successful transformation of businesses and to overcome internal resistance from various stakeholders during the transformational processes.?Leaders are responsible for creating systems that develop organizational culture and reinforce workplace norms. Cultural norms in the workplace are adopted from the actions of the leader: where their attention is focused, how they react to crises and the behaviours they model.

New Skills and Competencies

New digital skills and competencies fall into 2 separate, but distinct categories.?Skills and competencies for citizens, and skills and competencies for practitioners.

Digital Competencies for Users

In 2022, the European Commission updated its DigiComp 2.2 – a framework aimed at engaging users confidently and safely with digital technologies, taking account of emerging technologies, such as Artificial Intelligence (AI), the Internet of Things (IoT), datafication or new phenomena derived from the pandemic crisis, which have led to the need for new and increased requirements in digital competence for citizens and workers.?This framework defines the competencies needed across 5 competency areas which are:

• Information and data literacy – to articulate information needs, to locate and retrieve digital data, information, and content, to judge the relevance of the source and its content, and to store, manage and organise digital data, information, and content.
• Communication and collaboration – To interact, communicate and collaborate through digital technology while being aware of culture and generational diversity, to participate in society through public and private digital services and participatory citizenship, to manage one’s digital presence, identity, and reputation.
• Digital content creation – To create and edit digital content, to improve and integrate information and content into an existing body of knowledge while understanding how copyright and licences are to be applied, to know how to give understandable instructions for a computer system.
• Safety – To protect devices, content, personal data and privacy in digital environments, to protect physical and psychological health, and to be aware of digital technologies for social well-being and social inclusion, to be aware of the environmental impact of digital technologies and their use.
• Problem solving – To identify needs and problems, and to resolve conceptual problems and problem situations in digital environments, to use digital tools to innovate processes and products, to keep up-to-date with the digital evolution.

Digital Competencies for Practitioners

On one side we have the people who use the digital applications, and on the other side we have the people who create them.?And these skills are very different.?For the creators of digital applications – be they AI, IoT, Robotic Process Automation (RPA), Machine Learning (ML) these skills and competencies are:

• Programming (Web and App Development) - At the heart of any tech product or digital service is coding.?Coding is also vital for emerging technologies such as augmented reality (AR) and virtual reality (VR).?Coding provides AR and VR Developers with the foundation skills needed to develop the next generation of AR and VR technologies.?There are a number of languages and tools used for coding in the digital field, and they are changing and new languages and tools being developed regularly.?The challenge is keeping up with the latest languages and https:
• Digital Business Analysts – Business analysis is at the epicentre of digital transformation projects. They help organisations develop a digital ecosystem of technologies that will hel
• Digital Design and Data Visualization - Websites, Apps and Digital Services have one thing in common - a user interface.?Designers create effective, dynamic user experiences and can also visualize complex data to create valuable insights from data to help management make vital business decisions. ?As with coding, there are a number of tools available and new ones appearing on a regular basis.
• Digital Project Management - Project management is a vital part of developing digital products and services in a timely and cost effective manner.?Digital project managers need an understanding of a range of methodologies and need a holistic understanding of how digital projects are developed - from ideation to prototyped to fully developed digital product or service.
• Digital Product Management – Responsible for managing the full product life cycle of digital products.
• Digital Marketing – Most organisations today are looking to digital marketing to promote their products and services.?Understanding of how to get the most value for money out of the broadest range of networks is key for this responsibility.
• Data Science and Data Analytics – Data Science is a multi-disciplinary blend that involves algorithm development, data inference, machine learning, and predictive modelling to solve analytically complex business problems.?Data analytics uses existing information to uncover actionable data for better business decision making.
• Cybersecurity – The practice of protecting hardware and software systems, networks, and programs from digital attacks usually aimed at accessing, changing, or destroying sensitive information, extorting money from users, or interrupting normal business processes.
• Cloud Computing– The delivery of computing services – including servers, storage, databases, networking, software, analytics, and intelligence over the Internet to offer faster innovation, flexible resources, economies of scale, and business flexibility.
• Telecommunication – the exchange of information over significant distances by electronic means, and refers to all types of voice, data and video transmission.

Within each of these broad categories, there are a range of functions, from strategy, analysis and design, to operational.

Research suggests that skills generally have a “half-life” of?about five years.?But with technical skills the “half-life” is just two and a half years and shrinking. ?The short shelf-life of technical skills requires a continuous re-skilling effort to stay relevant.

A New Culture and “Digital Mindset”

A recent article from Forbes suggests that "Reluctance to let go of existing procedures stops them (executives) from setting and achieving new goals that contribute to the growth of their employees and organisation."[6]

A 2017 McKinsey survey of global executives found that shortcomings in organisational culture are one of the main barriers to company success in the digital age.[7]

Corporate culture is the result of how a company works and operates. It is composed of the collective experiences of employees; what they believe in and what they value. ?Leadership, purpose, and how work can implement a vision also play a role in describing a corporate culture.

Capgemini together with MIT have defined digital culture as a set of 7 key attributes:

• Innovation: the prevalence of behaviours that support risk taking, disruptive thinking, and the exploration of new ideas
• Data-driven Decision-Making - the use of data and analytics to make better business decisions
• Collaboration - the creation of cross-functional, inter-departmental teams to optimize the enterprise’s skills
• Open Culture - the extent of partnerships with external networks such as third-party vendors, startups or customers
• Digital First Mindset - a mindset where digital solutions are the default way forward
• Agility and Flexibility - the speed and dynamism of decision-making and the ability of the organisation to adapt to changing demands and technologies
• Customer Centricity - the use of digital solutions to expand the customer base, transform the customer experience and co-create new products.

Last Word

What should be clear by now is, digital transformation is complex, and it’s driving new business imperatives for organisations in the future.

The 5 requirements for successful digital transformation above have the ability to be a roadblock or a catalyst for successful digital transformation.?Leadership teams need to step up and evolve at a faster pace if digitalisation is to achieve its goals in the organisation.

To help us understand how organisations are managing their Digital Transformation journey, could you please share with us:

• How do you ensure alignment of your Digital Transformation with organisation strategy and goals??Do you use specific tools to assist?
• Have you renewed your Leadership Development programs and initiatives to develop new forms of leadership now and for the future?
• Do you use organisation capabilities to differentiate your organisation from its competitors??What new organisation capabilities are being included to assist with Digital Transformation?
• Have you identified the new skills and competencies needed, both now and into the future, for both users and practitioners??Do you have programs in place to develop these skills?
• Is your organisation still trying to hang onto its pre-Covid culture, or do you have initiatives in place to develop a new culture and ‘digital mindset’?

Let us know if you would like to share some of this information.?We will set up a time to meet with you to discuss.?If we all share (without divulging your company strategy or secrets), we can all improve our success rate with Digital Transformation going forward.

Please message me if you would like to share your stories.

Thanking you in advance.

[1] Dr. Corrie Block, PhD, DBA, Forbes Councils Member, “12 Reasons Your Digital Transformation Will Fail ”, Forbes Coaches Council

[2] World Economic Forum “Talent, not technology, is the key to success in a digital future ”

[3] McKinsey Business “Perspectives on Transformation”

[4] DDI “Global Leadership Forecast”

[5] Heidrich & Struggles, “Developing Future-ready Leaders ”

[ 6] "Digital Transformation And Its Impact On Organizational Culture"

[7} "Culture for a Digital Age "