Ironically, Digital Transformation is Not a Technology Problem

At PI DX we explore how organizations from across many industries are moving towards creating an end to end digital enterprise. New technology and ways of working continue to transform the business around us and our daily lives, so we focus intently on the technology at work. Over the past 10+ years, PI has been running conferences across manufacturing, apparel and ship building and we hear time and time again that the most successful change programs put new technology in the proper context. One that puts people first and helps them envision how new features and information access will enhance their life experiences and improve their personal effectiveness at work and at home. 

Given that experience it amazes me how many conversations on Digital Transformation (transformation through better use of data) confine themselves to the technology aspects of the solution. Typical questions I hear are, how will we get as much data as possible from the products, process, people, and IT systems? How will we consolidate data? Clean legacy data up? The Technology aspects of solution's are the enabler, the real innovation comes when those technology elements transform the business and markets served. How will data and the access to information disrupt and transform the markets you participate in? How will a digital transformation program change the way in which your company interacts with customers? What new market opportunities will emerge that might be lucrative? These are the real transformation questions that executives should explore to provide context for the technology implementation initiatives. Data access is causing disruption across many industries to products, services and entire markets so how can you be sure that your investments are targeted properly? I believe that paying close attention to the following four areas can help executives be successful at creating the foundation for transformation of the business.

First and foremost, think strategically about markets and look broadly at the opportunity space

Digital transformation enabled by ubiquitous connectivity and data access will give rise to a whole new set of opportunities. One quite common example is companies shifting from selling a thing to selling a service. Software selling is a basic example of this shift. When companies moved from selling a shrink-wrapped piece of software "the thing" to disconnected customers over to leasing software "as a service" it changed the software market. This became the new way of selling.

The transformation shifted how revenues were recognized. Customers received regular updates and obtained rapid access to new features. Companies consolidated their software base and it became more manageable. Another common early model is leasing equipment through a "per unit" model. Prior to "per click" a company was limited to selling a device and maybe an annual service contract. The opportunity to sell was focused on an annual event. When selling a connected "per click" device, companies have the expanded opportunity to place a piece of hardware, gather data on the customers operations and become a valued partner by offering customers insights. Insights create an opportunity to make the customers day to day operations easier leading to a deeper relationship with the customer. Opportunities to sell expand, allowing companies to offer services like; material replenishment, operational data sharing, enhanced reporting, up-time guarantees, etc. To establish trust, it is particularly important to leverage available device data to improve internal service operations because companies that have low reliability will never become a trusted partner. Companies should then very quickly shift their focus upstream to create new ways to engage customers and even the broader marketplace; establishing partnerships if necessary, to help customers solve their operational inefficiencies. 

Digital Transformation will impact the portfolio management process, focus on providing strong leadership

Changing the nature of customer engagement can lead to a portfolio of projects impacting many different aspects of a company’s culture in new and unfamiliar ways. This is a time to apply the fundamentals of leadership, so dust off those books and locate your most talented leaders. Make sure annual investment “baselines” are challenged to ensure that funding and resources reach critical mass and truly find their way into the transformation portfolio! Ensure that efforts are coordinated around business objectives, accompanying strategies and rigorous communication plans that help focus and align the multitude of functions that must be involved in decision making. Determination of appropriate investment levels by function is critical to the overall success of the transformation initiative.

Product Technology alone may no longer be the road to the customer, so the company strategy must evolve to the next level of sophistication as portfolio decisions are made and money shifts. Feature and Technology development organizations that for years led the way may find themselves giving sacred ground to groups that understand customer facing experiences that access to data makes possible. The plan must clearly come together for top level executives to lead. The portfolio plan must create alignment, so the various functional parties have awareness of each other’s role and responsibilities. All functions must have an appreciation for, and a full commitment to, the business transformation objectives at hand. Push the business verticals to focus on opportunities that increased access to data exposes. Allow central groups like IT determine the technology platforms needed to clean and present data. Avoid wasteful, endless technology preference discussions. The transformation portfolio and the entire organization needs to be focused on delivering the digital transformation priorities.

Make maturing cross functional team management processes, communication, and coordination a priority

 Appreciate that most digital transformation projects cut across many diverse functions and will require mature cross functional coordination as a critical component of success. Statistics show that a vast majority of transformation efforts fail to deliver. These failures may be attributable to the siloed organizational governance models and the lack of mature cross functional processes that identify the critical deliverables needed for true transformation. Processes must ensure people are engaged and working together and allow management an acceptable level of oversight that is not bureaucratic in nature.

An integrated methodology and light weight framework will help cross functional teams make well informed decisions at the project level creating coordination success at the portfolio level. Avoid arguments that revolve around “turf” in favor of cross functional team coordination that includes all functions; Sales, R&D, IT, Logistics, business, process improvement and appropriate operational resources. Digital is disruptive, so disrupt your internal culture first and reward the teams that play well and deliver together! 

Break traditional silos that negatively impact the delivery speed of transformation

Silos depend on momentum so shake up management by banging the birdcage hard! Rethink investment levels and maybe even organizational structures based on the emerging portfolio strategy. Resources must fully commit and shift towards the new opportunity spaces that enable innovations for your customer and for your internal operations so communicate clearly change is inevitable. As a result, various functions will have new expectations and must make the changes necessary to be successful. As examples; R&D resources that may have always worked on feature development may find themselves shifting to analytical data modeling that will help predict the failure of a component so that service can be more proactive, save money and customers can avoid downtime. Research may shift from 100% new technology investigation to understanding data visualization and interface development. IT will need to become a strategic partner, understand aspects of Data Engineering, and learn to work next to their cross functional counterparts to clean up and prepare data for analysis.

A true transformation will require a shift in thinking away from a pure feature orientated, product driven, annual mindset towards a more engaged, data driven, real-time perspective that is more in tune with customers. Many organizations will get this wrong at the beginning and squander large amounts of time and money because of silo optimization by laggard managers. Transform them first. Traditional mindsets and current momentum are the enemies of digital transformation, engage your teams early and often, making sure all knowledge workers understand the opportunities that access to data can bring to the enterprise and to their work. This is an exciting time for leaders, not so much for silo thinking traditional managers. 

The promise that all this new technology brings to the market is an important, but secondary conversation to the broader business innovations that must take place to be successful. There are many challenges that digital transformation brings to the forefront for any organization large or small, so the leadership and strategic foundation will become the mechanism to align the company around a transformation of this magnitude. Organizational leadership, change management, strategic thinking, targeted portfolio investments, aligned executives and solid cross functional program management will turn out to be the real enablers of success for companies that are working to transform themselves and gain the promise that access to data brings. 

Written by David G Sherburne is an independent consultant and former IT/R&D executive that helps companies navigate digital transformation programs to help speed delivery of new products and services to the marketplace.