Guest author David A. Smith (CEO and Founder of Global Futures and Foresight) addresses how an organisation can prepare for a successful transformation in this third post of a trilogy preceding his keynote speech at DigitalCONNECT 2016.
A change in culture
All organisations and industries are built, to varying degrees, around (traditional) assumptions and beliefs surrounding value creation as well as a resultant set of behaviours. This ‘mental model’ has often been found as unfit for purpose in the digital economy and inverting some core beliefs is a prerequisite for changing wider business models and therefore vital for any successful digital transformation.
Prior to the Uberisation of many industries, a common belief that physical assets are durable and reliable was pervasive in many arenas, yet the creation of platforms for under-utilised assets (in Uber’s case, cars) brought this into question. Indeed, for GE this inversion meant transforming from a manufacturing company into an analytics one and divesting various (mostly hitherto successful) parts of the company along the way. Their new focus - the application of data to equipment in order to boost productivity - has led to software revenue growth of 20 percent a year with sales of $5 billion. By the end of 2016, GE software is forecast to be used to monitor about 200,000 pieces of heavy-duty machinery and establish itself as an early key player in the emerging Internet of Things (IoT) space.
The process of transformation is so problematic for the very reason that it runs contrary to layers of accumulated and established ways of working, both within management and the day-to-day operations of workers. Its’ strategic nature means that it directly threatens management practices that have little changed since the 1980’s and in some cases are little changed from their 19th century military origins. That said, certain cultural characteristics can better enable transformations than others. Harvard Business Review notes the following as propitious –
- A strong, shared sense of purpose
- Freedom to experiment
- Distributed decision-making
- Open to the influence of the external world.
More specifically, leadership behaviours, job descriptions and roles and the systems and processes that allow people to work must be changed if the way people work and act in an organisation are to change.
Reorganising for success
The new power of customers means that a focus on the customer now matters more than any other strategic imperative,’ says William Band, a principal analyst at Forrester. Indeed, since 75 percent of digital data is now created by consumers, the need for a consumer-centric business model is more pressing than ever – and digital models are the most apt at providing better consumer-centricity at scale. The link between digital and consumer-centric models is well established by Mindfield in their ‘Get Personal to Make Digital Real,’ paper, where it is noted that ‘…digital transformation requires a strong digital foundation for offering personalisation.’
MIT Sloan notes that, amongst digitally maturing organisations, a raft of behaviours are evident that are generally absent within organisations in the early stages of digital development.
- 80 percent of digitally maturing organisations are actively engaged in efforts to bolster risk taking, agility, and collaboration.
- Companies that allow their leaders the opportunities and resources to develop themselves in a digital environment are more likely to retain their talent.
- 75 percent of digitally maturing organisations provide their employees with resources and opportunities to develop their digital acumen, compared to only 14 percent of early-stage organisations.
- Whilst a CEO should have a grasp of how technology can be aligned strategically, managerial attributes such as having a transformative vision (22%), collaborative skills (22%) and being a forward thinker (20%) are all seen to trump the notion of technical skills as primary success factors.
Driven from the very top
These factors have not occurred randomly; it is clear that decisive actions from the CEO can give an organisation a substantial push on the road to digital transformation. The good news is that an increasing number of CEOs accept the basis for change - 41 percent anticipate that their companies will be significantly transformed over the next three years (in 2015 just 29 percent of CEOs thought so).
Since a lack of urgency is one of the bigger barriers identified to transformation and since the CEO is uniquely placed to drive it, establishing urgency is a critical first step for leaders. Clearly, no management team or boardroom can successfully implement a raft of digital transformation changes in a coherent fashion whilst also dealing with the day to day operational issues of work, without either significantly redefining their role or establishing a group to drive change and thus spread the load. Within this group (of which the CEO must be a part), a vision and strategy needs to be enacted and communicated effectively. Concurrently, obstacles that exist – whether organisational, technological or cultural need to be removed and this includes digital training for staff and a reorganised incentive system.
The level of resistance is likely to be high in cases of highly siloed or traditional companies since digital transformation requires a reallocation of their asset portfolio to support new, digitally enabled business models. This shift, in and of itself, is often a lengthy process, and one that is likely to engender discomfort amongst managers and leaders more comfortable with the older industrial economy and associated asset types. It is here that the importance of soft skills of collaboration and leadership outrank any technical abilities of the CEO.
The role of the CIO
The CIO is the most likely C-suite executive to own digital transformation -66 percent of Europe's CIOs say that it is their role to lead digital transformation . This could be seen as somewhat worrying given that nearly 60 percent of IT organisations worldwide are deemed unprepared for digital disruption according to Gartner.
Very few, reveals an Economist Intelligence Unit survey, have adopted methodologies such as Agile development (17%) or DevOps (15%), that are designed to make IT more responsive to the needs of digital business . Additionally, 81 percent of CIOs believe that most IT organisations do not know how to operate as a multi-speed IT enterprise.
Against this challenging backdrop is the reality that within five years or so, CIOs will likely be judged by the nature of digital business outcomes across the business. The gap between current reality and future goals necessitates collaboration with a wide range of internal and external actors.
Nearly three quarters cite CIO-C-suite collaboration as key to digital success. Although CIO to CEO and CMO collaboration is vital, an oft overlooked issue relates to HR. In fact, over two-thirds of CIOs believe that a In a Cognizant survey, over two-thirds of respondents said a ‘…key element of success for digital transformation is the CIO’s ability to actively collaborate with talent acquisition teams to acquire needed skills.’ Sufficient talent has been identified as IT’s most important determinant in relation to digital transformation. On a company-wide scale, only 17 percent reportedly have employees with the right skills to embark on a transformation. Creating a highly skilled cadre of ‘change agents’ – replete with both technical and business acumen is vital if CIOs are to survive the friction created from the demands of digital transformation. Collaboration with HR to build the talent platforms that allow for this, as well as learning platforms for other staff will become mission critical for those not already digitally versed.
The issue of talent is clearly of import beyond just the IT department. Forrester correctly notes that ‘…as IT leaders build upon their organisations’ digital business capabilities in the age of the customer, they must recognise the pivotal role that employees (and employee focussed technologies) play in delivering superior customer experiences. Technologies and processes that enable the right information to flow to the right person, regardless of business unit, at the right time, becomes critical in enabling this, as does the provision of digital resources that enable staff to do their job differently.
McKinsey surmises that ‘…digital transformations are, by their very nature, complex. There are multiple moving parts, integrated processes and technologies, and the need for expertise that cannot always be found in the company.’ There is no blueprint in how to build an agile, resilient and proactive organisation that applies to every industry.
However, figuring out an end-point for what digital transformation means for your organisation – both generally and with specific examples can help establish a goal to work backwards from, and this is generally recognised as a superior approach than building forward in piecemeal terms towards an unknown goal.
Executives aware of the shifting market around them and the ability of digital business models to help them stay in tune with these changes – whether consumer driven, regulatory based or in the form of market competition – have already begun aligning their people, processes, and culture and augmenting their value proposition to stand a better chance of long term success in an ever more turbulent environment.
Inherent in digital transformation is an acknowledgment that organisational transformation must begin with a leadership transformation. A change of priorities must be evident across the C-suite if efforts are not to stall out, and collaboration between business units is no longer optional. Cultural change is never easy to enact, and will require supportive measures that codify behaviour change – whether it be through different processes, incentives or new talent in key positions. The value at stake is enormous and will ensure that companies bold and daring enough to move out of their comfort zone and create new processes, new models and new forms of value will, in general, prosper. Success is not guaranteed, but in comparison with the certainty that business as usual will result in a Kodak moment or a Blockbuster style crash, it is a chance that executives must grasp.
You may have missed...