How to ensure your organization’s digital transformation is a success
meIn the age of digitalization, businesses face the critical challenge of adapting and embracing innovation or risk being left behind in a rapidly evolving world. These forces are called creative destruction, the process by which innovation and technological advancement reshape industries and business models. This is changing the direction of the competitive landscape. Winners will prosper, while losers will lose ground to competitors, disappoint stakeholders and customers, and put themselves at a serious competitive disadvantage.
To illustrate the potential impact, in 2007 Nokia held a little more than half of the mobile phone market share, with operating profits of approximately $7.8 billion. That same year, Apple launched the iPhone, which revolutionized the industry with its superior touchscreen interface and powerful app ecosystem. Nokia couldn't keep up. Cell phones were quickly perceived as outdated and difficult for developers to work with. Since then, market share has plummeted by 90%. In 2013, Nokia's mobile phone division was sold to Microsoft. A post-mortem study was conducted that indicated that lack of organizational coordination, internal politics and lack of technical capacity were hindering the ability to change.
The driving force behind digital transformation is the adoption and implementation of digital technologies in processes, products, and assets to increase efficiency, enhance customer value, manage risk, and unlock new revenue opportunities. These changes typically involve significant changes in the way the business operates, encompassing people, processes, and technology. In addition to digital transformation, organizations are constantly dealing with other transformations such as mergers and acquisitions, divestitures, cultural transformation, and more.
Approximately 89% of organizations have already adopted a digital-first business strategy. By 2030, spending on digital transformation programs is expected to exceed $3 trillion.
Surprisingly, 70% of such plans fail to achieve their goals. This represents enormous risks with serious implications for those carrying out such large-scale efforts.
This raises several related questions. First, why does this program fail?
According to McKinsey, common reasons why transformation programs fail include lack of desire, lack of shared vision, lack of engagement, lack of investment in capacity building, and lack of structure in the transformation team. I have personally seen this phenomenon many times and believe it is a symptom of the underlying root cause: organizational complexity.
Organizations undergoing change often operate multiple lines of business in multiple markets, manage aging and complex IT environments, and are subject to significant regulatory oversight. Successfully delivering these transformations typically requires a multi-year, multi-workstream program, requiring substantial, targeted efforts across many different business and functional teams who must collaborate effectively.
This complexity creates challenges such as unique perspectives and language within different teams that impede communication and accountability. Lost translation from leadership to implementation teams and across groups that must collaborate can have costly consequences. Organizational complexity can also mask active resistance, and many organizations lack the expertise to effectively manage such large-scale change. Successfully navigating this environment requires change leaders with almost superhuman abilities to maintain focus across all the different components toward the goal of change.
A second and more important question remains. How do organizations achieve success?
Successful digital transformation requires organizational alignment where all elements work cohesively to achieve the organization's purpose. This alignment includes two important dimensions: vertical alignment, which harmonizes strategy, goals, and activities from top management to individual contributors, and horizontal alignment, which fosters collaboration across different business and functional areas.
A common language is important to achieve alignment. This language creates shared understanding across multiple perspectives and enables clear communication by eliminating ambiguity and confusion. Promote ownership, accountability, and collaboration in delivering complex innovation agendas.
To be effective, this common language must meet three criteria:
- It must be business-oriented, which is critical to driving change from a business perspective.
- Collaboration between departments must be promoted;
- To be useful to senior leadership and subordinates, they must represent various levels of granularity.
The only candidate that meets all these criteria is a business process.
Using a common language of business processes allows organizations to envision their digital future through a business lens, enabling a digital strategy that clearly articulates the impact on existing processes and the requirements for future processes. This allows cross-functional teams such as business teams, technology teams, risk management, compliance, people leaders, etc. to collaborate to effectively implement the future vision. The accountability and transparency this approach provides makes the transformation leader's role easier by allowing them to plan with precision and manage the journey effectively.
Establishing this approach requires developing a comprehensive list of processes. Leveraging this inventory to align operational and resource information transforms various operational data repositories into a unified operational intelligence repository, a key element in driving vertical and horizontal alignment. This also means creating the capacity to build and maintain this information for long-term value, usually through a process center of excellence (COE).
This framework is the core of operational excellence that is critical to becoming an agile organization that can not only deliver your digital transformation agenda, but can quickly adapt to change.
This strategy requires investment from the organization, but the choice is clear. Invest now to increase your chances of transformational success, or face the consequences later.
michael shank He is the founder and managing director of Process Inventory Advisors LLC. He has over 25 years of experience as a management consultant in the financial services industry, advising clients on technology, process, risk, large-scale business and digital transformation. His book Digital Transformation Success: Achieving Alignment and Delivering Results with the Process Inventory Framework (Apress, December 24, 2023) shares how to drive the new levels of operational efficiency and agility needed to succeed in this digital age. Learn more at processinventory.com.
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Posted by Michael McKinney at 10:41 AM
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