In partnership wth GHD Digital

"In today’s era of volatility, there is no other way but to re-invent. The only sustainable advantage you can have over others is agility, that’s it."

– Jeff Bezos, Amazon founder

Digital transformation is the integration of technology into all parts of a business.

Businesses must make fundamental changes to their operations so they can deliver better value to customers.

It is also about organisational cultural change. Companies need to challenge the status quo from within and experiment to find what works for their organisation. This can mean replacing old business practices with ones that embrace digital technologies to unlock their full potential. In short, digital capability and core business are becoming one and the same in the modern organisation.

Recently I’ve had the opportunity to present and participate at a number of leadership forums, interacting with more than 200 top level executives about digital transformation. What I gained was a deeper insight into the digital transformation journey, and an understanding that future proofing is a priority for leaders across all industries.

Many CEOs, CXOs, Chief Digital Officers and CIOs are working on transforming their businesses. They recognise digital transformation will replace traditional methods. One in three senior executives say this will have a significant impact on their core business over the next two years. Now is the time to take radical steps to:

  • realign culture within the business
  • update organisational structures
  • reassess measurement systems
  • modernise operating architectures.

Business leaders realise they are at risk of becoming uncompetitive if they are slow to transform. But, first, they must overcome some barriers to digital transformation, including:

  • business silos
  • legacy technology systems
  • lack of internal skills
  • cultural problems, organisational dynamics and internal politics
  • budget and a lack of investment.

Top 10 takeaways for digital transformation success

Here is some food for thought. The below have been identified as the top 10 takeaways for digital transformation success.

1. Digital transformation is not a bolt-on strategy

Executives realise bolt-on digital strategies do not work. Digital transformation needs direct engagement with clients across an organisation’s value-chain. Many executives find clients are transforming at a faster rate than expected. They are outpacing their own transformation and expectations. There is a sense for an urgent need to:

  • digitise existing products and services
  • create new partnerships and
  • provide insights as linear value-chains collapse.

2. Evaluate technology options to transform

Many leaders see legacy IT systems and networks as a major bottleneck for successful digital initiatives. IT departments struggle to empower internal clients to improve business agility and operational excellence. Executives realise technology is a key enabler of digital transformation. They have concerns about becoming digital dinosaurs. Rather than waste time, some are investing in new partnerships with digital companies to use cloud-based products and platforms to accelerate benefits.

3. Think value, not cost

Business leaders recognise digital disruption threat needs a strategic mindset. But they find it difficult to switch from operational thinking when they need to defend losses and grow profits over the short term. Numbers continue take precedence over value-creation. This is a major challenge for executives working to transform organisations from within. They need to think value, not cost. Due to the threat of disruptive impact, executives are asking to fund digital over other priorities. Many firms are re-purposing its discretionary spend to digital.

4. Respect the HiPPO but do what is right

Executives believe they must avoid falling victim to the Highest-Paid Person’s Opinion (HiPPO) when priorities are set based on gut instinct or for political reasons. They know decisions without real data and insights compromises digital transformation initiatives. And contributes to mediocrity. Individuals tend to shape their opinions to fit the biases of senior executives. Leaders recommend doing what is right for the firm to ensure success. Easier said than done in hierarchical organisations. But they need to break through this mindset from the top down to achieve success.

5. Critical skills gaps widen

Leaders acknowledge they have critical skills gaps. And these are widening. They do not have the right skills to execute digital strategies as the pace of transformation accelerates. The skills of senior and mid-level management teams also need assessing. Organisations need the right people to deliver major transformation outcomes.

Some leaders feel this skills gap also dominates at the board level. The majority of directors have limited experience in digital or transformation initiatives. This is contributing to misaligned investment priorities and delays. As traditional models prove inadequate, companies are diversifying their teams at all levels.

6. Look for new industry-specific opportunities

Firms already on the digital transformation journey understand new industry-specific opportunities for growth. As they develop new business models, markets, products and services, they gain greater insight. They are working on new business models that challenge existing rules and assumptions.

7. Co-creation with anyone is the new mantra

Many businesses are implementing co-creation strategies with clients, partners and even traditional competitors. They agree that no matter how big or dominant they are in their industry, they cannot succeed alone. Digital success requires integration across their business and industry ecosystem. Firms are partnering with technology start-ups to gain first mover advantages.

8. It is a journey with no final destination

Digital transformation is a journey of experimentation and not a single initiative. It is a journey with no final destination. A need for growth, industry vulnerability to disruption, and customer and employee expectations are key drivers for change. Digital transformation is now the same as traditional business transformation. External market conditions and client expectations define the journey. Leaders realise that customer centric firms never stop transforming themselves.

9. Organisational culture remains the biggest barrier

Business leaders find changing organisational cultural is a challenge for digital transformation. But, changing culture is always a challenge. They do not have the time or resources to rethink the ground rules, beliefs and assumptions that drive cultural change. Some firms have developed a clear digital strategy. But struggle to achieve desired outcomes because they cannot find new ways to work with and service clients. Leaders expressed a need for greater assistance to facilitate culture changes.

10. Conflict between old and new

Digital innovations contribute more and more to traditional managers’ discomfort. They realise new ways of working challenge the status quo. Millennials embrace digital innovation faster than very experienced executives. This is creating reverse-mentoring opportunities for senior executives.

Digital leaders see a misalignment between their boards and executive teams. They are highly experienced and successful traditional leaders. In the most successful boards, CEOs take charge (one in four CEOs drive digital transformation). There is reasonable diversity of thought at board and executive leadership team levels.

An outside-in approach

There is a common belief that true digital transformation starts with customers. This triggers inward alignment to meet client expectations. Business leaders recognise the importance of an ‘outside-in’ approach as the only way to transform rapidly to meet changing market conditions. Leaders fear a negative impact on jobs that support traditional processes that can be automated using digital technologies. There are already early signs of job eliminations visible in some industries. Workforce reskilling and upskilling is a major priority. Firms are revamping their learning and development strategies. Digital transformation is challenging the status quo and conventional thinking across all industries. It must be led from the top down.

Kumar Parakala is GHD Global Digital Leader. At GHD Digital, our goal is to find new ways to engage with our clients using our understanding of existing and new technologies. Find out how GHD Digital is changing how businesses future proof their organisations.