November 2018 | Point of View

Digital transformation: From ambiguity to practical course of action

Digital transformation: From ambiguity to practical course of action

In our discussions with business executives across industries, one theme often comes to the forefront: They are flustered by the imperative to drive digital transformation.

Everywhere executives turn, they are being warned that their organizations must become digital now or risk survival. In turn, boards are asking questions and expecting to see a well-conceived digital strategy. The problem is, few executives are confident that they know what digital transformation means -- let alone how to implement it.Our usual advice? Relax. Having worked in consulting for a few decades, we have been through similar waves of change involving nebulous technology-based concepts -- ERP, e-commerce, CRM, cloud and big data to name a few. Each arrived with a sense of urgency but also a level of complexity and unfamiliarity that spawned trepidation and even fear. This time around is no different.

An Important Lesson From The Past

With so much hype and grandiose language, this era of digital transformation feels a lot like the early years of the mid-90s with the dot-com boom and the “new economy.”

There are some similarities. At the time, business media warned that dot-coms would push “traditional” companies out of business, so companies rushed to take their businesses online. They had little perspective to understand how the internet could transform their businesses, so they did what they knew at the time: They built websites using existing brochure content and product catalogs. New skills required to establish an internet presence were scarce, so they scrambled to find available resources at any cost.

There are also some key differences. Most organizations approached the internet as a new front-end channel that extended their operations, but they didn’t fundamentally change what already existed. The digital economy, on the other hand, is not just about adding new channels to an existing business -- it's about wholesale changes to the way an organization operates from front to back, driven by new data-driven capabilities such as machine learning, big data, agile methodologies and blockchain technologies.

A good illustration is mobile banking. While offering a mobile presence is critical, it is the underlying digital capabilities -- such as analytics-driven chat functionality that provides targeted guidance to customers -- that will ultimately distinguish a bank in that channel. This requires transforming more than the front end -- it requires new technology platforms, new skills and new capabilities for capturing and using data. It also requires a shift in culture.

So while digital transformation represents more comprehensive and complicated change, there is one lesson we can take from the dot-com era: Once the hype settled down, cooler heads prevailed. Companies proceeded with more clarity and with thoughtful, effective strategies that leveraged the internet’s true capabilities to evolve their business models.

Getting Past 'Go'

While it is understandable to feel a sense of urgency, that doesn’t mean you have to have all the answers today. In fact, starting with an all-encompassing digital strategy (which will likely change over time) may only serve to slow down transformation. Instead, look for small ways to begin translating an imposing and ambiguous concept into a practical course of action. Following are a few steps that can help.

Initiate meaningful conversation within your organization:

True transformation starts with rational discussion. Because digital transformation will ultimately cut across your organization, make sure the discussion includes people who represent various perspectives within your organization. At the same time, harnessing the discussion and keeping it moving in a productive direction will require a calming voice with good facilitation and collaboration skills.

Learn from the leaders: 

Observe what companies such as Amazon and Google do well and how they are innovating. For example, if you think the Internet of Things (IoT) could transform and differentiate your product suite, look at how Amazon employs IoT technology and then develop some initial ideas for your business.

Look first at existing performance-improvement initiatives:

Most companies have their hands full simply trying to run a better business, so a good starting point is a core process already targeted for improvements. For example, claims adjudication for an insurance company, pricing for a manufacturer or field service for a utility. Emerging technologies can increase operational proficiency while also providing a way to ease into digital transformation.

Start small: 

While it is good to think big and out of the box, it can lead to analysis paralysis and make it harder to get moving. Instead, pick a rational, bite-size project with a manageable scope. We have found it helpful to target a project in a small unit of the business, where you can gain valuable experience without the complexity of changing core operations.

Target one key tenet of digital transformation: 

Set a goal that focuses on a key principle, such as using data differently, accelerating the speed of operations or viewing your organization as a “software company.”  If you do these things well and avoid getting bogged down with developing the perfect long-term vision, there is a good chance the right starting point and next steps will become obvious.

Take A Deep Breath: 

Keep in mind that digital transformation is likely to be a five-to-seven-year process. Eventually, the propaganda will quiet down and clear, rational and strategic approaches will take hold. That might seem hard to believe at the moment, but that is exactly how each hype cycle of the past has unfolded.

Until then, we will continue to navigate a lot of dramatic talk. So take that deep breath. Use your organization’s current strategic, operational and financial priorities as the lens for choosing a manageable opportunity. Develop it, learn from it, apply that experience to expand your digital roadmap and then repeat. That is the prudent path to success in the digital world.

Read the article in its original version via Forbes Technology Council. 

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