The road to digital business transformation is littered with failed attempts. Where have they gone wrong?
People have been doing IT – using the product of Moore’s Law – to improve business for decades, but why is it still so hard to get digital business transformation projects off the ground and into production?
There are a couple of reasons, which Mark Raskino, a Gartner Fellow in the CEO and digital business leadership research team, outlined at the advisory firm’s annual Symposium in Cape Town recently.
He says that some senior business executives from a ‘very large company’ had approached Gartner a while ago for advice on its digital business strategy. The company was late to the game; it had made some major acquisitions that had taken longer to integrate into its business, but was now finally ready to launch some kind of digital business transformation.
But before it took the plunge, it asked Gartner about the experiences of others that had gone before.
Thus the question: what are the biggest digital business strategy mistakes that we can avoid? Raskino and his colleagues came up with nine typical mistakes that enterprises make.
He’s divided these into sets of three, the first of which deals with mistakes that are made at corporate governance level.
1. Corporate governance
They’ve simply misread the situation, says Raskino. Put another way, it’s misunderstood what’s going on.
He says that he often sees companies trying to copy bits and pieces of things ‘that someone’s read in Wired (magazine), or it’s trying to catch up with e-business without realising that the game has, by now, moved on’.
And if they’ve been left behind, it’s probably safe to assume that they’ve also neglected to examine how digital forces are already changing the basis of their industry.
These companies, he says, miss the point of data, and still frame their organisation around business process. There might also be a lack of corporate mission and ambition for these typically older companies, which are used to ‘milking an economic rent for the last 20 years’. There’s also a good chance the company has forgotten why it’s in business in the first place.
What can be done?
Raskino advises the entity to think in terms of reinvention: How will your company use digital to reinvent what your industry does?
“If your board of directors has that level of question in its mind, it’s more likely to get to the right answers.”
2. Too much inward thinking
Companies guilty of this type of navel gazing are also probably guilty of thinking that digital change is just like any other operating model change. It’s more important, he says, to focus on changing the business model, which will entail analysing the whole market.
He says organisations have to consider their digital response in the ‘full external competitive context’, whereas people often only looked inside their own industry for examples of transformation.
There was also the questionable assumption that the organisation can make the journey to a transformed world with the same leadership team in place.
What can be done?
Raskino says don’t look internally: “The starting point is what is the world doing, and what is it likely to do. What might our role be? And how can we change?”
Think about an ‘outside-in’ perspective.
3. Dissociation
Here, an organisation is not owning the issue of transformation. Boards will distance themselves, and ‘treat digital transformation as a management issue’.
“They seem to think if they’ve done the right thing, like gone to the World Economic Forum and read some magazines, talked to some consultants, sharpened themselves up, kicked the management team and told them that digital is coming, that, somehow, the non-executive director’s role is fulfilled.”
He says that, to be fair, this approach – when dealing with something like regulatory compliance – was often good enough. But it won’t work with digital business transformation because the nature of the company has to fundamentally change, and the ideas have to be understood and internalised at board level.
CEOs can sometimes be at the root of the problem, because they don’t believe in this digital journey. They’ll employ avoidance tactics, such as pushing the responsibility to other executives as much as possible, and for as long as possible. Either that, or they’ll hire a chief digital officer. These chief executives are not interested in change, and are probably quite happy doing what they’ve always done.
“Your digital future is what you are going to be, so you have to own it.”
What’s the corrective action?
If it’s not made a core principle of the business, digital transformation won’t happen, and thus, will probably elude the company.
4. Unguided action
The next three impediments are the purview of the upper level of management.
Even if the board has indeed decided it’s going to embark on a digital journey, and has allocated money and hired consultants, it will still fail because – a little like 4IR – digital itself has not been defined.
“The word digital is flung around loosely, everywhere, until it becomes everything and nothing,” he says.
Specifics are in short supply; is it about changing the product? Or just selling online? Is it going into a new industry, or changing the model to add services to a product?
{pullquotes}“Your digital future is what you are going to be, so you have to own it.”</p><br /><p>Mark Raskino, Gartner{/pullquotes}Companies are advised to think about plainly stating what they’d like to achieve with their digital programme.
5. Measures and targets
An organisation needs ‘things it can count’ as well as difficult goals that will cause it to actually make the transformation.
What are the top two or three measures of progress? What’s the goal, what is the target that the whole company’s trying to get to over three or five years, he asks.
A good example, he says, could be found in financial services; a bank may envisage that 90% of clients would be using mobile banking service most of the time in three years. As a result, it would shut 40% of its branches.
“That’s getting specific, and it’s often absent,” he says. Incentive structures will also need to be changed for upper and middle management, and organisations need to link KPIs with targets upfront, and not a year down the line.
6. Incrementalism
Organisations often trumpet their minimum viable product, but then go no further. This is superficial behaviour often masquerading as digital transformation, he says.
Why? Business is averse to change, not least because of its cost.
He uses the example of VW, which is eyeing an autonomous and electric future. This means it has had to strip all the equipment used to produce diesel engines out of its factories in Germany.
“You cannot make this happen if you do not fund the change. The change will give you the return, but you have to put in the capital.
Legacy systems and processes must also be examined. “You can’t say you’re going to build a digital future, and leave the legacy in place. It doesn’t work.”
7. Mistakes in execution
The next three areas concern team leaders.
Raskino says that people tend to plan too much, and digital business transformation was more about doing something than it is about planning. The goal, in this case, may not yet have revealed itself, and neither is the destination clear.
He says organisations need to think of it as exploration. He says every level of the organisation, not just IT, should also adopt some measure of startup thinking.
“What’s the point of having a minimum viable product that you can put in front of customers if legal takes six months to sign it off?”
8. Technology-centric
CEOs or CIOs can quickly pour cold water on new ideas by employing the latest buzzwords learned at conferences (big data, AI, blockchain, etc.). To do so is missing the point. It’s about reinventing your industry with a collection of technological tools that are being brought to your door, he says.
What action can be taken?
He suggests aiming at the unmet needs of the market and customers.
These tools must be employed collectively to deliver solutions that nobody could do before, he says.
9. Culture blindness
Raskino says the normal way of doing business may no longer be fit for purpose.
“The way people think, the way they behave, the way they credit each other’s behaviours, has to change.”
And these new behaviours, when they emerge, need to be nurtured.
“As managers, you have to work out how you will protect the fledgling of the new behaviour against the mob of the old.”
He suggests thinking in terms of purpose and beliefs.
“What is the purpose of your company? What does if yield for the world? Why are these people coming to work every day? What do they think they’re there for?
“You have to do these things, otherwise you’re setting up for a long slow-linger corporate death,” he says.
Paraphrasing David P Abney, CEO of UPS, he says: “We have to think and act like an entrepreneur, because if we don’t, someone else will.