Spoiler: start with people.
A recent survey of CEOs and top managers showed that the risks associated with digital transformation are the subject of discussion No. 1 in 2019. However, 70% of all transformation initiatives do not achieve their goals. According to estimates, of the $ 1.3 trillion spent on digitalization last year, $ 900 billion went nowhere. But why are some transformation initiatives successful and others not?
Opinions of the Russian market players regarding new business trends were divided. So, during a discussion of this issue at one of the main St. Petersburg IT conferences, White Nights, there were statements that digitalization is another hype that has shown its failure and will pass quickly. Opponents argued that digital transformation is an inevitable new reality that needs to be adapted now.
One way or another, studying the experience of foreign companies, one can recall several disastrous examples, for example, cases of General Electric and Ford.
Transformation Feils
In 2015, GE announced the creation of GE Digital, a company that should focus on digital products and, first of all, on digitalizing sales processes and supplier relationships. Despite the success of the division, the company's CDO was forced to leave the post under pressure from some shareholders due to stagnation in the stock price.
GE is not the only company whose performance has fallen amid digitalization. In 2014, Ford Director Mark Fields announced his ambitious plans for digitalizing the company. However, the project was later closed due to the fact that stock prices fell amid constantly rising costs.
What determines the success of the transformation?
Many Russian companies perceive digital transformation as the introduction of new IT systems to optimize business processes, while the evangelists of this process insist that digitalization is not only an investment in infrastructure, but also a change in strategy, the development of new competencies and the restructuring of business processes .
At the heart of the process, according to the adherents of digital transformation, is the change in the focus of the business from production capabilities to the needs of customers and the alignment of all processes around improving customer experience.
Why are people important?
KMDA's study “ Digital Transformation in Russia ” shows that ordinary employees and top managers differently assess the level of transformation of the company.
Top management estimates the use of digital technologies in the company's work higher than ordinary employees. This may indicate that management may overestimate the situation, while ordinary employees are not informed about all the projects.
Researchers unanimously reiterate that no organization can take advantage of new generation technologies without putting employees at the center of their strategy. To understand why, we need to consider the three main elements of digital conversion.
The first is speed
Machine learning and automation can accelerate all business functions, from supply and customer service chains to finance, human resources, security, and IT sharing. They also allow business processes to adapt and improve independently.
The second is intelligence
Companies traditionally relied on KPI "look into the past" - an analysis of the results to build new hypotheses. These metrics quickly give way to tools that use machine learning to monitor real-time situations. Built into the workflow, this principle speeds up and improves human decision making.
The third and most important element is the importance of human experience.
Thanks to digital technologies, companies can improve the experience of interacting with the brand both from the client and from the employer. This experience requires continuous quality improvement to achieve business objectives.
And yet, as with any technological change, adjusting thinking and behavior can be the most difficult and most important task that needs to be overcome.
Each of these elements in itself can become destructive. Together, they represent one of the greatest shifts in labor history. Companies can invest in the acquisition of advanced technologies to accelerate the digital transformation process, but these investments will be wasted if employees do not accept this change. To capitalize on this shift, enterprises need to create a solid internal frame.
5 lessons of successful companies
In March 2019, an article was published in the Harvard Business Review, written by 4 existing CDO companies. Behnam Tabrizi, Ed Lam, Kirk Girard and Vernon Irwin combined their experiences and wrote 5 lessons for future CDOs. In short, then:
Lesson 1: Before investing in something, determine your business strategy. There is no single technology that would provide “speed” or “innovation” as such. The best combination of tools for a particular organization will vary from one vision to another.
Lesson 2: Using Insiders. Often, companies engage external consultants using universal methods to achieve “maximum results”. Experts advise involving experts from among employees who know all the processes and pitfalls of the business in the transformation.
Lesson 3: Analysis of the company from the point of view of the client. If the goal of the transformation is to increase the degree of customer satisfaction, then first of all it is worth talking to the customers themselves. It is important that managers expect big changes from the introduction of several new products, while practice shows that better results bring many small changes in a large number of different business processes.
Lesson 4: Recognizing workers' fear of innovation. When employees understand that digital transformation can threaten their work, they can consciously or unconsciously resist change. If digital conversion is ineffective, management will eventually give up efforts and their work will be preserved). It is very important for managers to acknowledge these concerns and emphasize that the digital transformation process is an opportunity for employees to improve their skills in accordance with the future market.
Lesson 5: Use Silicon Valley Startups' Operational Principles; They Are Known For Their Quick Decision Making, Prototyping And Flat Structures. The process of digital conversion is inherently uncertain: changes must be made first, and then adjusted; decisions must be made quickly. As a result, traditional hierarchies interfere. It is better to adopt a single organizational structure that will be somewhat separate from the rest of the organization.
Output
The article is large, and the conclusion is short. The company is not only IT architecture, it is people who cannot leave home from work, and in the morning come with new competencies. Digital transformation is an ongoing process of several large deployments and a huge number of small “twists”. A combination of strategic planning and ongoing testing of micro-hypotheses works best.