Although highlighted as leading examples, GE, Ford and P&G are not the only companies that failed digital transformation. A few years ago, Nike had to lay off an engineering team that was building wearable hardware, as competition for digital apps was fierce and the company could not keep up. Another example of digital failure comes from LEGO, which had to withdraw LDD, its virtual building program.
But what is digital disruption and why do companies fail in digital transformation? Digital transformation is all about bringing new, innovative tech into your organization, be it AI, chatbots, AR/VR applications, etc. Doing so, you can boost productivity, optimize internal processes, reach new markets and gain competitive advantages – ultimately cutting down on operating costs and overall benefiting the bottom line.
Changes in tech are exciting, but can become confusing, or even disturbing. Remember that unfamiliar feeling the first time you used a touchscreen smartphone? Or that time when your favorite app went through a complete makeover – completely changing what was familiar and comfortable to you.
The fear of change is real
Now, let’s scale this up: instead of just you trying to figure out how to type in your new smartphone, picture how it is for an entire department at your company trying to get used to a new tool. Or, how difficult it is for all the staff to go from pen, paper and post-it notes to a centralized, company-wide project management system. That’s a pretty big ask especially when you need your entire team on board for the initiative to be successful.
But there are greater risks beyond the normal period of adjustment to new tech. There’s a pitfall in rushing to be an early adopter without considering consequences. There are privacy and compliance issues – such as GDPR and CCPA – you need to tackle. And there’s the risk of using data that this new, shiny software is providing you, in a wrong or inefficient way.
Does this mean that you should not bother with digitizing your company? Absolutely not.
Resisting digital transformation is equally dangerous
In 2018, Lush, the cosmetics company, admitted that they underpaid 5,000 employees because their manual and outdated payroll system could not support their growth. As a result, the company had to launch a $2-million backpay scheme and invest an additional $1.5 million to establish a system that will help them calculate repayments correctly. That $3.5-million hit to the pocketbook doesn’t even include the amount of time spent to identify and fix those payroll mistakes or the inevitable damage control.
Digital transformation is not just about avoiding such mistakes; it’s also about being up to speed with customer needs. Slow-loading websites cost retailers $2.6 billion in lost sales each year. At the same time, an omnichannel approach is usually preferred, meaning that consumers are expecting to interact with brands in various channels beyond the traditional ones. 44% say that they’ve used three to five different customer service channels, with 15% of those aged 18-34 saying they’ve used chatbots.
Falling behind might cost you customers as well. You could also be missing on opportunities to increase profitability. 56% of CEOs say that digital improvements have already increased their profits, while digitally mature businesses are 26% more profitable than their peers and achieve 12% higher market valuations than other large firms in their industries.
There’s a risk in bringing digital transformation to your business too fast and there’s a risk in not bringing it at all. The tricky part is how you can strike the balance between the two extremes. So, how can you make sure that your digital transformation initiative doesn’t fail?
Success lies in change management
As David D’Souza, HR expert, highlighted in a recent interview on the future of work: “Just because a technology exists, it doesn’t mean that it will be implemented and utilized straight away.” Before rushing to be an early adopter, make sure you have a plan in place:
1. Build a digital transformation framework
- What is going to change
- When the change is happening
- Why you want this change
You don’t have to do everything at once. You might want to start with one department that has outdated systems or one process that needs to be automated. But you need to take into account how one change affects other areas inside your organization. For example, if you’re going to update a system and that system is integrating with other tools you’re using, you have to ensure that you don’t cause any disturbances.
It’s also important to set goals and expectations for your digital transformation. The “why” will help you get buy-in from senior management, board of directors, or other stakeholders, but it’ll also help you explain the reasoning behind it to those whose day-to-day work is affected by the change.
2. Prepare for and communicate the change
Now it’s time to add a missing puzzle piece to the aforementioned framework: the “who”. These are the people who are going to lead the change across the organization. Internal stakeholders are an integral part of a successful digital transformation program. In other words, someone must own the digital transformation strategy. The way they will communicate why and how change is going to be implemented can make or break the entire process.
Don’t underestimate or try to rush this step. Josh Vickery, CTO at SquareFoot, a US-based commercial real estate agency, notes that this step might actually take up a significant part of the entire project:
Don’t limit yourself into thinking that stakeholders are just the tech-savvy among your company. To initiate a successful digital transformation, you also need:
- C-suite executives who shape the strategic vision
- HR who can manage change and handle concerns on a company-wide level
- Line managers who reinforce changes and provide support on a team level
- Executors who apply changes and can share feedback on best practices and results
- IT who will ensure integration with existing processes and required security compliance
You need all those aligned if you want to see your digital transformation project succeed.
3. Test, then implement
When large-scale changes happen, you can’t predict everything. But you can avoid some pitfalls. Use a demo environment to run tests safely before applying changes. Also, consider consulting external partners who’re specialized in digital transformation – they’ll be able to help have a smooth transition to the digital era. Finally, plan for some necessary downtime or inevitable lag in production as you set up and implement a new system.
Emad Georgy, CTO of Georgy Technology Leadership, a consulting firm leading digital transformation in $100M plus-revenue companies, explains that no matter how thorough your strategic planning might be, ultimately a strategy is a hypothesis.
“A hypothesis needs constant testing and validation. We need to ensure we have feedback loops at all levels of granularity in the organization that answer basic questions such as: ‘Is our strategy working?’, ‘Are we on pace to meet our goals?’, ‘What is blocking us today from doing that?’”
During the test phase and after implementation, adopt an agile methodology. Don’t be afraid – in fact, be prepared – to redesign your processes if you find inefficiencies. It’s those constant feedback loops that allow teams to get back on course quickly. An interesting report from the 2018 Digital Transformation Index shows that CEOs are the top reason why digital transformation might not progress. Having a flexible senior management team should be your top priority in order to be able to adjust to ever-changing business needs and market changes.
4. Train and support everyone involved
Perhaps the phrase “digital transformation” sounds a bit misleading. It doesn’t necessarily refer to a robot revolution or a situation where automated systems replace jobs and humans. “It really is more about the processes than the software,” says Kevin Grice, Director of Digital Transformation at Trace Solutions, a UK-based property management SaaS company.
“The objective is to create processes that are faster, simpler and better than existing ways of doing things.”
But people – especially employees – often tend to be resistant to change. So, when you think about implementing new tools, you should not just worry about the technical aspect of it; your emphasis should also be on people. Learn what kind of digital challenges employees face and give them all the resources they need to adjust to new tech and new processes. Some might be less familiar with tech, so you need to train them on new skills and have them ready to adopt emerging technologies. Others might prefer to stick to the old ways they’ve been working with, so in this case it’s not just about technical training, it also calls for a shift in mindset.
5. Develop a digital-savvy workforce
Digital transformation is not a one-time event; it’s a strategic decision to use emerging technology to solve performance issues, to automate manual tasks and to innovate. You will always need people to be your willing companions on this journey if you want to sustain the business gains you get from digital disruption.
This doesn’t mean that every employee must learn how to code or how to write a machine learning algorithm. But we can’t ignore the fact tech is changing the way we work. Yet, only a third of workers are given many opportunities to develop digital skills outside their normal duties, based on a survey from PwC.
While you’re looking for tech to disrupt your business, it’s important to ensure your people don’t stay behind. And this goes beyond strictly technical skills. It’s also about learning how to embrace change, how to be resilient and resourceful and how to make faster decisions. After all, the new tool that you just installed might be obsolete next year, or simply might not be covering your ever-changing business needs. In this case, adaptability wins over know-how.