3 mistakes in digital transformations: steering clear of trouble
Digitalisation is no longer an end in itself; today, every form of business development involves some degree of digitalisation. There is no business evolution without it. However, succeeding with a full digital transformation remains a challenge for many.
Why is it hard to succeed with a digital transformation? And what does a digital transformation truly entail? Sometimes, organisations merely digitise. They may convert analog content into digital formats such as scanning paper documents into PDFs. Unfortunately, this approach doesn’t harness the full potential of digitalisation, which involves being able to utilise digital technologies and data to reshape processes and enable changes in business models and customer offerings.
Succeeding with a digital transformation requires both digitisation and digitalisation effects. It requires rethinking organisational structures, culture, skills, leadership style, and strategy, to fully capitalise on the benefits of digitalisation. It’s also crucial to evaluate external relationships with customers, suppliers, partners, and other stakeholders, as well as addressing the entire ecosystem we operate within.
Clearly, a digital transformation involves a lot more than digital tools and applications. Yet many companies focus mainly on technology, cling to the status quo, and innovate from within their own organisation.
How can we navigate the common pitfalls of digital transformations?
- Don’t start with technology
- Don’t anchor in the present
- Don’t innovate in isolation
1. Don’t start with technology
Many companies begin with technical solutions and later wonder why customers don’t buy the product or service, or why employees avoid using new systems. This often stems from creating products or services based on a technical, sometimes overly logical perspective that doesn’t align with complex human behaviour. While digital technologies are crucial for enabling innovation and business value, human needs and behaviour should always be the foundation. Given that needs and behaviour will change over time, it’s important to be flexible and allow the technical solution to emerge and develop as we learn what creates value and what does not.
For instance, we’ve witnessed a retail company, in their eagerness to embrace AI, invest significant resources in integrating AI support into their online store recommendations using a multitude of parameters. As part of their ongoing improvement efforts, they sought to leverage AI within their operations. This aspiration evolved into a specific requirement within their improvement initiatives. However, as they recognised the complexity of the task, it transformed into its own development project with high priority.
After many months of development and fine-tuning, the service was finally completed. Nevertheless, the outcome proved only marginally superior to the original, which had relied on pattern recognition from other users’ interactions based on traditional parameters like user preferences and history. Furthermore, due to its complexity, it turned into a challenge to manage and maintain.
So what did we learn? We need to start defining what value we want to achieve, and then think of how to do it.
2. Don’t anchor in the present
Sometimes we need to have the courage to question why we do things the way we do and whether it’s necessary to change. What worked in the past might not be profitable anymore. That’s why we can’t rely on existing processes and organisational structures. To avoid getting stuck, we need to challenge the norm and be prepared for digital transformation, and embrace change when we see it.
In the fear of falling behind, it’s common to glance at competitors and set goals based on what they have already achieved. We had a project once that started from a wishlist of capabilities from our client, which turned out to be a selection of their competitors’ strongest unique selling points. There’s nothing wrong with looking sideways, but the issue is that if we had helped them achieve these goals, their competitors would have simultaneously advanced their offerings. Thus, when our client would finally be prepared to enter the market with their new capabilities, they would still be one step behind.
The solution, of course, is to envision the future. Structured future exploration and daring to invest in something that doesn’t yet exist are the keys to a competitive journey in a digital transformation.
3. Don’t innovate in isolation
Being too confined to your own reality might blind you to opportunities and threats that could disrupt your current business. Don’t hesitate to seek external perspectives and involve people from outside your organisation. Innovation and disruptive transformation often thrive beyond an organisation’s walls, regardless of whether they are already in a good position or struggling for survival.
Once, a client approached us with a thoroughly developed idea for a digital service aimed at supporting and streamlining their operations. This pertained to one of their key processes, and it was evident that the service had been meticulously thought out. The design revealed a deep understanding of the domain and current operations. The idea had matured over an extended period of time, and we were impressed by the extensive effort they had invested in defining their requirements. However, there was something bothering us.
It wasn’t until after some time of collaboration and a workshop involving the employees who would benefit most from the service that we realised what was wrong. They had devised a solution that validated their own effort. No matter how well-acquainted they were with their operations and how intricately designed the intended service was, it was rooted in their present way of working. Nowhere had they contemplated whether the existing process was truly optimal for the goals to be achieved, both in the present and the future. Instead, the desired solution would have solidified a procedure that was neither innovative nor particularly efficient. Our work then shifted to focus on process alteration and innovation.
It’s human nature to have biases that make us want to validate our own efforts. Being aware of it is a first step towards being able to challenge it.
To sum it up
Avoiding these pitfalls lays the foundation for a successful digital transformation. By understanding and navigating these common missteps, companies can truly leverage the power of digital transformation to propel their growth and stay ahead in a rapidly changing landscape. Remember, digital transformation is not just about technology; it’s about harnessing innovation to drive meaningful change across the entire organisation.