Dr Noel Carroll explains why you need to start with the ‘what’, not the ‘how’, when it comes to digital transformation.
The Covid-19 pandemic is arguably one of the most defining crises over the past 50 years and has had massive implications on organisations and the nature of work.
Organisations have been forced into rapid ‘big bang’ introduction of technology and tech-driven practices in an unprecedented and time-pressured manner. This urgency meant that there was little time to develop strategies, to train or to experiment with alterations.
In many cases, there has been little training or reflection on how practices and associated technology should be introduced, integrated or adapted to suit the new workplace context.
While adjusting to the ‘new normal’ presents many challenges for organisations, some are taking stock of current operations and exploring ways to re-engineer their business models, working environments and supply chains. Yet, there are many challenges to overcome with digital transformations.
‘Approximately 70pc of all digital transformation initiatives do not reach their goals’
Due to its hype, digital transformation is often misunderstood and thus has a high failure rate. Approximately 70pc of all digital transformation initiatives do not reach their goals with billions of dollars going to waste. Of the successful digital transformations, it is estimated that there is a 45pc chance of delivering less profit than expected.
As organisations adapt to growing business demands and strive to keep up with technological advancements, such as cloud, mobile and artificial intelligence, many CEOs will launch transformation projects in the coming months. One of the core reasons for failure among these projects is the overemphasis often placed on the digital assets rather than the transformation process. However, there are ways to beat the odds and achieve long-term transformational success.
Common digital transformation challenges
According to research at Irish software research centre Lero, the DT-Lab and the Whitaker Institute, some of the key challenges that emerge across all sectors include the inability develop a well-defined digital transformation strategy and the inability to clearly communicate the motivation to undergo a digital transformation strategy across all organisational stakeholders. In fact, these are common reasons for digital transformation failure.
In many cases, decisions made about undergoing a digital transformation are kept within the C-suite, yet other stakeholders that are tasked with operationalising the strategy are less informed about the need to transform. This means employees often lack clarity on the need for a digital transformation and are therefore less likely to engage in the transformation process. In addition, employees can also view digital transformations as a threat to the security of their position within an organisation and are then less likely to commit to driving changes.
‘Employees often lack clarity on the need for a digital transformation and are therefore less likely to engage in the process’
Another key challenge for management is the need to fill the aspiration and inspiration gap. Research indicates that leaders can try to play it safe and target quick wins, which has both positive and negative implications. From a positive perspective, quick wins are necessary in order to sustain digital transformation efforts. This ensures that teams deliver solutions regularly and feel motivated towards sustaining the transformation process. However, some employees can perceive them as low aspirations of digital transformation and associate this with weak efforts to achieve the overall transformation vision.
For an organisation to deliver fundamental and lasting change, it must be ambitious. It must inspire and empower employees to drive meaningful and sustainable change in terms of culture, capabilities and, ultimately, performance.
Another key challenge for organisations is simply keeping up with the pace of technology innovation and not becoming overwhelmed with future-proofing digital transformation strategies. This can also generate new challenges in matching the digital transformation strategy with new skillsets and workforce.
To develop a long-term strategy in such a turbulent and fast-paced environment is extremely challenging and requires an agile approach to chase a moving target. Therefore, more focus needs to be placed on ‘what’ to transform, rather than ‘how’ to transform in order to ensure organisations chase what matters. Based on our research, it is becoming apparent that the overarching challenge for organisations is to shift this focus.
Focusing on ‘return-on-experience’
To uncover what it is your organisation wants to truly transform into, a critical step prior to any digital transformation is to revisit the customer or user experience and step into their shoes.
Organisations can do this by examining the customer journey to identify pain points, explore value mapping, and immerse themselves in customer expectations using techniques such as design thinking. You can then begin to align digital transformation efforts with more clarity on the return-on-experience.
These efforts will directly and continuously inform the executive engine on how to realign the organisation’s mindset, culture, practices, organisational structures, roles, norms and analytics to both anticipate and enhance the customer experience by building new digital assets and capabilities.
With a focus on the return-on-experience, it is possible for organisations to not only orchestrate and personalise the entire end-to-end customer journey, but to do it step by step, at scale, on any channel or omnichannel, and within a real-time context.
There are some very exciting examples of certain sectors leading in digital transformation. For example, fintech and healthcare are well positioned to delve deeper into customer experiences and exploit innovative technologies to support digital transformations using a combination of cloud, internet of things, data analytics and artificial intelligence.
In summary, digital transformation should not only focus on technology. We need to think about the actual endgame: what we want to transform the overall experience into in order to compete for and maintain customer engagement. Only then can we question how technology can play a role to optimise the return-on-experience, and decide on the tools and technologies to support, manage and sustain this digital transformation.
Dr Noel Carroll is a lecturer in business information systems at the School of Business and Economics, NUI Galway. He is also researcher in Lero, the Irish Centre for Software Research, as well as the DT-Lab and the Whitaker Institute at NUI Galway.