Digital transformation is more about people than technology

The Covid-19 crisis forced businesses worldwide to accelerate the adoption of digital technologies by three to four years, said a McKinsey Global Survey of executives published in 2020. The changes largely took place in three main areas: interactions with customers, the supply chain and internal operations. Across business areas, the largest leap in digitisation – seven years – was the share of offerings that are digital in nature.

Previous research has, however, shown that the success rate for digital transformations is low. Only 16% of respondents of a 2018 survey said that their organisations’ digital transformations have successfully improved performance and also equipped them to sustain changes in the long term. An additional 7% said that performance improved but those improvements were not sustained.

The reasons for the failure of digital transformations are many, and much has been written about them elsewhere. But many of these reasons can be boiled down to just one: People. In our experience as digital strategy consultants, such transformations often fail because most companies forget that these critical initiatives – from developing a vision and crafting a strategy to communicating it to the rest of the organisation and executing it – are enabled by people first.

In this blog, we will talk about the two groups of people – leaders and employees – who are critical to the success of any organisation’s digital transformation.

LEADERS

”If you think about digital transformation as two words, we pay too much attention to the digital and not enough to transformation. It’s not a technology challenge, it’s a leadership one.”

–  Dr George Westerman, senior lecturer, MIT Sloan School of Management

Digital transformation is not just about embracing technology alone. It is about using technology to transform business processes, models and organisational culture. It is about using the insights brought by technology to envision new business models, markets and more efficient ways of attracting, engaging and delivering value to customers. This is why organisations that focus on putting talented people in key positions at the start of their digital transformation projects are more likely to see success.

Good leaders will have a clear vision of the digital path the organisation must take, and the ability to inspire employees to work towards it. When roadblocks pop up, they are able to adapt quickly and pivot strategy while keeping the big picture in mind. Good leaders will also invest in people who can harness technology to meet the organisation’s goals. They protect organisations from falling into the costly trap of innovation theatre, where resources are being spent on encouraging innovation but few tangible results are seen.

Synchronised transformation

Because of the nature of the beast, it is not unusual to find different departments working on their own digital transformations independently and in an ad hoc manner often before the C-suite even draws up a cohesive plan for the entire business. This is seen in attempts by function heads to automate certain processes or use digital tools to mine data to guide their business actions. But having each department do their own thing with regard to digitising can lead to inefficiencies down the line when the entire organisation decides to go digital and business systems are unable to communicate with each other because they use different technologies.

What’s worse is that sometimes the digital tools already in use by some departments determine the organisation’s overall digital strategy. That is an expensive mistake. Your vision and strategy for the future should determine what digital technology your organisation acquires and uses, not the other way around.

Your vision and strategy for the future should determine what digital technology your organisation acquires and uses, not the other way around.

Good leaders will ensure that this happens. To use an analogy, they are like orchestra conductors who ensure that different functions aren’t playing their own digital tunes in their own silos but are collectively working to produce one organisational melody, which is in tune with the big picture strategy.

Too many cooks?

Having said this, just bringing in new leaders with fancy digital designations won’t do either as too many digital leaders floating around in an organisation can lead to confusion, a lack of accountability, frustration and inefficiencies, threatening your whole transformation project.

A survey of 700 executives found that on average, companies have close to two CxO-level digital leaders with some companies having six or more. A third of respondents didn’t know which of them was responsible for most digital/technology functions in their organisation. That a large number of functional heads in any modern business also have digital responsibilities can add to the confusion.

It is therefore important for organisations to define each digital leader’s roles and responsibilities clearly. Everyone in the organisation should be clear about who is in the driving seat regarding the digital transformation project.

In a similar vein, here’s something to think about: Organisations where digital leaders directly reported to the CEO were perceived to be more effective than where they were not, found a 2017 McKinsey survey.

EMPLOYEES

When faced with any new ideas or initiatives our first instinct is to resist it, it’s in our DNA. This is why employee buy-in is critical to the success of any transformation project – digital or not. Research shows that in successful digital transformations, employees in every role tend to be more involved overall.

When organisations fail to engage employees in proposed transformations, they risk the activation of what has been referred to as “innovation antibodies”. Just as our bodies fight foreign cells with antibodies, an organisation’s innovation antibodies are activated when its employees perceive a threat to the status quo by the disruptive demands of the proposed change, and resist it either willfully or subconsciously.

Staff help you shape the right strategy

But this isn’t the only reason employee buy-in is critical to the success of your project. Involving employees early in the project helps the leadership get insights from the ground, which will enable them to shape a truly beneficial digital transformation strategy with a high chance of success. After all, employees have intimate knowledge about what works and doesn’t and can advise the organisation about potential improvements in processes. A strategy that’s crafted with a top-down approach, on the other hand, may not be able to meet the needs of the organisation and can lead to failure.

To get employee feedback, ask them these questions while working on your strategy: Do they have any mundane tasks that can easily be automated? Do they face any work frustrations that can be solved by better processes or technology? Is there any data that will help them do their jobs better?

Involving employees in the early stages of the project has another advantage. It generates a sense of ownership within them, which is employee buy-in – exactly what you need.

Communication is key

All of the above takes good internal communication. Similarly, once the strategy is finalised, communicating its goals and benefits to all employees is extremely important. Among other things, it helps reassure employees who are anxious that the proposed changes may make their roles redundant. Experts suggest communication can focus on three things to overcome resistance to change. They are:

• Dissatisfaction with the status quo – Discuss the many ways the current way of working can be frustrating and lead to poor business performance, which directly affects employees.
• The vision for the future – Mention how the proposed changes will make things better, enabling employees to do their jobs better, and perhaps even opening up new career opportunities.
• Concrete steps to reach that goal – The plan so far and each employee’s role in it.

Additionally, rally support among employees by identifying transformation advocates among them. These are people who are convinced of your vision and are willing to be early adopters and evangelists so to speak. Some of them can be integrators – employees who know their job inside out and can integrate the new digital way of working with the old one.

Skills development

Once you tackle the mindset, it’s time to focus on skills.

70% of respondents of a 2018 Gartner survey found that they haven’t mastered the skills they need for their jobs today and as high as 80% said they lack the skills they need both for their current role and their future career.

Training all employees to use all the new digital technologies being introduced is imperative because only when all employees make full use of all functionalities of the new systems and tools will your project truly succeed and deliver a high return on investment.