Despite all the euphoria about going digital and paving the way for a bright future of data-centric business models and scalable digital platforms, many organizations have no plan how to get there. Some 60% of organizations still lack a formal transformation plan, according to 451 Research’s Voice of the Enterprise Survey.
However, the brutal truth is that digital transformation is a hard requirement, not an option. Organizations that fail to come up with a clear strategy and roadmap face the risk of becoming stranded by organizational inertia — the tendency of established organizations to resist change and simply follow their daily routines until it’s too late (think Kodak).
Deer in the headlights
The digital race is on. Switching off the radar and going full speed ahead can be a dangerous undertaking. The longer organizations wait to outline their digital strategy, the harder and more painful it will be to implement necessary changes. Regardless of the obvious need to take action, the digital age leaves many senior executives puzzled about how to respond.
As pointed out in IDC’s Data Services for Hybrid Cloud Taxonomy Report, “Digital disruption is real. To survive, companies need to embrace and accelerate DX [digital transformation],” says Ritu Jyoti, Research Director at IDC. “Leading digital organizations are exploiting data insights to deliver personalized value services, optimize customer experience, explore new opportunities, and reduce the overall cost of doing business. The world’s most admired and best-run businesses use IT for their competitive advantage. The groundbreaking agility, flexibility, and power of cloud computing has businesses exploring ways to adopt cloud functionality and economics. Hybrid cloud and multi-cloud deployments are becoming the new norm.”
70% of change programs fail
Implementing change is often much easier said than done. Research by McKinsey & Co. has found that seven out of 10 change programs fail to accomplish their objectives, predominantly due to employee resistance and a lack of leadership support. Unless people clearly understand why change is needed, what must change, how to make the change happen, and what the benefit of these changes will ultimately be, transformation initiatives run the risk of being seen as a threat rather than an opportunity. To tear down silos, break down resistance, and obtain buy-in, empathy is everything.
Unlike IT systems, there is no such thing as a reset button when it comes to human beings. As highlighted in one of my previous articles, cultural change won’t happen overnight. So a senior leadership team simply proclaiming change without providing purpose and direction is, for all intents and purposes, doomed to fail. Organizations have established routines and honed certain capabilities over decades. As a result, it will take time and enormous effort to reinvent a company by targeting new customer segments, launching new products, implementing new operating models or requesting new behavioral patterns.
From observing to driving transformation
CIOs have a major role in the world of digital transformation. First, they must understand the goals and intentions that underlie the digital business strategy and support the C-Suite in coming up with a vision, roadmap and guidance on how to make digital happen. In the digital age, the demarcation lines between corporate strategy and IT strategy are blurring and will ultimately merge into one and the same.
Second, IT assets — especially digital platforms — can be strategically used to disrupt the marketplace, target new customer segments, do business and produce revenues. Third, innovation plays a major role in this equation. Companies that embrace innovation tend to be much better positioned to respond to the uncertainty and risk inherent to the digital world. This also requires a corporate culture that rewards experimentation and allows failing.
To move from theory to practice, astute CIOs will seek close alignment with their line-of-business peers and the chief strategy officer to determine how to disrupt and how to deal with disruptive rivals. For instance, sales and marketing might notice disruptive activity on the customer front, while product owners tightly observe industry trends. However, these leaders may not share the same willingness for disruptive innovation. Marketing might favor a game-changing approach to poach customers away swiftly, but product management may not be prepared to sacrifice revenue streams from an existing “cash cow” product. One role of the CIO is to orchestrate the digital journey across the organization and actively steer the discussion rather than just observing it.